Published in July 2016 issue

Flying the Creole Spirit, with a Middle Eastern Twist

By Matteo Legnani

The Southeastern part of the Indian Ocean is home to a patchwork of airlines. From the largest to the smallest, each island (or archipelago) has its own flag carrier: Air Madagascar (MD), Air Mauritius (MK), Int’Air Îles (I7) from Comoros, and Air Austral (UU) of Réunion—all with strong historic links to France and, in some cases, to its flag carrier Air France (AF).

However, national carrier Air Seychelles (HM) decided to give a different twist to its recent past and foreseeable future. On January 25, 2012, the carrier announced a deal with Middle Eastern giant Etihad Airways (EY), to become one of its partner airlines. The Abu Dhabi-based carrier invested $20 million to buy a 40% share of HM, an investment matched by the Seychelles government. Etihad also provided a shareholder loan of $25 million to meet working capital requirements and support Air Seychelles’ network and fleet development.

Early Growth

After HM lost US$12.5 million in the 2010- 2011 fiscal year, the Seychelles said it could no longer provide the airline with ‘unsustainable’ subsidies and underwrite its day-to-day operational expenses. That opened the door to EY, a move that saved the airline from its demise. The onetime Seychelles Airlines was founded in 1977 following the integration of Air Mahé and Inter-Island Airways, which had been providing domestic inter-island service since Mahé International Airport (SEZ) had opened in 1972. In October 1978, the new airline switched its name to Air Seychelles. With three Britten Norman Trislanders and two Islanders, the carrier served as a feeder for British Airways (BA), Lufthansa (LH), and Air France (AF).

However, this business model was hard hit by the recession of the early 1980s. BA and LH canceled their flights to Mahé, leaving AF as the sole link between the islands and the rest of the world. The government had no other means to save the tourist industry except to help HM develop its own long-haul operations. In 1983, HM reached an agreement with British Caledonian Airways (BR) to provide a DC-10-30 service from London-Gatwick (LGW) via Frankfurt (FRA) to SEZ. A year later, two DC-10-30s were chartered to Martinair (MP), and flights to Jeddah (JED) and Amsterdam (AMS) were added.

Then, in 1985, with the lease of an Airbus A300B4 from Air France, HM began operating wide-bodies on its own. It refreshed its image with its distinctive red, white, and Green livery, together with its double-bird logo—a scheme that survived over two decades. In 1987, the airline took possession of its two first Boeing 707-324Cs. These aging aircraft had the perfect range and capability to serve Europe, but were expensive to operate and maintain. This caused the carrier to lag behind its competitors, which flew more modern (and reliable) aircraft that were more attractive for the tourists heading to Seychelles.

A major step up in equipment arrived in June 1989 with the arrival of an International Finance Lease Corporation (ILFC)- leased Boeing 767-200ER. The 208-seat twin-engine extended operations (ETOPS) certified jet enabled HM to add Paris (CDG) and Rome (FCO) to its European network, and to open new destinations to Johannesburg (JNB) and Singapore (SIN). The alliance with ILFC proved crucial to the airline’s growth over the next 12 years. The American lessor firm provided HM with a Boeing 757-200 in March 1993, two 767-300ERs in December 1996 and April 2001, and a 737-700 for the regional routes in November 2001. HM leased a fourth 767 (a -200ER series) from UK charter carrier XL Airways (JN) in December 2007.

During the same period, the network grew considerably. Air Seychelles added Manchester (MAN), Milan (MXP), Madrid (MAD), Nairobi (NBO), Dubai (DXB), Mumbai (BOM), the Maldives (MLE), Mauritius (MRU), Réunion (RUN), Mayotte (DZA), Antananarivo (TNR), and Bangkok (BKK).

On long-haul routes, the airline offered three classes of service: Business Class (named Pearl Class), Economy Plus (available on the Boeing 767-200s only) and Economy Class. HM enhanced its Business class in 2007 by opening the VIP lounge Salon Vallée De Mai (named after the UNESCO World Heritage site on the island of Praslin) in Mahé.

Thirty years after its birth, in the second half of the 2000s, Air Seychelles had grown to become an important player in the Indian Ocean. Its fleet numbered 11 aircraft (four 767s, five DHC6 Twin Otters, and two Short SD-360s) and its network covered a dozen cities in three continents. Then, the economic downturn of 2008 shattered all expansion plans.

Drastic downsizing

While negotiating with Etihad during the fourth quarter of 2011, Air Seychelles announced a major restructuring. It appointed a new CEO (its fourth in four years), adopted a new corporate branding, and repositioned its focus to concentrate on high-end tourism. It also reduced its workforce by almost 20%, cutting 115 positions, and slashed its long-haul network to focus on regional service. Cut were Singapore, London, Paris, Rome, and Milan, leaving Johannesburg, Mauritius, and Abu Dhabi, which became the mandatory stopover to reach Europe from the Seychelles.

HM also downsized its long-haul fleet, returning three of its four Boeing 767s to the lessor three years before the leases expired and canceling an order for two 787s it was to lease from ILFC. The cuts were so dramatic that the carrier was no longer the largest airline operating from Mahé. Emirates (EK) was the leader in terms of weekly international seats offered.

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Etihad to the rescue

Those drastic measures, along with Etihad’s 2012 capital investment, did the trick. After two consecutive years in the red, Air Seychelles reported a profit of $1.1 million in 2012. Profits rose to $3 million in 2013 and to $3.2 million in 2014. Passenger numbers rose, too, by 21% on inter-island (domestic) flights, to 186,767 travelers; and by 22% on international routes, to 336,106. Etihad played an important role in creating an economy of scale for maintenance, spare parts, and cabin crew training. “Also as important is the power that such a huge group has in defining contracts and prices with manufacturers and lessors,” Roy Kinnear, CEO of Air Seychelles since July 2015, told Airways.

This new financial stability allowed HM to reconstruct its fleet. After retiring its last 767, HM turned to Airbus, its new partner (EY) being a big client of the European manufacturer. On July 5, 2012, the first Airbus A330-243 (Aldabra • S7-ADB • MSN 751) arrived at Mahé, operating flight HM19 from Abu Dhabi. The 254-seat jet was a major step up for the airline in terms of passenger comfort and amenities, offering 18 lie-flat seats with a huge 82-inch (208 cm) pitch in its Pearl Class cabin (2-2-2 layout) and personal IFE in Economy. Actually, there is a second A330 in the colors of Air Seychelles around (Vallée de Mai • A6-EYZ • MSN 807) operated by Etihad on its own network.

Within days of receiving that first A330, Air Seychelles launched a Mahé – Hong Kong service (three times a week via Abu Dhabi). The carrier had wanted this route for a long time, given the close political and commercial relationships that had existed between the Islands and China since a coup had brought a Maoist government, the Progressive Popular Front, to power in the Seychelles in 1977. Also a growing number of Chinese tourists were visiting the Seychelles.

Kinnear, who started his carrier in commercial aviation 30 years ago as a British Midland (BD) ticket agent before holding key positions at Gulf Air (GF) and EY (where he was SVPRevenue Management and Planning) told Airways that Air Seychelles “cannot continue to base its tourist traffic on Europe and South Africa as the airline did until now, because that exposes us to the periodical crisis that hit those markets.” He added, “We have to differentiate as much as possible, and that’s the reason why we decided to take our A330s and A320s under Seychelles national registry (S7), since there are countries like China where you cannot operate without that condition.”

Today, the Abu Dhabi – Hong Kong leg is flown by Etihad, so the priority at Air Seychelles is to provide a direct link to Beijing (PEK) and eventually to Shanghai (PVG).

The plans for a direct service to the capital city of China became a reality in February 2016, when flight HM888 (in Chinese culture, number eight is associated with wealth and luck) arrived at Mahé from PEK with 208 passengers on board. At the ceremony that followed the inaugural flight, Alain St. Ange, Seychelles’ Minister of Tourism and Culture, said that “during 2015, China has grown to become the sixth-largest source of tourism in the Seychelles with almost 14,000 visitors (after France, United Kingdom, Italy, Germany, and South Africa). The scheduled non-stop Beijing flight (that started as a weekly service) will build on this position, bringing even more leisure travelers to our islands.”

To reach as many markets as possible with a relatively small fleet, the airline focused on codesharing, acting as a promoter (and founding member) of the Etihad Airways Partners program, unveiled in October 2014. Today, the HM code appears on several flights operated by Etihad, Air Berlin (AB), Jet Airways (9W), Alitalia (AZ) (Airways, November 2015), Niki (HG), Air France, and South African Airways (Airways, June 2016). Now, European passengers can reach Mahé from cities in France, the United Kingdom, Italy, Germany, and Austria with a single ticket and check-in.

In its region, Air Seychelles is one of the founding members of the Vanilla Alliance, formed in September 2015 (after a long process started back in 2012), together with Air Madagascar, Air Austral, Air Mauritius and Int’Air Îles of Comoros. Altogether, the airlines of the Southeast Indian Ocean sport a fleet of 45 aircraft, a network of 82 destinations in Africa, Europe, the Middle East, and Asia, and carried 2.3 million passengers in 2015.

The aim of the alliance is to optimize codesharing between member airlines, increase connectivity between the five countries involved, and reduce air fares, which today are extremely high and a deterrent to travel: more than 600% higher than those found on internal European sectors, one analysis showed. Even compared with the Caribbean, where there is a similar pattern of a large number of inter-island services, routes between the Indian Ocean territories are 180% more expensive.

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Fleet and Network Optimized

To serve Africa and India, HM deploys its Airbus A320 fleet. The first narrow-body (Amirantes • S7-AMI • MSN 1944), arrived at the end of November 2014. The initial route was to Dar es Salaam (DAR) in Tanzania until last March, when it was redeployed to cover two additional rotations to Johannesburg, which now has five flights a week), Mumbai (BOM), and Antananarivo (TNR). The second aircraft (Silhouette • S7-SIL • MSN 1945) arrived last September.

Just like in the A330, the A320s feature a two-class passenger cabin with 16 Pearl Class seats (2-2 abreast) offering a 49-inch (124 cm) pitch, and 120 Economy seats, with 32 inches (81.2 cm) of pitch. In both classes, each seat is fitted with individual IFE screens. To date, inflight connectivity, called HM Connect, is available on the A330 only.

The greatly improved cabin includes new menus, ‘dine at any time’ service and a new individual inflight entertainment system offering movies and music on demand, live TV, short features and games (although no live maps following the flight).

These enhancements helped Air Seychelles to soar in the Skytrax rankings, jumping from the 133rd position to the 56th. It is now one of 35 airlines in the world with four-star status. Its stature was further ratified in June 2015, when it was named the Indian Ocean’s Leading Airline and awarded the titles of Best Cabin Crew and Best Business Class in the region at the World Travel Awards. So far, in 2016, HM has won another 4 World Travel Awards: Indian Ocean’s Leading Airline, Leading Business Class, Leading Economy Class and Leading Cabin Crew.

Domestically, HM operates flights to the smaller islands with a fleet of five DHC-6 Twin Otters, three of which are of the -400 series manufactured by Viking Air Limited of Canada, featuring improved interiors and a glass cockpit. The 19-seat VSTOL aircraft operate over 25 daily return flights between SEZ and Praslin (PRI), the second largest and most populous island of the archipelago. The 15-minute flight is essential for both locals and tourists, as some of the most luxurious and exclusive hotels in the Seychelles are located there. Flights to the outer islands (Fregate, Bird, Desroches, Alphonse, and D’Arros), are operated as charters by tour operators taking clients to exclusive resorts.

“When a wide-body lands here in Mahé, three or even four Twin Otters are arranged to be there, ready to commute travelers to Praslin and to other islands as quickly as possible. That’s why sometimes, during the day, we have departures to PRI every 10 or 15 minutes” said Kinnear.

He was in his office overlooking the apron at SEZ. “This is a very privileged point of view, that allows me not only to have the pulse of highs and lows of traffic, but also to check how our people work on the tarmac,” the CEO said. “For example, if they hand umbrellas to passengers when it rains or if the tugs and other vehicles are operated safely.”

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Next Step: Infrastructure and Staff

After almost four years spent in regaining its leading position in the region, the airline is planning its medium- to long-term future: the focus is on infrastructure and people. “The problem here in Mahé is not the size of the terminal building, but the way it is used,” Kinnear said. “We have to exploit the space that we have during the whole day, and not only for the morning and evening rush hours.”

Ninety-eight percent of the staff are Seychellois, Kinnear said. “That’s a thing we are proud of and a key element of our onboard service: we want people to feel in the happy place that the Seychelles are from the same moment they get on the plane. It is important that they are welcomed onboard by Seychellois.

“We would like to increase the number of local pilots, particularly on long-haul services,” he went on, “firstly because expat pilots are more expensive, and also because we have a responsibility towards the local community as the main employer of the country. That requires advanced planning in selecting the adequate profiles among the students attending the University of the Seychelles.”

On the operational level, “the current long-haul fleet can afford one more rotation only, so we are considering the introduction of a third A330-200, as the -300 series is too big for markets out of Johannesburg and Paris,” Kinnear said. However, adding that third wide-body isn’t an immediate priority, because the airline doesn’t intend to rebuild the European network it had before 2012. “Paris had a better-than-expected start, with load factors in the high 80%s during the summer months and flights will be expanded. The French capital will be our European hub as Abu Dhabi is  for the Middle East and Asia. We are now looking at the Far East and Africa, trying to establish a sort of hub between the two continents here in Mahé, although we have very strong competitors, Ethiopian Airlines (ET) and Kenya Airways (KQ).

“Of course, fleet, network and frequencies will grow but, having in mind the impact that these decisions will have on the local infrastructure, hotels capability, power consumption, water, and food; we always have to keep in mind that this is a small land inhabited by less than 100,000 people that already receives twice that number of tourists every year.”