MAURITANIA AIRWAYS: IF IT CAN SUCCEED IN

C O N F I D E N T I A L NOUAKCHOTT 000693 E.O. 12958: DECL: 11/23/2018 TAGS: ECON EAIR EINV ELTN PGOV PREL MR SUBJECT: MAURITANIA AIRWAYS: IF IT CAN SUCCEED IN MAURITANIA, IT COULD SUCCEED ON THE MOON REF: A. NOUAKCHOTT 688 ¶B. 07 NOUAKCHOTT 827 Classified By: Charge d'Affaires Dennis Hankins for reasons 1.4 (b) and (d). ¶1. (C) Summary: Mauritania Airways recently celebrated its first anniversary, marking the end of a difficult year for the company. Its first year of operations has been extremely difficult and the company is struggling to stay afloat. It continues to be hampered by the reputation of the now defunct Air Mauritanie, and the current political crisis has only exacerbated its difficulties in obtaining credit and financing. High operating costs along with a lack of skilled labor have made operations difficult. The company is now looking for a major new investment in the company from Qatar, which had initially planned to create a second airline in Mauritania but has since cancelled those plans. Mauritania Airways is currently flying to five international and two domestic destinations. It will add four more international destinations in the coming months with the arrival of a third aircraft. The recent closure of the Mali-Mauritania border has interrupted bus service between Bamako and Nouakchott. The Malians assert that Mauritania Airways investor and Aziz financier Mohamed Hmeye Ould Bouamatou was behind this closure to try to create more business for his airline. End summary. ¶2. (C) EconOff met with Mauritania Airways Director General Moncef Badis and Commercial Director Anis Chebil November 19. Mauritania Airways began operating in November 2007 following the collapse and bankruptcy of Air Mauritanie and recently celebrated its first anniversary. Many small airlines in Africa are struggling right now, and Mauritania Airways is no exception. The new airline has had a difficult first year and continues to lose money. When asked how the company was doing, Badis replied "things could be better." He said that Mauritania Airways was managing to hold on, but even that was a struggle. Badis later conceded that Mauritania Airways' goal for its first year of operations was merely to get set up and become operational, which it had succeeded in doing, but that was as big of a success as it could report to date. ¶3. (U) Mauritania Airways currently operates international flights to Paris, Las Palmas, Dakar, Bamako, and Abidjan, and domestic flights to the northern cities of Zouerate and Nouadhibou. Initially it had intended to fly to Casablanca too, but has cancelled plans for the time being. According to Chebil, Casablanca is only a transit point for most passengers; it is rarely the final destination. Mauritania Airways had hoped to form a partnership with Royal Air Maroc (RAM) to allow its customers to fly onward, but was unable to do so. In addition, the Government of Morocco, trying to protect its airline from competition, made it difficult for Mauritania Airways to secure landing rights in Casablanca. Under these circumstances, Chebil said that it did not make sense for Mauritania Airways to continue to try to fly to Casablanca. ¶4. (U) Mauritania Airways also intended to fly to two southern Mauritanian cities - Selibaby and Nema. Plans to add those two routes have been delayed pending infrastructure improvements. The runway in Selibaby is in poor condition and must be refurbished before planes can land there. The Government of Mauritania originally promised that the runway would be ready by the end of 2007, but that did not happen. Mauritania Airways is now hoping that it will be ready by the end of 2009. Mauritania Airways cannot fly to Nema at this time because there is no means to obtain jet fuel there to refuel its plane. ¶5. (U) Mauritania Airways is currently leasing one Airbus A320 and one ATR 42-300. Around the end of December or beginning of January, it will give up its lease on the A320 and replace it with two Boeing 737s. It will continue to operate the ATR 42-300. Once the two 737s have arrived, Mauritania Airways will add flights to Tunis, Cotonou, Libreville, and Brazzaville. ¶6. (U) Mauritania Airways' most popular and profitable flights are to Las Palmas (Spain),followed by Nouadhibou and Zouerate. Las Palmas is a popular vacation destination for wealthy Mauritanians and many Mauritanians do business there. Binter Canarias, a Spanish airline offering flights from Nouakchott and Nouadhibou to Las Palmas, stopped operations at the beginning of November. Chebil reported that the company Binter Canarias was leasing its planes from had gone into bankruptcy, forcing Binter Canarias to halt its operations. Mauritania Airways no longer has any competition to its most popular international destination, which should benefit the company. The company will add a third weekly flight to Las Palmas by mid-December. ¶7. (C) EmbOffs who have flown on Mauritania Airways have observed that domestic flights are almost always near capacity, while flights to Paris, Bamako, and Abidjan are normally half-full at best. Mauritania Airways has faced heavy competition on its route to Bamako by the popular "Bamako Bus" which takes passengers from Nouakchott to Bamako at a tenth of the price. While there was an official land transportation agreement between Mauritania and Mali, the land border has been closed for the past three weeks. The Malians believe that Mohamed Hmeye Ould Bouamatou (Mauritania Airways investor and Aziz financier) is behind the border closure, in an effort to create more business for Mauritania Airways (ref A). ¶8. (C) When Mauritania Airways began operations in November 2007, Chebil told EconOff that the company was struggling to overcome the terrible reputation of Air Mauritanie. He said that even after operating for a year, it is still struggling to emerge from the shadows of the defunct airline. In addition, Mauritania Airways is now associated with the political crisis in Mauritania too, compounding its problems. Even though Mauritania Airways is a professional well-run company with no connection to Air Mauritanie and little connection to the government, it has still had difficulty differentiating itself from past problems. Badis reported that as a result it has been almost impossible for the company to obtain financing. Suppliers require the company to pay them up front in cash. ¶9. (C) Badis said that there are numerous problems on the ground impeding Mauritania Airways' operations. He said "if Tunis Air (majority shareholder) is able to succeed in Mauritania, then it could succeed on the moon," indicating just how difficult the conditions really are. Badis said that inputs are extremely expensive in Mauritania because most must be imported and there is little available locally. Taxes and airport fees are extremely high, especially compared to neighboring countries. It is also difficult for the company to find skilled technicians on the local labor market. There is no means to obtain the necessary training in Mauritania, so people must be sent abroad to obtain training. Most Mauritanians who have gone abroad end up staying abroad and find work with another airline. Bringing foreigners into Mauritania is an extremely expensive proposition because they demand huge bonuses (more than what Mauritania Airways can afford to pay) to relocate to a poor developing country. Furthermore, Mauritania is a difficult market to operate in. As a poor developing country with a small population, there is not a large demand for air travel. ¶10. (C) Several incidents and conditions have made Mauritania Airways' first year of operations much more difficult than anticipated. First, the December 24, 2007 terrorist attack that killed four French tourists and three other small-scale terrorist attacks since then have destroyed the nascent tourist industry in Mauritania. Tourists in Mauritania are primarily French. The steep drop off in tourists has left the Nouakchott-Paris route struggling to find enough passengers. Second, record oil prices for much of 2008 made operating costs much higher than projected. While oil prices have come down, Mauritania Airways must now deal with the current economic crisis and a general downturn in economic conditions. Finally, the August 6 coup has created additional problems for the company. In addition to casting a dark shadow on Mauritania Airways, Badis said the company is not in a position to make any major management decisions until there is a resolution to the political crisis. ¶11. (C) In early 2008 Qatar announced that it was going to invest in a second airline to be created in Mauritania. When asked where plans currently stood for a second airline, Badis said that they had been cancelled. It is clear from Mauritania Airways' struggles as the sole domestic company that the market is not big enough to support a second Mauritanian airline. He said that the Qataris are now in negotiations with Mauritania Airways to become major investors in the company rather than start a new one. If the investment is finalized, Tunis Air will become a minority shareholder in the company. Badis warned that the negotiations had slowed down significantly since the coup because the Qataris are concerned about the country's political situation. ¶12. (U) Air Mauritanie Coda: Air Mauritanie went into bankruptcy in September 2007 (ref B) and began liquidation in January. In the High State Council's (HSC) ongoing attempt to portray Abdallahi's government as corrupt, it has accused 10 people associated with the former Air Mauritanie of embezzlement and corruption, including Prime Minister Waghef. Waghef was the Director General of Air Mauritanie from 2004-2006. Five people, including Waghef, are currently being held in jail while the cases of five others have been dismissed. They have been charged with diverting public goods, using costly means to reschedule debt payments, camouflaging the company's financial situation, and malicious use of the company's name and funds to achieve personal gains. The FNDD has called the "selective arrests" a "witch hunt" in the press and notes that the five people currently being held in jail are all active members of the FNDD. Others with closes ties to both the HSC and Air Mauritanie have not been investigated or arrested. HANKINS