Thursday, April 19, 2012

A Rough Ride for Royal Air Maroc

Last year rumours started to circulate that Morocco's Royal Air Maroc (RAM), the state-controlled airline was seeking a larger strategic partner. Shortly after, the Moroccan government intervened to assist the struggling carrier to the tune of $193 million. It followed this with an additional $900 million to upgrade itself by 2016. The View from Fez takes a look at the state of play.

The problems faced by the airline caused many commentators to believe the threat from low cost carriers and its struggle for profitability meant that the government’s injection of funds was intended to boost the airline ahead of a possible sale of a substantial stake to a foreign operator.

The possibility of a sale being the way forward was confirmed at a recent conference on the Tunisian island of Djerba when a Royal Air Maroc spokesperson, Mehdi El Yaalaoui, told the Reuters news agency that RAM was seeking a tie-up with a larger company.

"At the moment, Royal Air Maroc is a state company but we want to go to the market. We need to partner with a bigger company, especially through finance," he said. When pushed for more details, El Yaalaoui responded. "We have an idea who but I am not going to say."

Morocco relies on Europe for much of its tourism traffic and the financial crisis across the Mediterranean has squeezed the number of tourist arrivals and hit airlines and the economy in recent years. Higher fuel prices have also knocked the bottom line.

Yaalaoui said it had been a real struggle to adjust to the increased competition but the state airline had managed it. "We are confronting any competition. We did our duty and we confronted the low cost airlines," he said. "It has been a difficult strategy. Royal Air Maroc had to drop lines, for instance its Milan-Marrakesh and Brussels-Marrakesh lines, and had to sell 10 planes and lose 1,500 employees, but we have overcome this."

Asked if Royal Air Maroc was likely to need another state handout this year, he said: "No."

There is plenty of speculation as to who a potential buyer of a stake in the airline might be, but if such a buyer exists it is most likely to be an airline from the cash-rich Gulf airlines such as Emirates or Air France-KLM, which already holds a tiny stake in the Moroccan airline.

Royal Air Maroc has faced growing competition from low cost airlines since signing an "open sky" agreement with the European Union in 2006. It was also hit by a decline in tourist numbers last year, with the Arab Spring revolts spreading nearby and a suicide attack in the main tourist city of Marrakesh

With a relatively modest fleet of medium and long-haul aircraft, Royal Air Maroc has sought in recent years to develop Casablanca as a regional hub connecting poorly-served West African capitals to Europe and North America.

Yaalaoui declined to give 2012 financial forecasts for the airline but said it was doing better than last year.


1 comment:

Anonymous said...

Maybe the first step should be to fire the current president, Benhima, and stop those political appointments to the largest public companies. The monarchy is so keen on its prerogatives to nominate the presidents to these large companies. But these nominations are an aberration when a state owned company has to compete globally.
These nominations are key to the survival of the monarchy in the long term. So they won't stop any time soon.
Deceased former France president was once asked "What is the real power", he immediately replied "The power to nominate". This is why the Moroccan king will continue to nominate complete morons to key positions. And this is why Morocco will pay a huge price for those nominations. Instead of having visionaries and competent people at the helm of the key companies in Morocco. We have political nominees that are clueless how those same companies work.