Annual Report 2017/ 18

Transcription

1 Annual Report 2017/ 18

2 Mission, Vision & Values Strategic Role To be a profitable national airline Core Objectives Sustained profitability Support inbound tourism and home originating market Grow with smart investments Deliver exceptional service with a Mauritian touch Create a culture that encourages innovation and efficiency and rewards creativity Mission Statement We are the National Airline of Mauritius proudly connecting our country to the world with exceptional Mauritian hospitality Through innovative Employees determined to exceed the expectations of our Customers, we are committed to delivering sustained profitability in a socially responsible manner

3 Air Mauritius

4 Table of Contents 02 Key Results 04 Chairman s Message 06 Message from the Chief Executive Officer 08 Glossary 10 Annual Report and Business Review 10 Results for the year 10 Overview of the Business 12 The Board of Directors 18 Corporate Governance 31 Sustainability Report 34 Enterprise Risk Management 43 Management Discussion and Analysis 82 Certificate from the Company Secretary 82 Directors Disclosure Statement 83 Statement of Compliance 84 Directors Responsibility Statement 85 Independent Auditors Report 91 Consolidated and Separate Financial Statements 92 Consolidated and Separate Statements of Financial Position 93 Consolidated and Separate Statements of Profit or Loss and Other Comprehensive Income 94 Consolidated and Separate Statements of Changes in Equity 96 Consolidated and Separate Statements of Cash Flows 98 Notes to the Consolidated and Separate Financial Statements Appendices to Annual Report 162 Translation of the Consolidated and Separate Statements of Financial Position 164 Cascade Holding Structure 165 Directors in Subsidiaries 169 Shareholders Information 172 Notice of Meeting 173 Proxy Form Annual Report 2017/18 01

5 Key Results Group Financial Results 2017/ /17 Revenue Eur M Gross profit Eur M Net profit Eur M Attributable profit to equity holders of the parent Eur M Total equity Eur M Earnings per share Eur Key Financial statistics Gross profit margin % Net margin % Return on equity % Return on net assets % Interest cover Times Interest and lease cover Times Dividend cover Times Gearing ratio 0.4:1 0.3:1 Group Operating statistics Passengers carried 000 1,695 1,603 Seats offered 000 2,262 2,136 Revenue passenger kilometres (RPK) Million 7,366 7,074 Available seat kilometres (ASK) Million 9,339 8,887 Revenue tonne kilometres (RTK) Million Available tonne kilometres (ATK) Million 1,376 1,316 Passenger load factor % Revenue per ASK (RASK) Eur Cent Cost per ASK (CASK) Eur Cent Air Mauritius

6 Chairman s Message

7 Chairman s Message positions or growth prospect. A dedicated low-cost airline model customised to address the specific needs of the region, for instance, deserves further attention. The eco-system that has developed around the airline business also holds interesting prospects for the generation of ancillary revenue. Potential areas of development include ground handling, maintenance and engineering services, catering and IT expertise. Additionally, Air Mauritius is also part of a broader network of trade partners that make up the destination s tourist industry. Air Mauritius needs to work towards the strengthening of collaborations as a means to diversify risks as well as the impacts of operating environment cycles, in a true spirit of partnership. Dear Shareholders We are presenting the annual report of the Air Mauritius Group and the Company for what has been a year of transition. At the outset we note the good operating results of the airline with an unprecedented revenue of Eur 509.6M, which is a result of sustained growth in passenger numbers over the year, in spite of mounting competitive pressure and ruthless price wars. This year s profit of Eur 4.9M and Eur 4.5M for the Group the and the Company respectively reflect higher fuel prices and also the major investment made in our fleet modernisation programme and the revamp of our network. Total shareholders funds of the Company dropped from Eur 91.2m to Eur 87.9M year on year mainly due to actuarial losses of Eur 8.5M on the defined benefit pension scheme as a result of changes in market assumptions. As highlighted in this report, the new downturn in the airline operating environment, also impacted our performance for the current financial year, strongly emphasises the need to build a more resilient business model. We are therefore standing at crossroads and need to make a transition to the Air Mauritius of the future. Management has therefore been tasked to come up with a medium to long term plan made up of innovative solutions sustainable in the long term. This needs to take into account the specific dynamics of the various markets in which we operate as Europe, Australasia, Africa and the region all react to distinct sets of parameters, be it in terms of economies, competitive In our transformational process, we need to remain committed to our values and beliefs. This is a people business. The engagement and motivation of all the employees of Air Mauritius are an important complement to all our investments in new equipment and products. In this context, training of our personnel is key. Our commitment to service excellence, by putting our customers at the centre of our approach, is also of prime importance. Optimizing the use of Big Data to be closer to their needs and the use of technology to constantly improve our services and processes need to be high on our agenda. We are looking forward to this year another milestone in our fleet modernisation programme when we take delivery of two brand new Airbus A330neo by the end of the year. The new Air Mauritius cabin products revealed upon the delivery of our two brand new A last year received excellent feedback from our customers. We trust that the entry into service of the A330neo will be yet another moment of pride for the Company and for the country. With this, I wish Air Mauritius well, and seize this opportunity to thank all employees, the management, the Board, the Government, all our business partners, our shareholders and our customers for their support and trust. Dr Arjoon Suddhoo, FRAeS Chairman June 13, Air Mauritius

8 Message from the Chief Executive Officer

9 Message from the Chief Executive Officer The volatility and cyclic nature of the operating environment compels the airline to design a new resilient and agile business model for its sustainability. Robust Operating Metrics Management s focus for 2017/18 has been on laying the foundations for the transformation of Mauritius into a strategic airline hub for the region. Capacity was increased on Singapore, Kuala Lumpur, Perth, Cape Town, Bangalore, Chennai, Durban, London and Reunion Island. We launched three times weekly flights to Amsterdam from where we offer connections to 48 destinations in Europe with improved access particularly to Nordic countries. Service to Europe has also been reinforced with seasonal flights to Geneva. This resulted in a 5.9% increase in capacity to a total of 2,269,214 seats supplied over the network. The number of passengers carried grew by 5.8% to reach 1,694,956. Air Mauritius therefore made good use of the extra capacity in spite of stringent competition, with load factor at 78.9%. Air Mauritius reported profits again this year in spite of a tough operating environment marked by rising fuel costs and volatility of exchange rates. Operating revenue increased by 3.0% from Eur 494.8M to a record high of Eur 509.6M. Operating expenses however increased by 3.9% to reach Eur 464.7M mainly on account of increased levels of operations and rising fuel prices. The Eur/Usd exchange rate moved from 1.07 on April 01, 2017 to 1.23 on March 31, This change has mitigated the fall in the operating profit from Eur 23.1M to Eur 18.5M but has also resulted in higher net finance costs of Eur 12.6M. Air Mauritius therefore posted a profit of Eur 4.5M for financial year 2017/18. These results also reflect the impact of the airline s major investments in the modernisation of its fleet, development of new routes, improvement of its products and the development of its human capital. Overcoming a challenging operating environment Intensification of competition had a significant impact on Air Mauritius. A total of 450,000 seats were added by all airlines operating in the market. On one hand, Middle East carriers continued to divert traffic towards their hubs while, seasonal operators from Europe picked up market shares during peak periods. We conducted aggressive sales campaigns and further developed our distribution through digitalisation in order to protect our share in a context of intense competitive pressures and price wars. As a result, yield dropped by 4.1%. Subdued currency exchange rates in some key markets like the United Kingdom, China and Mauritius also impacted revenue. These factors were however mitigated by the growth we achieved in passenger numbers. Another determining factor was the average price of Brent which rose from Usd 48.9 to Usd Air Mauritius

10 Message from the Chief Executive Officer Outlook Our future is closely associated with the vision to transform Mauritius into a strategic hub for the region. One of the premises of this vision, is to leverage the strategic position of Mauritius between Africa and Asia, the two fastest-growing continents in the world. Access to hub Mauritius will be improved with more flexible schedules and enhanced frequencies aimed at providing better connectivity with India, South East Asia, Africa, Europe, Australia and the Indian Ocean. In the medium term, we are targeting daily frequencies on a number of destinations to complement Paris, Johannesburg, Antananarivo and Reunion (Saint Denis and Saint Pierre) which we already serve with daily flights. Air Mauritius is also contemplating the setting up of an African Airlines Alliance together with operators from the Continent in order to acquire a strategic edge in sub-saharan Africa. Each participating airline would provide and maintain its key position in its core market whilst promoting connectivity between Hub- Mauritius and the major hubs in Africa. Our fleet renewal program started last year with the arrival of the first two Airbus A350 aircraft. Two A330neos are to be delivered by the end of the year, offering similar levels of comfort and inflight facilities. Two A s will be joining our fleet in 2019 and two more in In order to have a homogeneous product on our medium and long haul flights, the cabins of two of our Airbus A340s and two A330s will be revamped in the coming months. The new Air Mauritius cabins have received excellent feedback from customers since it was implemented in our new A s. Meanwhile, Air Mauritius is also considering the modernization of the remainder of its fleet to support its regional ambitions. Air Mauritius is redesigning its inflight products and services so that passengers experience the true spirit of Mauritius on ground and from the moment they step on board on its flights. Various measures comprising of revenue enhancement, cost containment, automation of processes and digitalization as well as improved productivity from organisational restructuring, are also being undertaken to face the challenges ahead. This year, the development of Air Mauritius human capital has been set as a priority. The Air Mauritius institute will be launched to provide a wide range of quality aviation and management courses to all employees. It includes the setting up of a flying academy to conduct training courses for pilots and cabin crew in Mauritius. Our priority: A safe, sustainable and profitable operations in the interest of our country along with the well-being of our shareholders, our customers and our people. Somas Appavou Chief Executive Officer June 13, 2018 Annual Report 2017/18 07

11 Glossary Turnover Represents total revenue earned and loss derived, net of taxes, allowances and returns, from aircraft, helicopter, hotel, property rental, technical and traffic handling operations. Travelled Revenue Consists of gross revenue derived from the carriage of passengers, freight, mail and excess luggage. Profit after Tax Profit attributable to the equity holders. Gross profit margin Gross profit expressed as a percentage of turnover. Net profit margin Profit after tax expressed as a percentage of turnover. Earnings per share Profit after tax attributable to owners of the Company divided by number of shares issued. Net worth per share Total equity divided by number of shares issued. Return on Equity Profit after tax divided by shareholders interest. Interest Cover Profit before interest expense divided by interest payable. Interest and lease Cover Profit before interest and lease expense divided by interest and lease payable. Dividend Cover Profit after tax divided by proposed/paid dividend for the year. Return on Net Assets Profit after tax divided by total assets less current liabilities. Available seat-km (ASK) The product of seats offered and the distance flown (in kms). Revenue passenger-km (RPK) The number of passengers carried multiplied by the distance flown (in kms). Passenger load factor RPK expressed as a percentage of ASK. Available tonne-km (ATK) The product of capacity offered (in tonnes) and the distance flown (in kms). Revenue tonne-km (RTK) Multiplying revenue load carried (in tonnes) by the distance flown (in kms). Overall load factor RTK expressed as a percentage of ATK. Cargo tonne-km (CTK) Multiplying cargo tonnage carried by the distance flown. Revenue per ASK (RASK) Total operating revenue divided by ASK. Cost per ASK (CASK) Total operating costs divided by ASK. Unit costs Airline operating costs (excluding sales commissions and pool settlements) divided by system-wide available tonne kilometres. Cash Cash at bank, cash in hand and short-term deposits. EBITDA Earnings before Interest, Taxes, Depreciation and Amortisation. Gearing Ratio Total debt to equity. Debt includes interest-bearing loans and borrowings. Block Hours The time from which the aircraft departs from the gate to the time it arrives at the gate of its destination. Winter season Period between end of October to end of March. Summer season Period between end of March to end of October. Semdex An index of all listed share prices on the Stock Exchange of Mauritius. It indicates the movement of share prices from one trading session to another. 08 Air Mauritius

12 Annual Report and Business Review

13 Annual Report and Business Review The Directors have the pleasure in presenting the Annual Report, Business Review and Financial Statements of Air Mauritius Limited (the Company ) and of its subsidiaries (the Group ) for the year ended March 31, The Financial Statements are set out on pages 92 to 161. Results for the year The Group reported a profit of Eur 4.9m for the year ended March 31, 2018 compared to a profit of Eur 27.6m in the previous year. The Company posted a profit of Eur 4.5m for the year compared to a profit of Eur 26.9m for the previous year. The number of passengers carried went up by 5.8% to reach a record level of 1,694,956. The number of seats offered increased by 5.9% to 2,262,214 and the Passenger Load Factor decreased from 79.6% to 78.9%. Operating revenue increased by 3% from Eur 494.8m to Eur 509.6m whereas the operating expenses increased by 3.9% to reach Eur 464.7m. Consequently the gross profit decreased from Eur 47.5m to Eur 44.9m. Financial year 2017/18 marked the beginning of Air Mauritius fleet modernisation programme with the introduction of two new generation A aircraft. The first A aircraft was delivered on October 20, 2017 and the second one on November 26, Overview of the Business Principal activities Air Mauritius Limited The main activities of the Group are the operation of international and domestic scheduled air services for the carriage of passengers, freight and mail and the provision of ancillary services for aviation. The domestic network comprises solely of operations to Rodrigues using turbo prop ATR72 aircraft. The Company is the leading scheduled international passenger airline in the Indian Ocean region. The Group s Head Office is in Port Louis, while its principal place of operations is SSR International airport, Mauritius. From this base, it serves 25 destinations touching four continents i.e Africa, Asia, Australia and Europe. The airline has a comparatively high proportion of point to point business with interline accounting to about 36.5% of its passenger sales revenues. The Company has interline outward billings with other carriers which amount to around 7.4% of the airline passenger flown revenues. The Group also operates a worldwide air cargo business, solely in conjunction with its scheduled passenger services, using the belly hold capacity for cargo transshipment. Economic value is generated by the Group by meeting the demand for business and leisure travel, with leisure travel being the main passenger segment. The Company provides vital links for trade and investment, and feeds the tourism sector and the rest of the economy through its substantial leisure travel opportunities for individuals and families. In the financial year ended March 31, 2018, the Group earned Eur 514.3m in revenue as compared to Eur 497.8m for the previous year. 81% of this revenue was generated from passenger traffic, 9% from cargo and 10% from other activities. During the period under review, the number of passengers uplifted was 1,694,956 and 39,224 tonnes of cargo were uplifted across the network. At the end of March 2018, the Group had 15 fixed wing aircraft and 2 helicopters in operation. Mauritius Estate Development Corporation Limited ( MEDCOR ). The subsidiary Mauritius Estate Development Corporation Limited (MEDCOR) is engaged in leasing out office and commercial space. Air Mauritius Limited holds 93.7% of the issued share capital of the company. MEDCOR recorded a profit after tax of Mur 12.1m (Eur 0.3m) as compared to Mur 20m (Eur 0.5m) for last year. The office space stood at 99.7% occupancy level during the year. 10 Air Mauritius

14 Annual Report and Business Review Pointe Coton Resort Hotel Co. Ltd Pointe Coton Resort Hotel Co. Ltd is in the business of providing hotel accommodation together with all related services in Rodrigues. Air Mauritius Limited holds 54.2% of its issued share capital. The company recorded a profit of Mur 11.6m (Eur 0.3m) compared to a profit of Mur 14.5m (Eur 0.4m) for 2016/17. The occupancy rate of the hotel remained unchanged at 77%. Airmate Ltd Airmate Ltd is a wholly owned subsidiary of Air Mauritius Limited. It provides Call Centre services and provision of Human Resources to its holding company. Airmate Ltd recorded a turnover of Mur 221.3m (Eur 5.6m) and a profit of Mur 114,738 (Eur 2,880) as compared to a turnover of Mur 162.6m (Eur 4.1m) and a loss of Mur 4.6m (Eur 0.1m) for last year. Mauritius Helicopter Limited Mauritius Helicopter Limited is a wholly owned subsidiary of Air Mauritius Limited. It is in the business of providing helicopter services over the island. The company recorded a loss of Mur 6.0m (Eur 150K) as compared to a profit of Mur 0.8m (Eur 20,314) for the previous year. Objectives The Group aims to build a sustainable business with margins covering its cost of capital on a long term basis. It is working in partnership with all its key stakeholders to foster growth and harness business opportunities and also to effectively manage the risks associated with the business. Shareholders return For its shareholders, the Group s key responsibility is to generate a sustainable return on the capital employed in its business and to ensure it can invest for future growth. It seeks to return to shareholders a balance between capital growth and an income stream by way of dividend. The Group seeks to operate complementary businesses in its investments with the core being airline operations. Other stakeholders The Group also takes account of its responsibilities to other stakeholders including its employees, its customers and the communities affected by its operations, as well as having regard to the impact its business has on the environment. Group policies are benchmarked with best practice internationally in managing these stakeholder relationships. Air Mauritius (S.A) (Proprietary) Limited In South Africa, the Group operates through a 100% owned subsidiary, Air Mauritius (S.A) (Proprietary) Limited which acts as agent for Air Mauritius Limited. It operates on a cost re-imbursement basis with its expenses being directly accounted for in the books of the parent company. Air Mauritius Institute Co Ltd Air Mauritius Institute Co Ltd, a wholly owned subsidiary of Air Mauritius Limited. It is not yet operational. The Company was incorporated on December 19, It will cater for the learning and developement needs of Air Mauritius employees. Annual Report 2017/18 11

15 The Board of Directors

16 Annual Report and Business Review Seated from left to right Mr Derek LAM PO TANG, Mr Somas APPAVOU, Dr Arjoon SUDDHOO, FRAeS, Mrs Ammanah RAGAVOODOO, Standing from left to right Mr Muhammad Yoosuf SALEMOHAMED, Mr Louis RIVALLAND, Mr Anwar ABBASAKOOR, Mr Philippe ESPITALIER NOËL, Mr Ramprakash MAUNTHROOA ABSENT from the group picture Mr Nayen Koomar BALLAH, G.O.S.K., Mr Pradeep Singh KHAROLA, Mr Dev MANRAJ, G.O.S.K., Mr Patrick ROUX, Mr Bissoon MUNGROO, G.O.S.K. Annual Report 2017/18 13

17 Annual Report and Business Review The Board of Directors (Cont d) The names and details of the current Directors are set out below. All Directors served through the financial year with the exception of Mr Ashwani Lohani who resigned on August 23, 2017 and Mrs Banoomatee Veerasamy who resigned on March 29, Mrs Ammanah Ragavoodoo, Messrs Anwar Abbasakoor and Derek Lam Po Tang were appointed Directors on May 04, 2017, Mr Pradeep Singh Kharola was appointed to the Board on January 30, 2018 and Mr Somas Appavou was appointed to the Board on July 14, Current Directors Dr SUDDHOO Arjoon, FRAeS Chairman Dr Arjoon Suddhoo, FRAeS, was appointed to the Board and elected Chairman on March 09, After winning the national Laureateship in 1978, Dr Suddhoo completed his Aeronautical Engineering course with First Class Honours at the University of Manchester and pursued his PhD in Aeronautics at the same University. He is also holder of an MBA with Distinction from the University of Liverpool. After his post-doctoral research at Manchester University, he was employed in 1986, as Research Scientist/Manager for Rolls- Royce Aerospace in UK. In 1993, Dr Suddhoo was appointed as Head of Research and Planning by the Tertiary Education Commission and subsequently, in 1998, he assumed the post of Executive Director of the Mauritius Research Council, where he is currently. Dr Suddhoo has also been the Chairman of Air Mauritius Ltd for the period 2001 to He is a Fellow of the Royal Aeronautical Society, Fellow of the Mauritius Institute of Directors and Fellow of the Mauritius Academy of Sciences as well as Founding President and Fellow of the Aeronautical Society of Mauritius. APPAVOU Somas Chief Executive Officer Mr Somas Appavou was appointed CEO of Air Mauritius on July 14, He has over 20 years experience in the aviation industry and has worked in key global markets. He started his career in the Strategic Planning Department of Air Mauritius. He then joined Airbus where he held leadership positions including Head of Supply Chain in Hamburg, Germany and Regional Sales Director for Subcontinent-India and Africa. He was appointed Senior Sales Director, Middle East and Africa in 2009, a position he held until July In this capacity, Mr Appavou was in charge of mounting market presence and supporting the growth of established airlines and the development of new airlines in Africa. He is well versed in forming new business and industrial partnerships along with providing global functional support. During the past ten years, Mr Appavou grew Airbus commercial reach exponentially by selling over 200 aircraft to various customers around the world. Holder of multiple awards in Innovative Aircraft Financing Structure, Process Improvement and Aircraft Economics, he is also a certified Six Sigma Black Belt. Mr Appavou holds a Masters degree in Applied Mathematics from the University of Bordeaux in France, an M.Phil in Aerospace and Air Transport Economics from the École Nationale d Aviation Civile in Toulouse, France. Mr Appavou is a passionate pilot having obtained his licence in 1999 and enjoys flying as leisure. ESPITALIER-NOËL Philippe Mr Philippe Espitalier-Noël was appointed to the Board on October 09, He is currently the Chief Executive of Rogers & Company Limited, one of the largest listed conglomerates in Mauritius. He holds a BSc in Agricultural Economics from the University of Natal in South Africa and an MBA from the London Business School. Mr Espitalier-Noël also presides over the Business Mauritius Sustainability and Inclusive Growth Commission. RIVALLAND Louis Mr Louis Rivalland is currently the Group Chief Executive of Swan Insurance and Anglo Mauritius Assurance. He was previously part of the management team of Commercial Union in South Africa. He then worked as Actuary and Consultant for Watson Wyatt Worldwide. He is a former President of the Joint Economic Council and of the Insurers Association of Mauritius. He is a Board member of the Mauritius Revenue Authority. He has played an active role in the development of risk management, insurance and pensions in Mauritius having chaired or been part of various technical committees in these areas. He holds a BSc (Hons) in Actuarial Science and Statistics, and is a Fellow of the Institute of Actuaries, UK. He was appointed to the Board on July 26, Air Mauritius

18 Annual Report and Business Review The Board of Directors (Cont d) MAUNTHROOA Ramprakash Mr Maunthrooa is a Fellow Member of the Institute of Chartered Secretaries and Administrators UK (FCIS) and a Fellow Member of the Chartered Institute of Transport UK (FCIT). Mr Maunthrooa has spent more than two decades in the port sector. He was Director General of the Mauritius Ports Authority (MPA) up to October He has also served as Chairman of the MPA from October 2000 to November Mr Maunthrooa was also the Managing Director of the Board of Investment during the period 2010/2011. Mr Maunthrooa works as Senior Adviser at the Prime Minister s Office (PMO) since January 2015 and also serves on the Board of State Bank of Mauritius (SBM) Holdings Ltd, SBM (NBFC) Holdings Ltd, SBM (Bank) Holdings Ltd, SBM (NFC) Holdings Ltd and State Insurance Company of Mauritius (SICOM). He was appointed to the Board on February 05, MANRAJ Dev, G.O.S.K. Mr Manraj, G.O.S.K., is currently the Financial Secretary at the Ministry of Finance and Economic Development of the Government of the Republic of Mauritius. Mr Manraj is a Fellow of the Association of Chartered Certified Accountants (FCCA) and holds a Diploma in International Management Development from (IMD) Lausanne, Switzerland. During his career, predominantly within the public and semigovernmental spheres in Mauritius, he has contributed on a large scale to the socio-economic development of the country. Mr Manraj has participated in the negotiations leading to the signature of Double Taxation Avoidance Agreements with several countries. He has also attended numerous discussions and consultative meetings with the World Bank, International Monetary Fund as well as other key international institutions. As Financial Secretary, Mr Manraj has also concluded G to G agreements with various African countries such as Ghana, Senegal and Ivory Coast on behalf of the Mauritius Africa Fund. Mr Manraj has likewise participated actively in the implementation of major projects in Mauritius such as the Ebene Cyber City project and the setting up of numerous public sector organisations including the State Investment Corporation (SIC), State Informatics Ltd (SIL), the former Mauritius Offshore Business Activities Authority, the National Computer Board, the Board of Investment, Business Parks of Mauritius Ltd amongst others. Mr Manraj has also been a Visitor of the University of Mauritius. He was appointed to the Board on March 09, MUNGROO Bissoon, G.O.S.K. Mr Mungroo, G.O.S.K. is the President of the Association of Hotels de Charme de l ile Maurice, President of the Rashitriya Sanatan Dharma Mandir Sangathan, Trustee/Founder Member of Mangal Mahadev Foundation and the Chairman and Managing Director of Manisa Hotel (Mauritius) and Le Flamboyant Hotel. He is the Managing Director of Mungroo & Sons Ltd (Transport), Gitanjali Co Ltd (Transport), Director of ALTEO Milling Company and the Managing Director of Office Clean and DHR Training. He is a Member of the School Management Committee, MITD Ecole Hôtelière Sir Gaëtan Duval. He was appointed to the Board on April 10, SALEMOHAMED Muhammad Yoosuf Mr Salemohamed started his career in a chartered accountants firm where he obtained training in Accounting and Auditing. He joined a vertically integrated textile manufacturing Company as accountant in 1975 and ended his career there as General Manager. He has been associated in various textile activities since 1975 to date. He is a past president of the Mauritius Chamber of Commerce and Industry, past Chairman of the Mauritius College of the Air, past president of the MEFPA. He has also been a Director of the Development Bank of Mauritius, a member of the Petroleum Pricing Committee and an adviser to the Ministry of Commerce and Industry. He is presently the Chairman of Enterprise Mauritius and a Board member of the Islamic Cultural Centre Trust Fund Board. He was appointed to the Board on July 30, He has, additionally, successfully negotiated, on behalf of the Republic of Mauritius, for the obtention of concessional financing and grant from India and China to implement major national infrastructure projects. Annual Report 2017/18 15

19 Annual Report and Business Review The Board of Directors (Cont d) ROUX Patrick Mr Patrick Roux is a graduate from the Ecole Nationale Supérieure des Télécommunications in Paris. He began his career at Air France in In 1992, he joined the Revenue Management Team at Paris headquarters where he was in charge of implementing the first yield management tool. After having implemented the merger with Air Inter, he became, in 1998, Head of Pricing and Revenue Management for all short and medium haul flights. In November 1999, he became Head of the Air France CEO s Executive Cabinet, until 2002, when he became the worldwide Marketing Director of Air France. In 2008, his responsibilities were expanded when he was appointed Senior Vice-President of Marketing for Air France-KLM. In September 2010, he became Senior Vice-President Air France-KLM for the American Continent based in New York. In September 2013, he was appointed Senior Vice President Air France-KLM for Asia Pacific, and Senior Vice President Alliances Air France-KLM as from February 01, He was appointed to the Board on January 22, BALLAH Nayen Koomar, G.O.S.K. Nayen Koomar Ballah, G.O.S.K. was appointed Secretary for Home Affairs on January 01, 2015 and Secretary to Cabinet and Head of the Civil Service on September 16, He holds a Diploma in Public Administration and Management, a Bachelor of Arts in Political Science and Economics, and a Bachelor of Arts (Honours) in English. He has a long career in the public service and has been the Secretary of the Public Service Commission and the Disciplined Forces Service Commission. He has served in senior positions in various Ministries such as the Ministry of Agriculture, Fisheries and Natural Resources, Ministry of Arts and Culture, Ministry of Youth and Sports, the Ministry of Public Infrastructure, Land Transport and Shipping, and the Prime Minister s Office. He has also served as chairperson and member on various boards and committees and is currently the Chairperson of the State Bank of Mauritius Ltd, Mauritius Telecom, the Mauritius Revenue Authority and Multi-Carrier (Mauritius) Ltd, and Director on the Board of Mauritius Duty Free Paradise Co. Ltd. He was conferred the award of Grand Officer of the Star and Key of the Indian Ocean (G.O.S.K.) by the President of the Republic of Mauritius on March 12, 2018 for distinguished service in the public sector. He was appointed to the Board on November 10, RAGAVOODOO Ammanah Mrs Ammanah Ragavoodoo holds a Bachelor of Laws Degree from the London School of Economics and Political Science, United Kingdom since Having successfully completed the Vocational Examinations held by the Council of Legal Education in 1997, she was admitted as an Attorney in December 1998 and became a Member of the Mauritius Law Society. She has been in private practice for the last twenty years advising corporate bodies, statutory bodies, local and International clients. She is also a Board Member of the Financial Intelligence Unit. She was appointed to the Board on May 04, ABBASAKOOR Anwar Mr Anwar Abbasakoor is a practising Attorney-at-Law. He qualified as an Attorney at Law in April 1989 and has since then been exercising in the general practice of law in various fields including constitutional, political, administrative, family, tax, corporate, real estate, business, industrial, commercial, bankruptcy, insolvency, environmental and intellectual property laws. Over the past 28 years, he has been working with a widely diverse portfolio of clients ranging from local and foreign private individuals to corporate entities in Mauritius, few foreign corporate entities, NGOs, parastatal bodies, parastatal corporate entities and an autonomous regional government namely the Rodrigues Regional Assembly. He has also been a Lecturer in Law at the Council of Legal Education for three years. He is currently an Independent Practitioner whilst working in close collaboration with various other law firms and barristers chambers. He was appointed to the Board on May 04, Air Mauritius

20 Annual Report and Business Review The Board of Directors (Cont d) LAM PO TANG Derek Mr Derek Lam Po Tang is currently the Executive Director of several companies of the Lam Po Tang Group. He has over 25 years of management experience both in trading and manufacturing sector. He holds a Bachelor of Arts in Business Administration with Honours from Washington State University in USA. He was appointed to the Board on May 04, Kharola Pradeep Singh Mr Pradeep Singh Kharola, born on 15 September 1961, having Education Qualifications of Phd and Masters in Development Management, has taken over as Chairman and Managing Director of Air India Limited effective December 12, A 1985-batch Karnataka Cadre Officer, he has worked in various posts in Karnataka, including as the Chairman of Karnataka Urban Infrastructure Development and Finance Corporation Ltd. He has also served as Principal Secretary to the Karnataka Chief Minister. He was the Managing Director of Bangalore Metro Rail Corporation Ltd since February He was appointed to the Board on January 30, Resignation of the Directors The following Directors have resigned during the financial year: LOHANI Ashwani Mr Ashwani Lohani was the Chairman and Managing Director of Air India. He earlier worked as the Managing Director and Commissioner Tourism, Government of Madhya Pradesh, CAO/IROAF, CME Northern Railway, DRM Delhi, Director of National Rail Museum, New Delhi, Director in the Ministry of Tourism Government of India, Chairman and Managing Director of India Tourism Development Corporation and other important assignments in railways. VEERASAMY Banoomatee Mrs Banoomatee Veerasamy was the Acting Managing Director of The State Investment Corporation Ltd (SIC), the investment arm of Government of Mauritius. She has 30 years experience as Director on a number of Boards where Government holds a stake. She has a strong background in strategic investment, having managed the SIC s portfolio of wholly and partly owned Government businesses. She is the Executive Director of Prime Partners Ltd, a fully owned subsidiary of the SIC, serving as Corporate Secretary to subsidiaries/associates of SIC and other companies. A qualified stockbroker, Mrs Veerasamy has managed Prime Securities Ltd and has assisted in the inception of the Stock Exchange of Mauritius (SEM), of which she was also a member. A Fellow of the ICSA, Mrs Veerasamy also holds a Master s degree in law from the University of London. She was board member up to March 29, Recent Appointment of Director The following director was appointed after March 31, 2018: BEEJAN Manickchand Mr Manickchand Beejan is currently the Managing Director of the State Investment Corporation Ltd. He holds a B.A. Hons with Distinction in Economics from a Canadian University and an Msc in Financial Management from the University of London. He has a long and successful career with work experience in government, state-owned enterprises and private sector companies. He sat in capacities ranging from Chairman, Executive Director and Independent Director on more than 40 Boards of companies that are involved in a diverse range of activities including insurance, equity investment, portfolio and wealth management, fund management, casinos, housing, property development, sugar sector, IT sector, commerce and education. He was appointed to the Board on June 13, Company Secretary SEETUL Vijay Mr Seetul is also the Executive Vice President-Finance and currently also overseeing the Procurement and Facilities functions as well as the Human Resources functions of the Company. A former President of ACCA (Mauritius), he sat on the Board of the Financial Reporting Council. He is a fellow of the Chartered Association of Certified Accountants and joined the Company in April Annual Report 2017/18 17

21 Annual Report and Business Review Corporate Governance Corporate governance involves balancing the interests of the stakeholders in a Company - these include its shareholders, management, customers, suppliers, financiers, government and the community at large. The Board is accountable to the Company s shareholders for good governance and is committed to ensure that the interests of all stakeholders are given due consideration. A new Code of Corporate Governance is effective in Mauritius as from July 01, 2017, and the application of this new Code is as from the reporting year ending on or after June 30, 2018, in the Company s case therefore, for the year ending March 31, The main change brought about by the new Code is that it introduces a Principles-based approach. These Principles must be applied and the Company must explain how the Principles were applied (Apply and Explain). Hence, for the current year, the old Code still applies, and the reporting therefore still follows the old Code. In line with the Report on Corporate Governance for Mauritius issued by the National Committee on Corporate Governance under the Financial Reporting Act 2004 (the Code ), the Board of Directors has put in place various committees to assist in the execution of its responsibilities and to ensure compliance with the provisions set out in the Code. Board of Directors The Board is led by the non-executive Chairman, Dr Arjoon Suddhoo FRAeS, while the executive management of the Company is led by the Chief Executive Officer, Mr Somas Appavou. The roles of the Chairman and the Chief Executive Officer are separate and recognised in terms of the Report on Corporate Governance for Mauritius. Role of the Board The role of the Board is threefold namely, to establish policies, to make significant and strategic decisions and to oversee the organisation s activities. The Board sets the Company s strategic targets, ensures that the necessary financial and human resources are in place for the Company to meet its objectives and reviews management performance. The Board also sets the Company s values and standards and ensures that its obligations to the stakeholders are understood and met. Board Meetings The Board of the Company met fifteen times during the year under review. The Board has defined specific terms of reference for its committees. A statement of the Directors responsibilities in respect of the financial statements is set out on page 84 and a statement on going concern is given on page 105. Board Information All Directors receive regular information about the Company s affairs to enable them discharge their duties at Board meetings. Independent professional advice is available to Directors in appropriate circumstances, the cost of which is fully borne by the Company. Board and Director Appraisal The Board of the Company was reconstituted during financial year 2017/18 and it complied with the Company s policy to review and evaluate the performance of the Board. The results of the exercise were shared with the Board. Roles and functions of Chairman and Chief Executive Officer The Chairman s primary function is to preside over meetings of Directors and to ensure the smooth running of the Board and to preside the Company s meetings of Shareholders. The function and role of the Chief Executive Officer is separate from that of the Chairman. The main functions of the Chief Executive Officer are, interalia, to develop and recommend to the Board a long term vision and strategy for the Group, to devise business plans and budgets that support the Company s long-term strategy, to strive to consistently achieve the Company s financial and operating objectives and to ensure that the day-to-day business affairs of the Company are appropriately managed and monitored. 18 Air Mauritius

22 Annual Report and Business Review Corporate Governance (Cont d) Role of Non-Executive and Independent Non- Executive Directors There were 14 Directors serving on the Board of Air Mauritius as at March 31, Non-executive and Independent Directors play a vital role in providing independent judgement in all circumstances. The non-executive Directors are drawn from a diversity of businesses and other backgrounds, so as to bring a broad range of views and experiences to Board deliberations. Although the Board is presently composed of one executive Director, it is of the view that the spirit of the Code is being respected in view of the attendance and participation of the Senior Executives at all Board meetings and deliberations on matters such as strategy and investment. The Board acknowledges that the current practice is for the controlling shareholder to propose members of the Board for election by shareholders at the Annual Meeting of the Company. Four of these are Independent Directors as defined by the Code. In line with the Code, all Directors stand for re-election on a yearly basis. Nominations to the various committees are also made on a yearly basis. Senior Executives of the Company are invited regularly to attend Board meetings and sub-committee meetings. External consultants are also invited to attend Board and subcommittee meetings as and when their expertise is required. Significant Contracts No contracts of significance or loans existed between the Company and its Directors during the year under review, with the exception of the service contract of the Executive Director. The Company has a well-established procedure for the disclosure of interests including a Register of Interests for both Board and Management. Role and Function of Company Secretary The Company Secretary plays a key role in advising the Board in the application of Corporate Governance in the Company. He also ensures that the Company complies with its constitution and all relevant statutory requirements, codes of conduct and rules established by the Board. The Company Secretary ensures that papers for Board and Committee Meetings are distributed prior to the relevant meeting. All Board members have access to the Company Secretary for any further information they may require in the discharge of their responsibilities. The Company Secretary is the focal point of contact for institutional and other shareholders. The appointment and removal of the Company Secretary is a matter for the Board as a whole. Dealings in Company Shares No Director dealt in Company shares during the year. Directors are notified of close periods on a quarterly basis. Details of Directors shareholding in the Company are given on page 30 of this Annual Report. Directors Remuneration Board Directors are paid monthly fees for their services to the Company. Directors, who are also Directors within the Group, receive fees from these subsidiaries. Details of the Directors fees and other remuneration are contained on page 29 of the Annual Report. Annual Report 2017/18 19

23 Annual Report and Business Review Corporate Governance (Cont d) Directorship of the Group The table below shows the Board memberships across the Group. Name of Directors Air Mauritius Holding Ltd Air Mauritius Limited Mauritius Estate Development Corporation Limited (MEDCOR) Pointe Coton Resort Hotel Co Ltd Airmate Ltd Mauritius Helicopter Limited Air Mauritius Holidays Limited (under voluntary winding up) Air Mauritius Institute Co Ltd Dr Arjoon Suddhoo, FRAeS Chairman Chairman Chairman Chairman Chairman Chairman Chairman Chairman Mr Somas Appavou (CEO as from July 14, 2017) Mr Ramprakash Maunthrooa Mr Dev Manraj, G.O.S.K. Mr Philippe Espitalier-Noël Mr Louis Rivalland Mr Bissoon Mungroo, G.O.S.K. Mr Muhammad Yoosuf Salemohamed Mr Patrick Roux Mr Nayen Koomar Ballah,G.O.S.K. Mrs Ammanah Ragavoodoo (as from May 04, 2017) Mr Derek Lam Po Tang (as from May 04, 2017) Mr Anwar Abbasakoor (as from May 04, 2017) Mrs Banoomatee Veerasamy (up to March 29, 2018) Mr Pradeep Singh Kharola (as from January 30, 2018) Mr Ashwani Lohani (up to August 23, 2017) Mr Pankaj Srivastava (alternate Director to Mr A Lohani and Mr P Kharola) Mr Radhakrishna Chellapermal (alternate Director to Mr D Manraj) Mr Olivier Prévost (alternate Director to Mr P Roux) 20 Air Mauritius

24 Annual Report and Business Review Corporate Governance (Cont d) Board Members and Board Meetings The following table shows the list of Board members and the number of Board and Committee meetings held during the year and the attendance of individual Directors. Status Board AC RMSC SC CGC FC Chairman Dr Arjoon Suddhoo, FRAeS N 15/15 n/a 6/6 4/4 n/a 6/6 Chief Executive Officer Mr Somas Appavou (as from July 14, 2017) E 11/11 n/a 5/5 2/2 4/4 4/4 Directors Mr Ramprakash Maunthrooa N 14/15 n/a 3/6 4/4 n/a 5/6 Mr Dev Manraj, G.O.S.K. N 3/15 n/a 0/2 n/a n/a n/a Mr Philippe Espitalier Noël N 8/15 1/1 2/4 3/4 n/a 5/6 Mr Louis Rivalland N 11/15 4/5 5/6 n/a n/a n/a Mr Bissoon Mungroo, G.O.S.K. I 12/15 n/a 2/2 n/a n/a n/a Mr Muhammad Yoosuf Salemohamed I 15/15 1/1 n/a n/a 4/4 6/6 Mr Patrick Roux N 4/15 n/a n/a n/a n/a n/a Mr Nayen Koomar Ballah, G.O.S.K. N 10/15 n/a n/a 2/2 n/a n/a Mr Anwar Abbasakoor (as from May 04, 2017) I 14/14 3/4 n/a n/a 4/4 n/a Mr Derek Lam Po Tang (as from May 04, 2017) N 12/14 2/4 3/3 2/2 n/a n/a Mrs Ammanah Ragavoodoo (as from May 04, 2017) I 14/14 3/3 n/a 2/2 4/4 n/a Mr Pradeep Singh Kharola (as from January 30, 2018) N 1/3 n/a n/a n/a n/a n/a Mrs Banoomatee Veerasamy (up to March 29, 2018) N 13/15 5/5 n/a n/a 3/4 5/6 Mr Ashwani Lohani (up to August 23, 2017) N 1/6 n/a n/a n/a n/a n/a Mr Pankaj Srivastava (alternate to Mr A Lohani and Mr P Kharola) N 2/15 n/a n/a n/a n/a n/a Mr Olivier Prevost (alternate to Mr P Roux as from October 01, 2017) N 1/1 n/a n/a n/a n/a n/a Mr Radhakrishna Chellapermal (alternate to Mr D Manraj) N 7/15 n/a 1/1 n/a n/a n/a E = Executive Director I = Independent Director N = Non-Executive Director n/a: Not a member Company Secretary: Vijay Seetul Auditors: Ernst & Young and KPMG AC Audit Committee CGC Corporate Governance Committee RMSC Risk Management Steering Committee FC Finance Committee SC Staff Committee Attendance: Number of meetings attended/total eligible to attend Annual Report 2017/18 21

25 Annual Report and Business Review Corporate Governance (Cont d) Board Committees The Board has five specific sub-committees, which meet regularly under the terms of reference set by the Board. Copies of these are also available on airmauritius.com Specific responsibilities are assigned to sub-committees of the Board, namely, the Audit Committee, the Risk Management Steering Committee, the Corporate Governance Committee, the Staff Committee and the Finance Committee which act within the parameters of their clearly defined terms of reference. As and when necessary other committees have been set up by the Board on an adhoc basis to deal with specific issues of relevance to the Company. Each of the Committees has authority to take external advice as required. AC RMSC SC CGC FC Audit Committee Risk Management Steering Committee Staff Committee Corporate Governance Committee Finance Committee 1. Audit Committee (AC) Members: Mr Louis Rivalland (Chairman), Mr Philippe Espitalier-Noël (from Apr 01, 2017 to Aug 03, 2017), Mrs Banoomatee Veerasamy (up to Mar 29, 2018), Mr Derek Lam Po Tang (as from Aug 08, 2017), Mrs Ammanah Ragavoodoo (as from Aug 08, 2017), Mr Anwar Abbasakoor (as from Aug 08, 2017), Mr Muhammad Yoosuf Salemohamed (as from Jul 24 to Aug 08, 2017) Secretary: Mr Vijay Seetul In attendance: Mr Somas Appavou (as from Jul 14, 2017), Mr Indradev Buton, Mr Vijay Seetul, Mr Dindoyal Sookun, Mr Lekrajlall Narain, Ernst & Young and KPMG. All members of the Audit Committee are Non-executive Directors and included two Independent Directors of the Board. However, the non-executive Chairperson of the Audit Committee was not an Independent Director as prescribed by the Code but had the professional knowledge, expertise and experience in accounting to head this committee. The Board considers that each member brings broad experience and professional knowledge of financial reporting to the Committee s deliberations. The Committee s main responsibilities include: To oversee the financial reporting process to ensure the balance, transparency and integrity of published financial information; To review the effectiveness of the Company s internal financial control; To evaluate the independence and to review the effectiveness of the internal audit function; To ensure that no unjustified restrictions are made on the internal audit function; To review the effectiveness of the independent audit process including recommending the appointment and assessing the performance of the external auditor; To review the Company s process for monitoring compliance with laws and regulations affecting financial reporting, its Code of Business Practice and Ethics and its Fraud Prevention Policy; To review the appropriateness of the Group s accounting policies and consider changes to them; and To review the significant accounting judgments and monitor the integrity of the annual and interim financial statements. Ultimate responsibility for the approval of the annual and interim financial statements rests with the Board. In appropriate circumstances the Committee may make recommendations to the Board to put to shareholders for approval at the annual meeting, for the appointment, reappointment and removal of the Company s external auditors. The Committee reviews the work undertaken by the external auditors and assesses annually its independence and objectivity taking into account relevant professional and regulatory requirements and the relationship with the auditor as a whole. The Committee monitors the auditor s compliance with relevant regulatory, ethical and professional standards. It also monitors the provision of any non-audit services as well as processes for the rotation of partners, in the audit process. Items reviewed by the Audit Committee during the year include: a) Financial reporting: The Committee reviewed the draft annual and interim reports before recommending their publication to the Board. The Committee discussed with Management and external auditors the significant accounting policies, estimates and judgements applied in preparing these reports. 22 Air Mauritius

26 Annual Report and Business Review Corporate Governance (Cont d) b) Internal controls: The Committee has an ongoing process for reviewing the effectiveness of the system of internal controls. During the year it considered reports from the Head of Internal Audit summarising the work undertaken. The Committee looked at recommendations for improvements as well as actions taken by management as a result. The Committee also sought the views of the external auditors in making its assessment of the effectiveness of controls. c) Internal audit: It is the responsibility of the Internal Audit Department to provide assurance to the board regarding the implementation, operation and effectiveness of internal control and risk. To ensure the independence of the Internal Audit, the Head of Internal Audit reports directly to the Committee and the appointment and dismissal of the Head of Internal Audit is under the purview of the Committee. The Committee evaluated the performance of Internal Audit from the quality of reports and recommendations from the Head of Internal Audit. d) Audit Fees: The Committee also recommended to the Board the fees to be paid to external auditors each year. Details of the fees paid to the external auditors during the financial year 2017/18 can be found on page Risk Management Steering Committee (RMSC) Members: Dr Arjoon Suddhoo, FRAeS (Chairman), Mr Somas Appavou (CEO as from Jul 14, 2017), Mr Louis Rivalland, Mr Dev Manraj, G.O.S.K. (up to Aug 08, 2017), Mr Ramprakash Maunthrooa (up to Mar 29, 2018), Mr Bissoon Mungroo, G.O.S.K. (up to Aug 08, 2017), Mr Derek Lam Po Tang (as from Mar 29, 2018), Mr Philippe Espitalier-Noël (as from Aug 08, 2017) Secretary: Mr Vijay Seetul In Attendance: Mr Vijay Seetul, Mr Dindoyal Sookun and Mr Jean Laval Ah Chip The Committee s terms of reference include: Ensuring there is a system of risk assessment across the Company on an ongoing basis; Reviewing the effectiveness of the Company s risk management system including risk assessment reports; Assisting the Board to understand the total risks facing the Group and the Company; Approving risk mitigation actions for specific items of risk and identifying areas for system improvements and monitoring; Reviewing actions taken for specific critical transactions in accordance with the risk map for both financial and non-financial risks on a continuing basis; Setting and approving changes to financial approval limits for hedge and treasury transactions; and Setting and approving risk parameters for the Company s budget each year. The Risk Management Steering Committee met six times during the year to monitor enterprise-wide risk, approve hedge transactions for both currency and fuel and to set parameters for the Company s hedging strategy for each period. In addition the RMSC also:- Reviewed and approved risks limits and parameters, hedge mandate and any derogation from the risk manual as appropriate, whilst aligning to the business strategy and risk appetite; Reviewed and approved hedge performance for both jet fuel and currency and ensuring that these transactions remain within pre-approved risk framework; Ratified the key enterprise-wide risk register as approved by the risk owners and the leadership team; Carried out an analysis of counterparty credit risks, reviewing and approving new counterparties that would otherwise deviate from prescribed internally set criteria; and Reviewed and approved the budget financial parameters to be used as the basis for the financial year budget. Approving specific hedge counterparties and respective signature of ISDA documents thereof. 3. Staff Committee (SC) Members: Dr Arjoon Suddhoo, FRAeS (Chairman), Mr Somas Appavou (as from Jul 14, 2017), Mrs Ammanah Ragavoodoo (as from Aug 08, 2017), Mr Philippe Espitalier-Noël, Mr Ramprakash Maunthrooa, Mr Nayen Koomar Ballah, G.O.S.K. (up to Aug 08, 2017), Mr Derek Lam Po Tang (as from Aug 08, 2017). Secretary: Mr Vijay Seetul In Attendance: Mr Indradev Buton, Mr Balakrishna Seetaramadoo Annual Report 2017/18 23

27 Annual Report and Business Review Corporate Governance (Cont d) The Staff Committee is a Sub-Committee of the Board of Directors of Air Mauritius, and established by the Board which delegates the following powers to the Staff Committee to take appropriate decisions and/or to make recommendations to the Board on matters relating to inter alia:- (i) Human Resource plans and strategies; (ii) Selection, recruitment, appointments, promotion, restructuring and other related exercises; (iii) Remuneration and Performance Management System; (iv) Terms and Conditions of Service; (v) Training and Human Resource Development ; and (vi) Industrial relations policies and practices. 4. Corporate Governance Committee (CGC) Members: Mr Muhammad Yoosuf Salemohamed (Chairman), Mr Somas Appavou (as from Jul 14, 2017), Mrs Ammanah Ragavoodoo (as from Aug 08, 2017), Mr Anwar Abbasakoor (as from Aug 08, 2017), Mrs Banoomatee Veerasamy (from Aug 08, 2017 to Mar 29, 2018). Secretary: Mr Vijay Seetul The role of the Corporate Governance Committee is to ensure that Board structures as well as reporting requirements on corporate governance, whether in the Annual Report or on an ongoing basis, are in accordance with the principles of good governance and the Code. This committee was chaired by a Non-Executive and Independent Director. Four Independent/Non-Executive Directors have been appointed to that committee. The committee is composed of a majority of Independent Directors. 5. Finance Committee (FC) Members: Dr Arjoon Suddhoo, FRAeS (Chairman), Mr Somas Appavou (as from Jul 14, 2017), Mr Ramprakash Maunthrooa, Mr Philippe Espitalier-Noël, Mrs Banoomatee Veerasamy (up to Mar 29, 2018), Mr Muhammad Yoosuf Salemohamed. Secretary: Mr Dindoyal Sookun (up to Aug 29, 2017), Mr Vijay Seetul (as from Aug 30, 2017) In Attendance: Mr Somas Appavou (as from Jul 14, 2017), Mr Indradev Buton, Mr Vijay Seetul. The Finance Committee monitors all expenses and revenues of the Company by setting well established procedures of accountability and thresholds or limits of approval, in line with good governance and financial best practice and standards. The Committee s purpose is to support and advise the Board in overseeing financial affairs, including the review, approval, or recommendation to the Board (in each case consistent with the Board s delegation of authority) of agreements, financings, capital spending, short, medium and long term purchase agreements, leasing agreements, assets management, revenue obtained from its ongoing and new concerns and other transactions relating to the Company. The Committee advises the Board in relation to (a) Financial policies, strategies and courses of action, (b) Capital structure and funding; (c) Capital management planning and initiatives including capital allocation; (d) Acquisitions and divestments of assets, including proposals which may have a material impact on the capital position of the Company financial risk management practices; and (e) Transactions or circumstances which could materially affect the financial condition and profile of the Company. Directorship in other Listed Companies Name of Directors Mr Philippe Espitalier-Noël Mr Louis Rivalland Mr Ramprakash Maunthrooa Directorship in other listed companies Rogers & Company Limited Swan General Ltd New Mauritius Hotels Limited Swan General Ltd SBM Holdings Ltd 24 Air Mauritius

28 Annual Report and Business Review Corporate Governance (Cont d) Leadership Team Other than Mr Somas Appavou, whose profile is given on page 14, the leadership team of Air Mauritius comprises of the following senior executives. Indradev Buton Mr Buton was the Executive Vice President-Strategic Planning and Information Systems until September He has concurrently been the Officer-in-Charge from October 2016 to July Since September 2017, he is assuming the role of Chief Operating Officer, responsible for the main airport functions as well as the Fleet Planning department. Mr Buton joined Air Mauritius in Donald Emmanuel Payen Mr Payen is the Executive Vice President Customer, Product and Digitalisation. In the course of the year, he also oversaw Crisis Communications. Mr Payen has held several leadership positions in the operational areas, Cargo, Customer Experiences, Commercial, Communications and has also served the Company in Reunion, Singapore and France. He received the French national award, Knight of the Order of Merit - Chevalier de l Ordre National du Mérite in November He joined Air Mauritius in Vijay Seetul Mr Seetul is the Executive Vice President-Finance and also the Company Secretary. He is currently overseeing the Procurement and Facilities functions as well as the Human Resources functions. A former President of ACCA (Mauritius), he sat on the Board of the Financial Reporting Council. He is a fellow of the Chartered Association of Certified Accountants and joined the Company in April Fooad Nooraully Mr Nooraully is the Executive Vice President Legal. He was the Executive Vice President Legal, Corporate Communications and Company Secretary up to February 27, Barrister-at-law by profession, he was formerly a State Counsel at the Attorney General s Office. Mr Nooraully has also worked as Lecturer in Law at the University of Mauritius and News Producer at the MBC. He joined the Company in April Ashok Keerodhur Mr Keerodhur is the Executive Vice President-Technical Services. He is in charge of the Technical Services Department which provides maintenance and engineering services for the airline fleet and technical handling services to third parties. He joined the Company in April Captain Oumed Torabally Captain Torabally is the Executive Vice President Flight Operations. He is an experienced professional pilot, trainer and examiner. Captain Torabally joined the Company in Balakrishna Seetaramadoo Mr Seetaramadoo is the Executive Vice President- Commercial, Cargo and Resource Optimization. He initially joined the Company in 1984 and left in He has a wide experience in various areas of the airline business and is also a member of the IATA Faculty. He joined the Company in January Internal Audit The Internal Audit Department is headed by: Lekrajlall Narain Mr Narain is the Head of Internal Audit and is in charge of the Internal Audit function throughout the Group. He occupied various positions in Ground Operations Department, Human Resources Department and Technical Services Department before moving to the Internal Audit Department in May He is a fellow of the Chartered Association of Certified Accountants and also holds an MBA. He joined the Company in April Insurance Cover and Indemnities The Company has arranged appropriate insurance cover in respect of legal action against its Directors and officers. The Company has granted rolling indemnities to the Directors and the secretary, uncapped in amount but subject to applicable law, in relation to certain losses and liabilities which they may incur in the course of acting as officers of companies within the Group. These indemnities also set out the terms on which the Company may, in its discretion, advance defence costs. A specimen indemnity is available for view on the Company s website, by clicking on the heading Corporate Governance. Annual Report 2017/18 25

29 Annual Report and Business Review Corporate Governance (Cont d) Code of Ethics and Business Conduct The Code of Ethics and Business Conduct introduced in 2004 forms the foundation for the conduct expected of every employee in the Company s business dealings. This document has been endorsed by the Board and applies to all employees of Air Mauritius worldwide whether already in employment or newly recruited. Whilst it is impossible to anticipate or provide for every situation that may arise, the Code is a brief statement of the standards of business conduct which should guide everyday decisions. This Code sets out the standards and guiding principles of conduct of Air Mauritius personnel in the discharge of their duties and deals with principles of integrity, diligence and responsibility. It helps staff comply with their duties, adhere to the best standards and avoid breaches of discipline as a result of ignorance, misunderstanding or wrong interpretation of their obligations. Shareholders Agreement The Company is not a party to any shareholders agreement and to the best of its knowledge, there is no such agreement between its direct shareholders. Cascade Holding Structure The holding structure of the Company is set out on page 164 of the Annual Report. Substantial Shareholders The following shareholders were directly or indirectly beneficially interested in 5% or more of Air Mauritius Limited share Capital as at March 31, Shareholder Direct Indirect Effective % % % Air Mauritius Holding Ltd The Government of Mauritius The State Investment Corporation Ltd Rogers & Company Limited Compagnie Nationale Air France Air India Communication with Shareholders The Company maintains regular contact with its larger institutional shareholders through its meetings with the Chairman, the Chief Executive Officer and the Executive Vice President-Finance and Company Secretary. In addition, annual stockbroker and investor events are held to inform the public on the performance of the Company. The Board also receives regular feedback on investors views. Copies of any news releases and presentations to investors are made available to the public through the Company s website, The Annual Meeting of each year gives a reasonable opportunity to the Board to discuss all matters relating to the Company and its performance with shareholders. At these meetings, issues related to corporate governance, Company operations and performance are raised by the shareholders and responded to by the Directors. In addition, the Chief Executive Officer s address at the Annual Meeting responds to any issues raised by shareholders in writing, in advance of the meeting. Shareholders also express their views freely by voting for resolutions at the Annual Meeting. 26 Air Mauritius

30 Annual Report and Business Review Corporate Governance (Cont d) Donations As in previous years, the Group and the Company did not make any donations to political parties. The Company continued to provide support in the form of rebated tickets and promotions to social organisations. Only donation in cash was made to Prime Minister s Cyclone Relief Fund following the passage of cyclone Berguitta (Eur 24,558) during the financial year under review. Going Concern After making enquiries, the Directors consider that the Company has adequate resources to continue operating for the foreseeable future. For this reason, the going concern basis has been adopted in preparing the accounts for the year 2017/18 as disclosed in Note 4.3(i) of the financial statements Receipts and Returns to Shareholders Dividend Policy The Company has a policy of paying 30% of profits each year as dividend, subject to the solvency test. In determining the level of dividend, consideration is given to the Company s future funding requirements. The Directors have not recommended any dividend for the year ended March 31, 2018, in view of the financial results of the Company and major investment in aircraft that the Company intends to undertake in the forthcoming financial years. Shares and Shareholders The authorised share capital of the Company is MUR 2,000,000,000 (Eur 81,566,000) divided into 200,000,000 ordinary shares of MUR 10 each. The number of ordinary shares issued and fully paid in Air Mauritius Limited as at March 31, 2018 was 102,305,000 shares (Eur 41,724,000) the same as in the previous financial year. In accordance with the Company s constitution, all ordinary shares have equal rights to dividends and capital and each share carries one voting right. Capital Structure Shareholder Rights Air Mauritius Holding Ltd whose registered office is at Air Mauritius Centre, President John Kennedy Street, Port Louis is the holding Company of Air Mauritius Limited. The ultimate controlling entity is the Government of Mauritius. As at March 31, 2018, the shareholding of Air Mauritius Limited was as follows: Shareholding of Air Mauritius Limited as at March 31, 2018 Ordinary Shareholders Number of shares (of Mur each) % voting rights Air Mauritius Holding Ltd 52,175, % The Government of Mauritius 8,564, % The State Investment Corporation Ltd 4,646, % Rogers & Company Limited 4,379, % Compagnie Nationale Air France 2,841, % Air India 2,617, % National Pensions Fund 2,078, % The Mauritius Commercial Bank Ltd (A/C The Mauritius Development Investment Trust Co Ltd) 1,743, % Other Shareholders 23,257, % Total 102,305, % Annual Report 2017/18 27

31 Annual Report and Business Review Corporate Governance (Cont d) The shareholder analysis as at March 31, 2018 was as follows: Range of Shares No. of Shareholders No. of voting rights % of share capital % of all shareholders 1-1,000 10,341 3,639, ,001-5,000 1,081 2,474, ,001-10, ,558, ,001-25, ,145, ,001-50, ,101, , , ,881, ,001-1,000, ,456, Over 1,000, ,047, Total 11, ,305, Major clauses in the Memorandum and Articles of Association of Air Mauritius Limited In order to protect the operating rights of the Company under the air services agreements, the number of ordinary shares held by non-mauritian nationals is monitored by the Directors. Presently, there are no large interests of single or associated non-mauritian nationals in the shareholding of the Company. Issue of Shares Subject to the provisions of the Companies Act 2001 (the Act ) and, without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, any share in the Company may be issued either at par or at a premium or (subject to Section 54 of the Act) at a discount or by way of bonus and may, in accordance with any applicable enactment or rule of law, issue shares of no par value, and any shares issued by the Company may be issued with such preferred, deferred, other special rights or restrictions, whether in regard to dividend, voting, return of capital, or otherwise, on such terms and conditions and at such times and in such manner as the Company may by ordinary resolution determine. Transfer of Shares Any member may transfer all or any of his shares by instrument in writing provided that in the case of any shares of the Company which are traded on the Mauritius Stock Exchange the transfer may be in such form as is permitted by the Mauritius Stock Exchange. Every instrument of transfer of shares shall be accompanied by a declaration signed on behalf of the transferee in a form determined by the Board stating whether or not the transferee is on registration a Mauritian national and whether any person other than a Mauritian national will hold or have interest in the shares referred to in the instrument of transfer. Directors The number of Directors shall not be less than nine (9) members or more than fifteen (15) members. Not less than two thirds of the Directors of the Company shall be Mauritian citizens. 28 Air Mauritius

32 Annual Report and Business Review Corporate Governance (Cont d) Qualification of Directors No Director shall be required to hold shares in the Company to qualify him for appointment. Appointment of Directors The Directors of the Company shall be appointed by the Company in Annual Meetings. Related Party Transactions Related Party Transactions are disclosed in Note 32 of the consolidated and separate financial statements. Shareholders Information Information relating to share price, reporting dates, dividend declaration and payment dates and meetings of shareholders are shown on pages 170 and 171. Remuneration and benefits Remuneration and benefits of Mr. S. Appavou Remuneration and benefits of Mr. M. Pillay, C.S.K Fees paid during the year to Non-Executive Directors* Fees paid to the Executive Directors by subsidiaries 2 4 Fees paid to the Non-Executive Directors by subsidiaries * Monthly fees paid to each Non-Executive Director amounts to Rs 15,000 (Eur 376) except for the Chairman who was paid a monthly fee of Rs 75,000 (Eur 1,822) The fees exclude any amount of reimbursed expenses incurred wholly, exclusively and necessarily for the business. The Company provides the Executive and all Non-Executive Directors with the privilege of a reasonable amount of air tickets for themselves and their immediate family. The value of this privilege is not considered to be a part of their remuneration. Annual Report 2017/18 29

33 Annual Report and Business Review Corporate Governance (Cont d) Directors and officers liability insurance The policy covers: (i) the loss of each insured (a Director, officer and employee in a managerial or supervisory capacity) resulting from any claim made against the insured for any wrongful act in the insured s capacity as a Director, officer or employee of the Company except for and to the extent that the Company has indemnified the insured. (ii) the loss of the Company resulting from any claim made against the insured for any wrongful act in the insured s capacity as a Director, officer or employee (in a managerial or supervisory capacity) of the Company but only when and to the extent that the Company has indemnified the insured for the loss. The limit of liability is: First cover: Usd 10 M in the aggregate (including defence costs); Excess Layer cover: Usd 10 M in the aggregate including costs and expenses. Directors share Interests Ordinary Shares held on March 31, 2018 Direct Indirect Mr Anwar Abbasakoor 142,488 - Mr Derek Lam Po Tang 10, Mr Bissoon Mungroo, G.O.S.K 16,100 - Mr Louis Rivalland Auditors remuneration The remuneration to the auditors was as follows: The Company Subsidiaries Audit Services Other Services Remuneration for other services is derived from the provision of tax advice and special reports on compliance with financial and regulatory matters and transaction advisory services. Approved by the Board of Directors on June 13, 2018 and signed on its behalf by: Dr Arjoon Suddhoo, FRAeS Chairman of the Board Mr Louis Rivalland Director and Chairman of Audit Committee 30 Air Mauritius

34 Annual Report and Business Review Sustainability Report Sustainable Development Goals (SDG) Back in May 2017, Air Mauritius, in close collaboration with the Paille-en-Queue Social Club, participated in a full day awareness program on safe environment organised by ION Club (Mauritius). The main issues were: the urgency for recycling of plastic materials, keeping our beaches and lagoons rubbish-free and to foster installation of water dispensers (linked to the public water system) throughout the island and thus cutting down the use of water bottles. This was also an opportunity for the children to get acquainted with the pleasures of aquatic sports. To celebrate the 50th anniversary of the Company, a mini regatta was organised in Mahebourg. This was, yet, another occasion to demonstrate the Company s commitment towards the protection of the environment and the importance of social activities involving the community. Volunteers from Air Mauritius, Preskil Beach Resorts, Mauritian Wildlife Foundation (MWF), Cie de Beau Vallon Ltée and EcoSud, students from Loreto Convent Bambous Virieux, Loreto Convent Mahebourg, Hamilton College and Emmanuel Anquetil SSS proceeded with the plantation of 500 units propagules at the Ramsar site in Pointe d Esny. The event was also held in the context of Air Mauritius Climate Action project as part of the UN SDG 13 initiative. Air Mauritius, through its volunteers group, has, for the second consecutive year, maintained its sustainable action towards helping the needy children cared for by the NGO Association Elles C est Nous. Proper uniforms, shoes and school materials, were graciously offered by Air Mauritius employees and the NGO Association Airline Ambassadors. The event has as background the alignment of Air Mauritius with its Quality Education project as part of the UN SDG 4 initiative. Protection of the environment Air Mauritius, through its partnership with the Mauritian Wildlife Foundation, and having as key element of this agreement the One Take-off, One Tree Initiative, where MWF plants one native or endemic plant for each take-off of an Air Mauritius aircraft. Under this programme, MWF has produced and planted 6,000 native and endemic plants per year since 2008, which helps to reduce carbon emissions through habitat restoration. In 2017, 4,959 plants were planted in Anse Quitor Nature Reserve, 8,382 in the Grande Montagne Nature Reserve (Rodrigues) and 1,731 plants were donated (1600 to Rodriguan schools, 86 to Clubs and 45 to village communities). Therefore, over 15,000 plants have been planted in Rodrigues and given through donations. Preparation of Land In 2017, MWF Rodrigues continued to weed invasive alien species from plots selected for the Air Mauritius Project planting. MWF Rodrigues continued in its new planting site for the Air Mauritius One Take-off One Tree planting in Rodrigues, notably the Grande Montagne Nature Reserve. Another 3 hectares plot was opened up on the eastern sector of the Nature Reserve to accommodate for additional seedlings. Signing of the Buckingham Palace Declaration for the fight against the traffickers of endangered animals The International Air Transport Association (IATA) 72nd Annual General Meeting (AGM) unanimously endorsed a resolution denouncing the illegal trade in wildlife and wildlife products and pledging to partner with government authorities and conservation organizations in the fight against the traffickers of endangered animals. Propagation of Endemic Seedlings Native and endemic seedlings were propagated in the MWF Nursery at Solitude throughout In order to propagate these plants, propagation material consisting of seeds, seedlings, cuttings are collected from the wild throughout Rodrigues and brought to the nursery. During the year 2017, 13,341 seedlings of 37 endemic and native species were cared for in the MWF nursery and subsequently planted in the Anse Quitor and Grande Montagne Nature Reserves, of which 7,000 were under the Air Mauritius One Take-off One Tree planting programme. Annual Report 2017/18 31

35 Annual Report and Business Review Sustainability Report (Cont d) Planting in the Anse Quitor and Grande Montagne Nature Reserves The Mauritian Wildlife Foundation team planted in the Air Mauritius plot and other restoration plots in the Anse Quitor and the Grande Montagne Nature Reserves. Between 2008 and 2017, a total of 88,369 native seedlings have been planted in the Anse Quitor Nature Reserve, of which 26,995 native seedlings were planted within the Air Mauritius Plot. In 2016, the Mauritian Wildlife Foundation team extended the Air Mauritius One Take-off One Tree programme, to include the Grande Montagne Nature Reserve, where 1,500 plants were planted in the Air Mauritius Plot there. Plant Monitoring Following the planting of endemic seedlings in the Anse Quitor Nature Reserve and the Grande Montagne Nature Reserve, these seedlings are monitored for 3 years to assess survival and therefore improve planting techniques by planting species better adapted to the site conditions. Dead seedlings are also replaced. Donation of Plants in Rodrigues In 2017, MWF Rodrigues donated 1,731 native seedlings to 22 primary schools and various other local institutions, as part of its awareness-raising programme on the terrestrial biodiversity. This includes plants donated in the context of the World Biodiversity Day, when the Mauritian Wildlife Foundation gives one native or endemic plant to each Standard VI child throughout Rodrigues, These plants have been produced under the One take-off, One tree campaign in Rodrigues. Health Screening Campaign In July 2017, Air Mauritius, in collaboration with the Ministry of Health and Quality of Life, conducted a Non- Communicable Disease and Breast & Cervical Cancer Screening programme, for all its employees based in Mauritius. Blood Donation Campaign In May 2017, Air Mauritius conducted its annual blood donation campaign. Air Mauritius employees, as responsible corporate citizens, contributed more than 180 pints of blood to the Ministry of Health and Quality of Life to maintain the stock of blood bank. Health and Safety Status The financial year 2017/18 has been a busy year for the Company with the accomplishment of several health and safety initiatives aiming at ensuring continual Occupational Safety and Health (OSH) improvement, promoting a supportive OSH culture. The Company has achieved the following Safety, Health and Environment performance for the year 2017/18: a) Reportable Incidents Air Mauritius as an employer has had no reportable and notifiable accident, dangerous occurrences and fatal accident among its employees. Furthermore, there was no reportable and notifiable dangerous occurrence on the worksites despite numerous infrastructural projects were going on. However, the Company had registered one employee who had sustained severe multiple injuries following a road accident while one employee of Airmate working in the Company s premises sustained an injury which classified as reportable and notifiable to the Occupational Safety and Health Inspectorate. b) Emergency Preparedness Plan The Company had assessed its emergency preparedness to deal with situations of fire outbreaks within its premises. Unannounced fire drills had been conducted at Head Office and for all Air Mauritius Ltd buildings at the airport in compliance with provisions of the Occupational Safety and Health act of 2005 and also to ensure the validity of the fire certificates issued by the Mauritius Fire and Rescue Services. These fire simulation exercises had been instrumental to changes brought to the fire evacuation procedures as well as the need for review of the fire protection system in critical buildings. A plague management plan was established to counteract any possible risk of encountering passengers with plague travelling in Air Mauritius aircraft to Antananarivo. Several initiatives were launched namely the release of Plague Disease Fact Sheet, uploading of insect repellent, continuous monitoring and feedback from Antananarivo Station Manager and unflinching follow up by OSH Team and support of Senior Management Leadership team. 32 Air Mauritius

36 Annual Report and Business Review Sustainability Report (Cont d) c) Health and Safety Communication OSH communication and consultation have been the mandate for seeking active participation and involvement of the key partners through the following forums: OSH team has participated actively in the Aerodrome Safety Committee which falls under the aegis of Airports of Mauritius and comprises of all airport stakeholders with the mission to ensure safe operations on the airside. Statutory consultative meetings between management and employees on OSH matters had been held every two months during the financial year 2017/18. On the other hand, meetings of the Departmental Safety and Health Committees had also been convened on regular basis with all departments. There had been frequent OSH Leadership meetings between OSH team members and top management for review of OSH status in their respective clusters. Health Surveillance and Promotion at Work In compliance with statutory obligations, Cabin Crew as well as Pilots have undergone their medical assessment to be certified as being fit to fly while vaccination exercise had been on-going for cleaning staff. The following well-being programmes were organised: a) The implementation of a dedicated process to identify, assess, treat and monitor risks through appropriate risk reduction techniques (Prevention, Mitigation, Transfer). b) Involvement of Internal teams and line management to build up and update on a regular basis the risk portfolio. c) Regular reporting to RMSC for the review of major risks together with treatment measures in place. d) Stress Management at the Workplace Health and Safety Training The following OSH training had been carried out during the year 2017/18: OSH induction for Ground Operations Staff, Fire Fighting Techniques and Familiarisation with Fire Evacuation Procedures, Working Safely in Aircraft Fuel Tank, Noise at Work, Sensitisation on Plague Diseases, Manual Handling, First Aid at Work, OSH Induction for Cabin Crew, Technical Services and Contractors, Familiarisation with Defensive Driving and Changes in Road Traffic Act for Drivers, Ramp Safety, Human Factors, Safety Management System Training in Emergency Procedures. Management of Hazardous Wastes Yard upkeep was a priority activity to respond to the commitment to provide clean and environmentally safe working areas to employees. The following environmental interventions were taken: a) Assessment of air emissions of the incinerator at Qantas Building by the Ministry of Environment, b) Disposal of all solid wastes stacked outside the Company s buildings, (c) Establishment of a robust Pest Control System, (d) Safe storage, disposal and recycling of hazardous wastes. OSH, Fire and Environmental Routine Inspections During the year 2017/18, Air Mauritius had visits of officers from enforcing agencies namely the Occupational Safety and Health Inspectorate, the Mauritius Fire and Rescue Service, Public Health Officers and the Department of Environment for routine inspections to check compliance issues. All improvements notices had been attended. Annual Report 2017/18 33

37 Annual Report and Business Review Sustainability Report (Cont d) OSH Improvements The following OSH training had been carried out during the year 2017/18: a) The following OSH improvements have been completed: Upgrading of welfare facilities at Hangars, Installation, testing, commissioning and operation of an Electric Fire Pump at Hangars A340 and ATR 72 for Aircraft Fire Fighting, Improvements of automatic Fire Fighting at Inflight Services warehouse, Continuous housekeeping around the buildings at the airport, Grant of new fire certificate for Qantas Building b) The following OSH improvements are on-going: Installation of an Intelligent and Addressable Fire Detection and Alarm System at Technical Services and Inflight Services Departments, Upgrading of the Electrical Installation System at Hangar A340 and ATR 72, Construction of new office and welfare facilities for Ground Operations, drafting and reviewing of OSH policies. Carbon Emission In the first instance, Air Mauritius revisited the EU emissions trading system (EU ETS) which sets a cap on how much CO2 heavy industry, including aviation, and power stations can emit. The total volume of allowed emissions is distributed to companies as permits which can be traded. ETS is a pivotal part of the EU s policy to combat climate change and is key to reducing greenhouse gas emissions cost-effectively. Set up in 2005, it is the world s first major carbon market and remains the biggest one. It operates in all 28 EU countries in addition to Iceland, Liechtenstein and Norway. ETS limits emissions from more than 11,000 heavy energy-using installations (power stations and industrial plants) and airlines operating flights between these EU air space. Putting a price on carbon and trading it delivers concrete results for the environment: In 2020, emissions from sectors covered by the system will be 21% lower than in More relevant to the aviation sector and therefore Air Mauritius, the European Union has indicated its general acceptance of the ICAO Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). The Package contains the Standards and Recommended Practices (SARPs) technical rules for the international aviation carbon offsetting scheme that will apply to States and aeroplane operators from The rules are not without controversies. Airlines are striving to make planes more fuel and carbon efficient particularly in the light of rising fuel prices. Irrespective, Air Mauritius already has the One Take-off One Tree program contributing to more endemic trees on the island, as the program name suggests. Air Mauritius has voluntarily complied with the EU ETS since 2012 and continues to do so. Air Mauritius takes its social and environmental responsibilities seriously and intends to continue to improve its environmental efficiency and to minimise emissions. Enterprise Risk Management Enterprise Risk Management (ERM) is a strategic business discipline that supports the achievement of an organization s objectives by addressing the full spectrum of risks, thereby enhancing management decisions and fulfilling corporate governance obligations. ERM usually encompasses all significant risks faced by the organisation both internally including strategic risk, operational risk, financial risk, compliance risk and hazard risk, and within the external environment including geopolitical and economic considerations. The focus remains on mitigating these risks at all levels in the business, although many remain outside the Company s control such as government regulation, taxes, terrorism, adverse weather and pandemics. The Company ensures that it makes full use of its ERM as an integrated process to identify, assess, treat and monitor risks through appropriate risk reduction techniques (Prevention, Mitigation, Transfer). Through its ERM program, the Company is able to take a holistic view of its risk profile and not compartmentalize or silo risks, to recognize the correlation between risk types and put in place controls to mitigate future loss events. 34 Air Mauritius

38 Annual Report and Business Review Enterprise Risk Management (Cont d) The Company recognizes that its ERM program does not only identify threats but also discerns opportunities and proactively addresses risks and opportunities, to protect and create value for all stakeholders, including shareholders, employees, customers, regulators and society at large. Benefits of an ERM approach Increase of risk awareness across all operations Improvement of Risk Mitigation reducing the Company s exposure Increase of performance through greater certainty Effective balance between risk seeking, risk management and risk avoidance Enablement of a risk aware decision making process Achievement of risk governance objectives Protection of shareholder value Risk Management Structure Ultimate responsibility for effective management of risks rests with the Company s Board of Directors with overall management of risks delegated to a subcommittee of the Board- the Risk Management Steering Committee (RMSC). The Board sets strategies for the identification, analysis and management of the enterprise-wide risks for the Company on an ongoing basis. The risk function in the business is developed with the aim of controlling the undesirable aspects of risk taking and gaining the best rewards for the risks that are accepted. The RMSC is responsible for reviewing policies, defining risk tolerance and approving procedures and objectives. RMSC meets on a regular basis to set risk management policies and procedures, review, assess and ratify risk management activities. The Company has a Risk Management manual which provides guidelines for the establishment and implementation of the ERM process. The accountable managers of the department are responsible for risk management under a clear and predefined delegated authority. The Treasury and Risk Management Section works with Risk Owners to assist, advise and implement proactive risk management disciplines for mitigating risks identified to more sustainable levels. ERM Process - Organization chart Ultimate responsibility for effective management of risks - set strategies for the identification, analysis and management of the enterprise-wide risks Responsible for reviewing policies, defining risk tolerance and approving procedures and objectives Works with each department individually to assist, advise and implement proactive risk management disciplines for reducing risks identified - Review the risk matrix annually - Define the Risk Management Manual Responsible for risk management and continuity at departmental level Update Risk Register annually Conduct action plans in order to reduce risks to more sustainable level Air Mauritius Board of Directors Risk Management Steering Committee Treasury & Risk Management Section Departments and Accountable Managers Risk Management Delegation Report and advise on critical risks Collaborate and support Annual Report 2017/18 35

39 Annual Report and Business Review Enterprise Risk Management (Cont d) Risk Management Framework A formalized Risk Management Framework has been implemented across the Company under which risks are identified, evaluated and controlled on a coordinated and integrated basis. Key elements of this Framework detailed as follows: 1) Involvement of Internal Teams and Line Management to build up and update on a regular basis the risk portfolio with :- a. A yearly review, performed through on-site cross-functional workshops, rather than departmental ones that allows coherence in risk assessment at enterprise level as well as a better alignment in risk mitigation plans definition and achievement. b. Risk Mapping through scenario-based assessment, with the effect of introducing more objectivity and traceability in assessments. c. The concept of risk tolerance in order to be able to challenge current risk level with regards to Air Mauritius financial resources and capacity. This is helping to better define risk mitigation priorities. d. A continuous update performed all through the year, in case of modifications on risks already identified, new risks or new mitigation plans identified by Risk Owners. 2) Regular reporting to RMSC for the review of major risks together with treatment measures in place. Actions performed on an annual basis 1 Risk identification 2 Risk assessment 3 Risk mitigation Review list of risks identified during last update Identification of new risk issues Assess new risks Review action plans which were implemented since last update Update risks assessment taking into account environmental evolutions and new controls in place Define further risk treatment measures Conduct actions to set up new controls Report on actions performed Collaborative work between Treasury & Risk Management Section and each Department The Company mandated Marsh Risk Consulting to conduct the periodic reviews and assist in developing the major risks mapping. The ability of Air Mauritius to deal with the occurrence of a major risk is among the improvements that have been determined during the mapping workshops. Actions plans have been identified to reduce the probability of occurrence but also the impacts of the most critical risks have been distinguished. 36 Air Mauritius

40 Annual Report and Business Review Enterprise Risk Management (Cont d) Major Risk Areas The highly regulated and commercially competitive environment, together with operational complexity, leaves the Company exposed to a number of principal risks. Over the course of the period under review, the following were the major risks categories identified: 1. Market Competition Risks The markets in which the Company operates are highly competitive. It faces competition from other airlines on its routes as well as from indirect flights and charter services and from other modes of transport. As the aviation markets continue to be liberalized with competitors having lower cost structures and other competitive advantages, this trend is expected to continue. This competition consequently results in increased downward pressure on yields. Management has responded to this risk by implementing a number of initiatives with the objective of repositioning the Company and equally responding to competitor s fares to maintain passenger traffic. These are: a. Aggressive actions to counteract competitors move; b. Consolidation to existing operations on various international routes; c. Market intelligence and feedback; d. Review of network and fleet for long term sustainability; e. Partnerships with competitors; f. Review of regional strategy and fleet; g. Investments in ancillary revenues for instance Travel Insurance; h. Maintain good and long term relationship with customers (marketing campaign); i. Superior service across all value chain; j. Incentive mechanism for agents, tour operators and customers. The Company also remains alert to all developments in that area and constantly review its risk management strategies. 2. Business Model Risks The Company recognized the importance of revamping its business model. It remained focused and implemented measures that were crucial to ensure recovery and thereafter long term sustainability of the airline. The Company embarked on a major fleet modernization initiative. The first two A joined the fleet in November and December 2017 respectively. The Company has also announced that it was spurring up its fleet renovation programme with the addition of the two new Airbus A neo during the forthcoming financial year. Some aircraft will also undergo refurbishment leading to an alignment of the standard of cabin comfort across the fleet. Meanwhile, the airline s network is being reinforced with the increase in the frequencies to Singapore as part of the Air Corridor programme, the introduction of new operations to Amsterdam and the consolidation of services to China. The combined investments in aircraft, products and destinations will reinforce Air Mauritius positioning among the top carriers in the region. While this programme weighs heavily on the Company s finances, it is a precondition to its sustainability. It also means that the Company is committed to delivering profitability and results in the coming years by adding momentum to its sales force and by abiding to tight cost control processes. These programmes are the main focus of the Board of Directors, management and all teams. 3. Network and Alliances Risks The Company operates a number of aircraft based on a certain number of economic assumptions. When economic cycles change, it is very difficult for the Company to readjust the fleet size accordingly. The Company addresses this issue by: Having a mix of new and old aircraft in its fleet with flexibility for unencumbered aircraft to be leased out or disposed of. Financing its aircraft on both financing and operating leases to increase flexibility. The introduction of new generation, more fuel efficient aircraft in the fleet Fleet flexibility, swap in aircraft types, decision deadline to confirm delivery, option rights and purchase rights are some of the levers considered Annual Report 2017/18 37

41 Annual Report and Business Review Enterprise Risk Management (Cont d) Air Mauritius also aims at improving the economics of its various routes to maximize network profitability, provide customer satisfaction, and serve its market effectively and efficiently. In many instances, the Company has to adjust capacity and frequencies, add new ports of calls and end flights to destinations which do not prove to be cost effective to meet the ever changing demand patterns and capitalize on growing markets. With its strategic partnerships, the Company ensures: Constant scanning of the environment and up-to-date systems. High level of mutual understanding and nurtured relationships with major Code Share partners. Regular meetings to constantly align roles, vision, value creation, win-win and mutual trust. Alignment of product and services, maximising available connections. 4. Fraud Risks Air Mauritius mitigated this risk by having a proper and efficient system of internal controls across the Company which is subject to regular internal and external audits. The Internal Audit Department reports risk issues identified directly to the Audit Committee together with the actions taken to remedy the weaknesses. The Company has a detailed Fraud Prevention Policy which outlines procedures for prevention, detection and investigation of suspected frauds and irregularities. Staff and other stakeholders reckon the need to act with integrity and report all suspicious transactions to relevant authorities in accordance with Code of Business Practice and Ethics, Company procedures and the requirements of the law. The Code, which is applicable to all Directors and staff, is one of the key pillar implementation of high standards in corporate governance throughout the Group. 5. Major Events An air crash may cause major disruptions to the operations. The Company ensures that its Emergency Procedures manual is regularly reviewed and updated with the support of consultants, to meet and align with best practice standards. At regular intervals, classroom training on emergency procedures are undertaken and crisis simulations are regularly carried out to familiarise staff with those procedures and ensure that everyone is clear about his role in emergency situations. Pandemics and Epidemics: The Company can be severely hit by epidemics and pandemics as well as other health risks; risks which are beyond its control. The Company can only, to a certain extent, control the impact of these risks on its business performance by the monitoring of health alerts and flights modulations, implementing specific ground and inflight procedures. 6. Disruptions in Operations a) IT as Facilitator The Company is highly dependent on IT systems for most of its principal business processes. The failure of a key system may cause significant disruption to operations and result in the loss of revenue. System controls, disaster recovery and business continuity arrangements to mitigate the risk of a critical system failure are as follows: Having off-site back-up systems, replication of servers between 3 sites (Airport, Ebene Office and Head Office) and alternate disaster recovery sites. Ensuring maintenance and regular checks. On-time renewal and upgrade of main servers and storage equipment to replace aging hardware so as to minimise system downtime and unavailability that can result from hardware failure. Regular upgrade and reinforcement of current backup systems with new enhanced features e.g. duplication for faster backups, synthetic backups. Implementation of latest and more robust replication systems and data from main data centre in Ebene to disaster recovery site. Having simulations of redundant and fail-over systems, rehearsal of reinstallations and restorations from backup tapes, testing of disaster recovery site. Computer security standards, including ongoing backup structures, have been developed in house and by third parties to ensure that IT and other systems are reliable and well protected against threats of hackers and viruses. 38 Air Mauritius

42 Annual Report and Business Review Enterprise Risk Management (Cont d) b) Industrial Relations The Company has a large unionized workforce. Collective bargaining and effective communication take place on a regular basis between Management and the Unions as the Company recognizes that a breakdown in the bargaining process and communications may disrupt operations and adversely affect business performance. 7. Safety and Security The safety and security of customers and employees is fundamental for the Company. Failure to prevent or respond effectively to a major safety or security incident may also adversely impact operations and financial performance. The Company satisfies itself that it has appropriate safety resources and procedures. The Crisis Management Centre responds in a structured way in the event of an incident. The Company has a Crisis Communication Process within its Crisis Management Centre, a Media monitoring set up, Public Relation Agencies across the network, a restricted external communications policy and a Social media communication in place as mitigating actions. 8. Reputational Risks The Company faces reputational risk and consequently loss of public confidence when it is confronted to a negative perception. It recognizes reputation as an ongoing risk that can adversely or beneficially impact the organization s reputation and the very survival of its business depends on continued credibility and trust. It therefore works constantly to improve its image with all stakeholders, maintaining their trust and confidence. The Company also acknowledges that reputational risks may occur as a direct result of people failing to communicate properly. It demonstrates the importance that it places on communication with its internal and external stakeholders by bringing under one roof all the communications functions including management of the corporate identity and brand, corporate affairs, events management, corporate social responsibility and employee and investor communications. It focuses on further improving governance issues and ensures consistency in its relationship with local and international institutions, shareholders and other investors, the media and the general public. Its communications systems and public relations machinery are well prepared so that both staff and general public are well informed about the Company s activities and performances. 9. Legal and Regulatory Risks The Company s business and reputation may be harmed if it fails to comply with the applicable new or changed laws and regulations or governance standards or changes in interpretation of laws and regulations. It also has to manage the risk of loss that may be caused by a defective transaction, a claim resulting in liability for the Company or a failure to adequately protect assets owned by the Company. The Company actively monitors these risks through its Legal Section which ensures that all contracts are properly vetted and that legal risks pertaining to these agreements are adequately understood, properly identified and integrated into strategic decisions. 10. Business Continuity Whilst maintaining the annual review of business risks within the Company, it is also looking at assessing the opportunity to design a dedicated work program on Business Continuity, within the scope of the bursary available from Aviation Insurance Underwriters. A properly designed business continuity plan is intended to help return an organization to pre-disaster operation as quickly as possible, with the ultimate goals of lessening the overall business impact of the event and ensuring the Company s survival. Initialization of the Business Continuity Plan in 2018: Review of crisis scenarios based on the risks identified in the 2017 risk mapping Study of business impacts and prioritization Evaluation of the Recovery Time Objective (RTO) by activity and critical equipment Study of recovery needs by critical activity Preparation of the business continuity cards (prerequisites and operational procedures) Identifying degraded procedures Writing the Business Continuity Plan Annual Report 2017/18 39

43 Annual Report and Business Review Enterprise Risk Management (Cont d) Insurance The Company buys in basic and fundamental insurance protection reasonably standard within the airline industry, intended to provide adequate security to the Company: Against uncovering losses that could result in bankruptcy. To protect its assets. To meet its liabilities. To conform to Civil Aviation Regulations. To comply with credit and lease agreements. The scope of coverage basically includes All Risks, War and Terrorism protection for loss or damage to aircraft, engines and spare parts, passenger and third party liability, property damage, cargo and baggage liability and employee liability. Claims not covered by or exceed insurance limits The Company trusts that the insurance policies it has subscribed to would considerably mitigate the impact of claims liable to be brought against the Group in foreseeable circumstances. However, despite the fact that from time to time, the Group reviews its limits based on worldwide trends, these limits can occasionally be broken and uncovered, leaving the Group with consequent risk of additional cost or loss. Financial Risks Air Mauritius is exposed to financial risks relating to fluctuations in exchange rate, jet fuel price and interest rate movement, as well as credit and liquidity risks. The objective of the financial risk management at Air Mauritius is to minimise the negative impact of these market fluctuations on the Company s earnings, cash flows and equity. The Board of Directors sets the Risk Management policies and objectives of the Company, and lays down the parameters within which the various aspects of treasury risk management are operated. The Board through its Risk Management Steering Committee (RMSC) has approved a Risk Management Manual, which outlines the Company s policies and procedures for managing corporate and asset financing and financial risks. In carrying out its hedging activities and implementing its risk management strategy, Air Mauritius is guided by the provisions of its Risk Management Manual. The manual requires that the Company be hedged against variations in jet fuel prices and exchange rates. For jet fuel and foreign currency risk management, the minimum and maximum hedge ratios of 30% and 70% respectively are for a maximum tenor of 2 years, on a rolling basis. The RMSC is apprised of all the hedge transactions entered into by management. Foreign Exchange The Company is exposed to currency risk on revenue, purchases and borrowings in foreign currencies along with currency devaluation of cash held in currencies other than Euro, the reporting currency. This risk is minimised by holding cash in Euros wherever possible and subject to future cash flow requirements but exchange controls in some markets will from time to time delay conversion and repatriation of funds. When there are delays in the repatriation of cash coupled with the risk of devaluation, a review of the commercial policy for that route is prompted. The currency pair the Company is most exposed to is the Eur/Usd. Indeed, the revenue stream of the Company is principally in Euro. On the other hand, the Company pays a significant proportion of its expenses in Usd, a currency in which it earns a very small proportion of its revenues. The Company continues to report its financial statements in Euro, and consequently, the depreciation of the Euro vis à vis the Usd represents a risk which the Company needs to manage. During the financial year 2017/18, the Eur/Usd traded within a wide range from a low of to a high of A key foundation of the Euro exchange rate s rally through 2017, was the expectation that the European Central Bank (ECB) would step back from its aggressive monetary stimulus programme in 2018, with a view to raising rates in 2019 as inflation rises to a growing economy. The financial year started with Eur/Usd in 1.06 range. Euro surged against the Usd over Emmanuel Macron s victory in the first round of France s presidential elections and US weak first-quarter economic growth. The Eurozone growth and employment continued to strengthen and hinted that ECB could review Quantitative Easing (QE) and asset purchase program in the near future. Subsequently, the Eur/Usd rallied strongly to reach levels above Air Mauritius

44 Annual Report and Business Review Enterprise Risk Management (Cont d) Euro hit a three-year high above Usd 1.25 in the first quarter of 2018 when ECB refrained from expressing strong concern about its rally and Usd weakening due to US government shutdown after Republicans failed to pass a short-term funding measure. Subsequently, Euro weakened by data showing that growth in the Eurozone slowed in the first quarter of 2018 and concerns around global trade conflict as well as concerns about a stronger Euro. Jet Fuel Price Risk Jet fuel is a major variable cost component for Air Mauritius, accounting for over 28 % of total operating costs. Volatility in the price of jet fuel can have a material impact on the Company s operating results. The risk associated to fluctuations in the price of jet fuel is managed by various hedging techniques as well as the use of fuel surcharge, whereby some of the cost is passed on to the customer. This price risk is partially hedged through the purchase of oil derivatives in forward markets with the principal objective to increase the predictability of cash flows and profitability. Air Mauritius uses predominantly Brent crude as proxy for monitoring and hedging against increases in the price of jet fuel. During the financial year 2017/18, oil has been very volatile, trading in the range of Usd 44 to Usd 71. Supply, inventory numbers and geo-political tensions have dominated oil market during the financial year. The deal between the Organization of the Petroleum Exporting Countries (OPEC) and non-opec producers led by Russia to cut supplies and erase a global glut has helped oil prices reach Usd 78 per barrel, their highest level since The deal which started in January 2017 has been prolonged through 2018 with the goal at clearing the supply glut unleashed by US shale-oil drilling. Strong conformity by OPEC and participating non-opec nations in terms of production continue to support the oil market. price curve in backwardation at prices that increasingly appear to be sustainable - pointing in that direction. Counterparty Credit Risk The Risk Management Manual requires that the Company deals with only approved financial institutions. Overall exposure to each approved financial institution, including local Mauritian banks, is well defined. The Company has in place wherever possible ISDA (International Swap Derivatives Association) agreements with institutions with whom it carries out hedging activities. These aforementioned measures ensure that credit risks are minimized. Interest Rate Risk Air Mauritius earnings are also affected by changes in interest rates due to the impact of such changes on interest income and expenses from short term deposits and other interest bearing financial assets and liabilities. Air Mauritius mitigates this risk by having a loan portfolio which carries both fixed and floating rates. Short term facilities also bear floating interest rates. Liquidity Risk Liquidity risk is the risk that the Company will be unable to meet its obligations as they come due because of an inability to liquidate assets or obtain adequate funding. The Company mitigates this risk by careful cash flow planning and regular review of the facilities it has in place with its banking partners. Along with the growing global economy, an array of international events in the Middle East and elsewhere also contributed to the rise in oil prices. A plunge in Venezuelan oil output due to an economic crisis and the United States departure from a nuclear deal with Iran have supported prices. The OPEC deal had the side-effect of triggering a revival of shale production but shrinking global stockpiles partly offset the rebound in production. Market re-balancing is clearly moving ahead with key indicators - supply and demand becoming more closely aligned and the forward Annual Report 2017/18 41

45

46 Management Discussion and Analysis

47 Management Discussion and Analysis Industry Context The International Monetary Fund World Economic Outlook of April 2018 reported a growth in global economic activity of 3.8% in 2017 compared to 3.2% in The growth in emerging and developing Asian economies namely China, India and ASEAN countries (Indonesia, Malaysia, Philippines, Thailand and Vietnam) in 2017 remained unchanged at 6.5% same as in The growth in Sub- Saharan Africa increased from 1.4% in 2016 to 2.8% in 2017 and that of the Euro area from 1.8% in 2016 to 2.3% in Regarding the performance of the airline industry, the International Air Transport Association (IATA) announced a net profit of USD 34.5 billion in 2017 (compared to USD 35.3 billion in 2016) and a profit margin of 4.6% (compared to 5.0% in 2016). One of the factors for the lower profitability in 2017 was the average increase in fuel prices with Brent crude oil price climbing from USD 44.6 per barrel in 2016 to USD 54.2 per barrel in The industry profit remained unevenly distributed by region with carriers from Asia-Pacific, North America and Europe accounting for the bulk of the profit whilst carriers in Africa generated losses of USD 0.1 billion. IATA projects a deterioration in global industry profitability in 2018 with a profit forecast of USD 33.8 billion and a profit margin of 4.1%. However, this is based on forecast Brent crude oil price at USD 70 per barrel for 2018 which might be revised upwards given the current rising fuel price trend. Air Mauritius Competitive Landscape The operating environment for Air Mauritius has remained competitive in 2017/18. Major developments in the competitive landscape include the following: Saudi Arabian Airlines started new operations on the Riyadh-Jeddah-Mauritius and vice versa route with 3 weekly B787 flights as from September British Airways increased from 3 to 5 weekly B777 flights from Gatwick in Winter 2017/18. Lufthansa increased from 2 to 3 weekly A340 flights from Frankfurt in Winter 2017/18. Turkish Airlines maintained its 5 weekly A330 Istanbul-Mauritius-Antananarivo-Istanbul flights effective July 2017 as compared to 3 weekly flights in Summer Air Madagascar started operations between Madagascar and Guangzhou via Reunion with a weekly A frequency effective February 12, 2017 in codeshare with Air Austral and a second weekly service has been added as from Summer The competitive environment will continue to intensify in 2018 with existing operators consolidating their operations and the start of new operations by Kenya Airways and Alitalia. Kenya Airways started operations with 4 weekly flights with Embraer E190 aircraft (96 seats) from Nairobi effective June 07, 2018 and Alitalia will operate 3 weekly flights with A aircraft (256 seats) from Rome as from Winter 2018/19. Network a. Network Developments and Consolidation Introduction of Amsterdam Operations Operations between Mauritius and Amsterdam (AMS) were introduced as from Winter 2017/18 as an extension of the existing Air Mauritius/Air France joint venture agreement, with KLM operating flights in Winter and Air Mauritius in Summer to ensure year-round operations. During Winter 2017/18, KLM operated 3 weekly services with B787 aircraft configured at 294 seats. In Summer 2018, Air Mauritius will operate 2 weekly A340 flights, with a third weekly flight in July and August. All the flights are jointly commercialised by Air Mauritius and KLM on a free flow codeshare basis. The Amsterdam services have allowed Air Mauritius to target the Dutch market as well as the European market, and specifically the Nordic countries where KLM has a strong foothold. Moreover, this new opening has provided the opportunity to leverage on a dual hub strategy for Europe on Paris Charles de Gaulle and Amsterdam. Eurowings increased from 1 to 2 weekly A flights from Cologne in Summer Austrian Airlines increased from 1 to 2 weekly B777 flights from Vienna in Winter 2017/ Air Mauritius

48 Management Discussion and Analysis Network (Cont d) Resumption of Geneva operations on seasonal basis Operations were resumed to Geneva with a weekly seasonal A flight from November 18, 2017 to February 23, The flights have been planned as weekend operations during the peak period in Winter 2017/18 to optimise on traffic flows from the Swiss market. Consolidation of operations on Far East The Singapore hub has been consolidated with a fourth weekly flight operated during July and August 2017 and as a base frequency as from December The routing and timings for the fourth weekly frequency have been harmonised as per existing operations. The operations on China and Hong Kong have been maintained except for the once weekly operation on Beijing which was suspended as from November 18, 2017 due to poor passenger loads. The overall seat capacity on the Far East was maintained more or less at the same level in 2017/18 as in 2016/17 despite the Beijing cancellation. Double daily flights to Saint Pierre (ZSE) Operations on Saint Pierre were consolidated with double daily ATR flights as from Summer 2017 compared to 3 to 5 weekly flights operated previously. The double daily flight structure on Saint Pierre allows two-way connections between Saint Pierre and 10 points across Air Mauritius network, enabling Air Mauritius to optimize traffic flows to and from the south of Reunion. b. Online Network Air Mauritius operated on a total of 25 online points during the financial year 2017/18 with the addition of Amsterdam as from Winter 2017/18 on KLM operated flights and suspension of Maputo and Beijing on August 09 and November 18, 2017 respectively as follows: Regions Destinations Europe Paris, London, Amsterdam (added as from Oct 30, 2017) East Asia Hong Kong, Singapore, Kuala Lumpur, Shanghai, Chengdu, Guangzhou, Beijing (suspended on Nov 18, 2017) India Australia Mumbai, Delhi, Chennai, Bangalore Perth Africa Johannesburg, Cape-Town, Nairobi, Durban, Dar es Salaam, Maputo (suspended on Aug 09, 2017) Indian Ocean Antananarivo, Saint-Denis, Saint-Pierre, Rodrigues The Mauritius-Dubai route was served in codeshare with Emirates on its double daily A380 services. Annual Report 2017/18 45

49 Management Discussion and Analysis Network (Cont d) c. Codeshare Destinations Beyond Paris Air Mauritius has codeshared on 41 European destinations beyond Paris under the Joint Venture Agreement with Air France as below: Country France Spain United Kingdom Germany Austria Italy Switzerland Netherlands Sweden Norway Denmark Destination Brest, Bordeaux, Clermont-Ferrand, Lyon, Montpellier, Marseille, Nice, Nantes, Pau-Pyrénées, Rennes, Toulouse Barcelona, Bilbao, Madrid Aberdeen, Birmingham, Edinburgh, London Heathrow, Manchester, Newcastle Berlin, Bremen, Dusseldorf, Frankfurt, Hamburg, Hanover, Munich, Nuremburg, Stuttgart Vienna Rome, Bologna Zurich, Geneva, Basel Amsterdam Gothenburg, Stockholm Oslo Copenhagen, Billund Beyond Amsterdam Air Mauritius has codeshared on KLM to 48 European destinations beyond Amsterdam with 16 destinations distinct from the Paris hub. Points to be served via Amsterdam hub Common points with Paris hub Unique points on Amsterdam hub France Bordeaux, Lyon, Nice, Toulouse - United Kingdom Germany Aberdeen, Birmingham, Edinburgh, London Heathrow, Manchester, Newcastle Berlin, Bremen, Dusseldorf, Frankfurt, Hamburg, Hannover, Munich, Nuremberg, Stuttgart Bristol, Cardiff, Glasgow, Humberside, Leeds, Durham, Norwich Italy Rome Milan Norway Oslo Bergen, Kristiansand, Stavanger, Oslo-Sandefjord, Denmark Billund, Copenhagen Alborg Sweden Goteborg, Stockholm Linkoping Switzerland Basel, Geneva, Zurich - Spain Barcelona, Bilbao, Madrid - Austria Vienna - Belgium - Brussels Finland - Helsinki - 46 Air Mauritius

50 Management Discussion and Analysis Network (Cont d) Beyond Singapore Effective August 09, 2017, Air Mauritius has started codesharing on Singapore Airlines flights as marketing carrier beyond Singapore to 5 points namely Perth, Sydney, Bangkok, Hong Kong and Shanghai. Beyond Kuala Lumpur Under the cooperation with Malaysia Airlines, Air Mauritius code beyond Kuala Lumpur has been carried on the following 9 points: Country Malaysia China Thailand Singapore Hong Kong Destination Langkawi, Kuantan (southbound only), Penang, Kota Bharu, Johar Bharu Beijing Bangkok Singapore Hong Kong Beyond Perth Under the cooperation with Virgin Australia, Air Mauritius has codeshared beyond Perth on 4 points namely Melbourne, Sydney, Adelaide and Brisbane as marketing carrier. Beyond Dubai Air Mauritius is the marketing carrier on Emirates operated flights beyond Dubai to 6 points namely Cairo, Karachi, Colombo, Riyadh, Jeddah and Dammam. Annual Report 2017/18 47

51 48 Air Mauritius

52 Network (Cont d) INTERNATIONAL ROUTE MAP Annual Report 2017/18 49

53 Management Discussion and Analysis Aircraft Fleet a. Fleet Composition With the introduction of 2 A aircraft in October and November 2017, the Air Mauritius fleet increased to 15 aircraft and at the end of March 2018 it comprised as follows: Type of Aircraft Fleet Owned / Finance Lease Operating Lease Total Seat Capacity Airbus A C Wide Body Airbus A E Wide Body Airbus A Wide Body Airbus A Wide Body Airbus A Narrow Body /132 ATR Turbo Prop Total At the end of March 2018, the average age of the aircraft fleet stood at 12.6 years as compared to 13.4 years in 2016/17. b. Fleet Deployment The A fleet has been deployed on Paris and Johannesburg routes. The A aircraft have been primarily deployed on London and China long haul routes considering payload-range capability, while the medium haul operations to India, South East Asia and Perth have been served mainly by the A fleet. A mix of wide and narrow body aircraft have been deployed to Africa, Madagascar, and Reunion taking into account both passenger and cargo requirements. The ATR fleet operates on the inter-island routes, namely Rodrigues and Reunion (Saint Pierre and St Denis). c. Fleet Utilisation The number of flights operated and aircraft utilisation during 2017/18 was as follows: Aircraft Type Number of Flights Total Utilisation (Block Hours) Average Daily Utilisation (Block Hours) Airbus A ,718 23, Airbus A ,339 8, Airbus A , Airbus A ,428 5, ATR ,555 7, Total 12,483 48,695 - The above average daily utilisation figures are based on aircraft available days, that is, after excluding aircraft maintenance days for overhaul and heavy checks. Compared to financial year 2016/17, 1054 additional flights (or 2061 block hours) have been operated in 2017/ Air Mauritius

54 Management Discussion and Analysis Capacity Seat Capacity The seat input for 2017/18 stood at 2.26 million seats, representing an increase by 125,820 seats or 5.9% compared to 2016/17. The seat capacity evolution and distribution by region was as follows: *Including Madagascar Region 2017/18 Variance over 2016/17 Seats % Europe 376,374 26, India 255,743 24, Far East 293,394 (3,022) (1.0) Australia 78,078 11, Africa 396,034 18, Interisland* 862,591 47, Network 2,262, , In line with the objective to rebalance growth to emerging markets, additional seat capacity has been deployed on India, China and Africa. Cargo Capacity Air Mauritius deployed a cargo capacity of 71,605 tons during 2017/18, representing an increase of 5.7% over 2016/17. The evolution and distribution by region stand as below: Variance over 2016/17 Region 2017/18 Tonnes % Europe 15,381 1, India 10,302 1, Far East 11,276 (144) (1.3) Australia 2, Africa 10,396 1, Interisland* 21,374 (762) (3.4) Network 71,605 3, *Including Madagascar Annual Report 2017/18 51

55 Management Discussion and Analysis Bilateral Air Services Agreements (Cont d) During the financial year 2017/18, Mauritius concluded Bilateral Air Services Agreements with Ghana and Morocco. New Memoranda of Understanding were signed between Mauritius and Namibia, Russia and Swaziland. A codeshare framework was also signed with the Republic of Chile. As at March 31, 2018, the portfolio of traffic rights has been increased to a total of 61 Agreements, including Bilateral Air Services Agreements and other traffic rights arrangements. In line with Air Mauritius network expansion plans, these traffic rights, which represent potential market opportunities for future network development, will be further consolidated during the financial year 2018/19. Aero-political and Industry Developments On the aero-political and industry front, the major developments during the financial year 2017/18 included: a. Air Transport Liberalisation i. Mauritius Air Access Policy During the financial year 2017/18, two new entrants launched their services to Mauritius, namely, Saudi Arabian Airlines and KLM. Emirates and British Airways also increased their capacity/frequency on the route. Moreover, a series of charter flights by TUIfly Netherlands and Thomson Airways were operated during the peak periods of Northern Winter 2017/18. The gradual opening of air access continues to intensify competition. ii. Air Transport Liberalisation in Africa The African Union, supported by the various airline associations, has lobbied African States to adhere to the implementation of the Yamoussoukro Decision for air transport liberalisation in Africa. The objective of the African Union is to realise the vision of a Single African Air Transport Market (SAATM) as set out in the union s Agenda During the year 2017/18, more African States committed to the implementation of the Yamoussoukro Decision, bringing the total to 44 African States out of 55. The SAATM was eventually launched on January 28, 2018 and will enable airlines of the 23 signatory states to take advantage of a liberalised air access framework as provided in the Yamoussoukro Decision. Mauritius has however opted not to join the SAATM at this stage and will continue to address traffic rights issues on a bilateral basis. b. Environment and Climate Change i. Carbon Offsetting and Reduction Scheme for International Aviation, CORSIA At the 39 th Assembly of International Civil Aviation Organisation (ICAO) in October 2016, ICAO Member States reached a historic agreement on a Global Market- Based Measure (GMBM) to address international air transport emissions. The global scheme, known as Carbon Offset and Reduction Scheme for International Aviation (CORSIA) aims to limit and offset aviation emissions to achieve the global aspirational goal of carbon-neutral growth from 2020 onwards. As at date, 73 States representing more than 87.7 % of international aviation activity, have indicated their intention to participate in the pilot and first phase, from 2021 to 2023, of the CORSIA. ii. IATA Environmental Assessment (IEnvA) program The IATA Environmental Assessment (IEnvA) program is an Environment Management System (EMS) that aims at reducing the harmful effects of aviation on the environment. IEnvA is a voluntary program based on principles in compliance with environmental obligations and a commitment to continually improve environmental management. The scope of this program is to help airlines develop an EMS which will be of international standard (ISO140001) at a reduced cost. The IEnvA program is in two stages. Airlines are certified IEnvA compliant as per below: Stage 1: Documentation process/filing and assessment by an audit organisation Stage 2: Full implementation and compliance after onsite auditing Air Mauritius has, after signing the MOU with IATA, already embarked on the process for Stage 1 certification. Moreover, Air Mauritius has expressed its commitment for the implementation of Stage Air Mauritius

56 Management Discussion and Analysis Bilateral Air Services Agreements (Cont d) iii. Global Aviation Security Plan (GASeP) In order to achieve the common goal of enhancing global aviation security following commitments made in ICAO Assembly Resolutions, ICAO has come forward with a Global Aviation Security Plan (GASeP). The GASeP will help states and relevant industry stakeholders to work together and guide all aviation security enhancement efforts through an agreed set of tasks, targets and actions to attain the following priority outcomes: 1. Enhance risk awareness and response; 2. Develop security culture and human capability; 3. Improve technological resources and innovation; 4. Improve oversight and quality assurance and, 5. Increase cooperation and support The GASeP roadmap comprises of 94 tasks which set out objectives until the 40 th Session in Airline Alliances and Partnerships Air Mauritius continues to leverage on airline partnerships to broaden its network and geographical reach. During the financial year 2017/18, Air Mauritius has increased its airline alliances and has expanded existing agreements to offer a better product to its customers. The year 2017/18 witnessed the implementation of the joint venture agreement between Air Mauritius and KLM Royal Dutch Airlines, as well as the start of the codeshare agreement between Air Mauritius and China Eastern Airlines. The cooperation arrangements with Air India and Singapore Airlines were also expanded. a. Air Mauritius / Air France The current Joint Venture Agreement with Air France covers the Mauritius-Paris-Mauritius route as well as destinations beyond Paris and destinations beyond Mauritius. Beyond Mauritius, Air France codeshares to five destinations namely Reunion (Saint Denis and Saint Pierre), Perth, Durban and Cape Town. b. Air Mauritius / KLM Royal Dutch Airlines Effective October 30, 2017, with the launch of Amsterdam operations by KLM, Air Mauritius and KLM entered into a codeshare and joint venture agreement. The scope of the codeshare agreement covers the trunk route Mauritius/Amsterdam and Amsterdam/Mauritius as well as beyond Amsterdam and beyond Mauritius destinations. During the financial year 2017/18, Air Mauritius codeshared on flights operated by KLM beyond Amsterdam to 48 destinations. On the other hand, KLM codeshares beyond Mauritius to Perth, Reunion (St Denis and St Pierre) and Rodrigues. c. Air Mauritius / Singapore Airlines In line with the Africa / Asia air corridor, Air Mauritius and Singapore Airlines entered into a codeshare agreement since November 2016, whereby Singapore Airlines codeshares as a marketing carrier on the Singapore/ Mauritius and Mauritius/Singapore sectors of the Air Mauritius operated Mauritius/Singapore/Kuala Lumpur/ Singapore/ Mauritius flights. The codeshare arrangement was subsequently expanded in August 2017, allowing Air Mauritius to codeshare on Singapore Airlines operated flights to Bangkok, Hong Kong, Perth, Sydney and Shanghai. d. Air Mauritius / Emirates The codeshare agreement between Air Mauritius and Emirates covers the trunk route Mauritius/Dubai/Mauritius as well as beyond Dubai and beyond Mauritius destinations. Air Mauritius codeshares beyond Dubai to Cairo (Egypt), Karachi (Pakistan), Colombo (Sri Lanka), Riyadh, Dammam and Jeddah (Saudi Arabia). Beyond Mauritius, Emirates codeshares to Antananarivo. During the financial year 2017/18, Air Mauritius codeshared on flights operated by Air France and its franchises beyond Paris to 41 European destinations including domestic points in France. Annual Report 2017/18 53

57 Management Discussion and Analysis Airline Alliances and Partnerships (Cont d) e. Air Mauritius / Malaysia Airlines Air Mauritius and Malaysia Airlines have a codeshare agreement on the trunk route between Mauritius and Kuala Lumpur. The codeshare agreement with Malaysia Airlines also caters for beyond Kuala Lumpur and beyond Mauritius sectors as well. Beyond Kuala Lumpur, Air Mauritius codeshares on 5 domestic points in Malaysia and 4 international points while Malaysia Airlines codeshares on Air Mauritius flights between Mauritius and Johannesburg. f. Air Mauritius / Air India Air Mauritius and Air India have a codeshare arrangement on all flights operated by Air Mauritius between Mauritius and India, and during the year 2017/18, the cooperation was expanded to include beyond Mauritius and domestic Indian codeshare sectors. Since February 2018, Air Mauritius codeshares on domestic Air India flights. Goa, Hyderabad, Ahmedabad and Kolkata, in addition to Air Mauritius points of call in India namely, Delhi, Mumbai, Chennai and Bangalore, are the domestic Indian destinations to which Air Mauritius codeshares. On the other hand, Air India has started codesharing on Air Mauritius operated flights beyond Mauritius to Perth, Johannesburg and Durban. g. Air Mauritius / Kenya Airways Air Mauritius and Kenya Airways are in a codeshare arrangement since August Kenya Airways codeshares on Air Mauritius operated flights between Mauritius and Nairobi as well as beyond Mauritius to Perth. h. Air Mauritius / South African Airways Since 2015, Air Mauritius and South African Airways are in a codeshare agreement. The scope of the codeshare arrangement is the Mauritius/Johannesburg/Mauritius route, where each carrier codeshares on each other s aircraft. Under this codeshare agreement, Air Mauritius codeshares as a Marketing carrier on Virgin Australia operated domestic flights beyond Perth, to/from Adelaide, Brisbane, Sydney and Melbourne with seamless connections on Air Mauritius services to/from Perth. j. Air Mauritius/ Air Madagascar Air Mauritius and Air Madagascar are in a codeshare agreement since January 2013, on the Mauritius/ Antananarivo/Mauritius route, whereby Air Madagascar codeshares as a marketing carrier on Air Mauritius operated flights. k. Air Mauritius / Hong Kong Airlines The codeshare arrangement between Air Mauritius and Hong Kong Airlines, which dated back September 2015, covers the Mauritius/Hong Kong/Mauritius route. Hong Kong Airlines codeshares as a marketing carrier on the Air Mauritius operated Hong Kong flights. l. Air Mauritius / Air Austral Air Mauritius and Air Austral are in a codeshare agreement, whereby Air Austral codeshares on Air Mauritius operated flights to/from Perth. m. Air Mauritius / China Eastern Airlines A codeshare agreement was signed with China Eastern Airlines in November The codeshare cooperation was implemented as from April During financial year 2017/18, China Eastern Airlines placed its code on Air Mauritius operated flights on the Mauritius/Shanghai, Mauritius/Beijing, Mauritius/Guangzhou and Mauritius/ Chengdu and vice versa. i. Air Mauritius / Virgin Australia Air Mauritius and Virgin Australia have been in a codeshare agreement since December 2013 whereby Air Mauritius is able to tap into the Australian market via its hub in Perth. 54 Air Mauritius

58 Management Discussion and Analysis Patterns of Operations The main highlights of the financial year 2017/18 weekly pattern of operations are as follows: a. Europe Whilst competition continued unabated, Air Mauritius maintained its development strategy with the introduction of Amsterdam and Geneva operations into its European network. The services to Amsterdam is operated within the framework of a free-flow code share between Air Mauritius and Air France-KLM. This partnership provides for KLM operations during winter and an Air Mauritius service during summer. Consequently, KLM started its first flight on October 30, 2017 and Air Mauritius continued the Amsterdam services effective March 26, Furthermore, the re-introduction of the Geneva flights as from mid November 2017 has been in line with the Company s new commercial strategy to tap seasonal markets. The combined strength of Paris -Charles De Gaulle, London, Amsterdam and Geneva provides market access and enables Air Mauritius to increase its product offering to traditional and emerging European markets. i. France Air Mauritius served the Paris Charles de Gaulle route in joint venture with Air France. The base weekly services consisted of 10 flights in Summer 2017 (7 flights by Air Mauritius and 3 flights by Air France) and 14 flights in Winter 2017/18 (7 weekly flights by Air Mauritius and Air France each). Frequency modulations have been carried out during the lean months of May and June As from November 25, 2017, Air Mauritius operated its base daily flight with A aircraft instead of A Air France operated its base flights with B Supplementary flights were added by Air Mauritius and Air France during the peak periods in April, July to October, and mid-december 2017 to beginning of March 2018 to meet demand, going up to 4 additional weekly flights during the peak from mid-july to August ii. United Kingdom The base operations to the United Kingdom consisted of 4 weekly A frequencies to London Heathrow except 3 weekly frequencies during the off peak periods from May to June 2017 and from January to March iii. Netherlands Three weekly 787 flights were operated by KLM between Amsterdam and Mauritius during Winter 2017/18 on a free-flow codeshare basis with Air Mauritius. iv. Switzerland Operations were resumed on Geneva with a weekly seasonal A flight operated on this route from November 18, 2017 to February 23, v. China Operations to China in 2017/18 consisted of the following: Two weekly A frequencies to Shanghai with one flight modulated from November 21, 2017 to January 09, A weekly A frequency to Guangzhou throughout 2017/18. A weekly A frequency to Chengdu except flight modulated for the period December 04, 2017 to January 01, A weekly frequency to Beijing till November 11, 2017 and the flight was suspended as from November 18, vi. Hong Kong Two base weekly A frequencies to Hong Kong have been maintained throughout 2017/18. vii. Singapore and Malaysia Three weekly base A flights were operated on the Mauritius-Singapore-Kuala Lumpur vice versa routing, with a fourth weekly flight on the same routing during July and August and as from December 05, Air Mauritius undertook various joint marketing activities with Changi Airport and Mauritius Tourism Promotion Authority in the offline Asian markets so as to promote the Air Corridor. Annual Report 2017/18 55

59 Management Discussion and Analysis Patterns of Operations (Cont d) viii. India During the financial year 2017/18, Air Mauritius operated four weekly base flights to Mumbai, whilst maintaining the twice weekly operations to Delhi as well as the combined Bangalore and Chennai flight. With the increase in the number of leisure travellers from India, the airline has been injecting additional capacity on Mumbai and Delhi during peak season in order to tap into this emerging market. Thus, up to six flights to Mumbai and three flights to Delhi were operated during the super peak months of May-June 2017 and mid- December 2017 to mid-january ix. Australia Two base weekly A flights were operated to Perth in 2017/18 with a third weekly flight from July 2017 to January A fourth supplementary weekly flight was operated during the peak period mid-december 2017 to mid-january x. South Africa The base weekly operations to Johannesburg consisted of 7 weekly flights, all operated on a day structure (4 wide-body and 3 A weekly flights). Three of the wide-body flights have been upgraded to A as from November 25, Additional capacity has been provided through upgrades and supplementary flights during April and December 2017 and January 2018 peaks. The base weekly operations to Cape Town consisted of three weekly A flights in 2017/18 except one of the weekly flights was modulated during A aircraft heavy checks in September and October 2017 and February and March Flights were also upgraded to A during A319 heavy checks and during December 2017 and January 2018 peaks to provide seat capacity. The base operations on Durban consisted of three weekly flights with one of these flights operating via Maputo till August 02, As from August 09, 2017, all the 3 weekly flights were operated directly on Durban. One of the weekly Durban flights was modulated during A aircraft heavy checks in September 2017, October 2017, February 2018 and March xi. Kenya/ Tanzania Air Mauritius operated three base weekly flights with A aircraft to Nairobi in 2017/18 with one of these flights operating via Dar es Salaam. One of the direct Nairobi flights was modulated during A aircraft heavy checks in September 2017, October 2017, February 2018 and March The main actions in the Kenyan and Tanzanian markets focused on enhancing the awareness of the destination and the promotion of the Air Corridor. xii. Madagascar The weekly operations to Antananarivo consisted of five wide-body and one A flights in 2017/18. One wide-body and one A319 weekly frequencies were operated in a night structure in order to provide connections with the flight arrival from Singapore-Kuala Lumpur and Guangzhou to Antananarivo. xiii. Reunion The base operations to Reunion consisted of 3 daily flights to Gillot, with one of the daily frequencies operated with wide-body aircraft to meet cargo requirements. Two daily ATR flights have been introduced on Saint-Pierre as from March Additional capacity was injected during peaks through upgrades and operation of supplementary flights. xiv. Rodrigues Three base daily ATR flights were operated on the Rodrigues route in 2017/18. Additional capacity was injected during peak months of July 2017, August 2017, November 2017, December 2017, January 2018 and March 2018, going up to nine daily flights during the hyper peaks from mid-december 2017 to mid- January Revenue Management, Pricing and Business Intelligence Air Mauritius continues to harness its revenue management and pricing processes to achieve its revenue target. The Company continues to consolidate its Revenue Management and Pricing strategies with the objective of fully using these as an important strategic and marketing tool to support revenue generation. 56 Air Mauritius

60 Management Discussion and Analysis Revenue Management, Pricing and Business Intelligence (Cont d) The objective of Revenue Management and Pricing is to provide a methodology to stimulate traffic in the face of poor demand and ever increasing competition whilst reducing risks of yield decline and as well as providing visibility on future outlook for short and medium terms with prompt decisions. This has helped Air Mauritius to meet its revenue target despite aggressive competition by: Responding in a timely manner to competition; Addressing impact of external economic situations beyond the Company s control in some major markets; Favourable exchange rate. Air Mauritius has been consolidating on the Asia Corridor through the hub concept and other marketing, pricing and inventory management actions. Special Prorate agreements have been concluded and reviewed in order to support the flow of traffic on the route culminating into a code share agreement with Singapore Airlines. The Company also has in place some 80 Special Prorate Agreements, the purpose of which is to provide opportunities to tap into traffic to/from Mauritius at more competitive prices. Ancillary Revenues During the financial year 2017/18, the Company posted mixed results on the ancillary revenues front. Whilst all other products registered good growth, upgrades continued to feel the impact of the increase in prices, as the Company puts more focus on normal sales than upgrades. In order to give a boost to ancillary revenues, new products will be introduced in the next financial year. Travel insurance, which was released in France and Reunion in 2017/18, will be extended to other markets. Moreover, Advanced Seat Reservation, which is currently chargeable on exit seats only, will be extended to other seats on the aircraft, and Inflight Wi-Fi will be offered on the new and retrofitted aircraft. Additionally, the purchase of upgrades through the Upgradenow programme will be enhanced with further automation, which will allow bids to be made closer to departure. Loyalty Marketing During the financial year 2017/18, a new Customer Relationship Management (CRM) system was implemented for Kestrelflyer, the frequent flyer programme of Air Mauritius. MS Dynamics CRM is a customer relationship management software package developed by Microsoft which focuses mainly on Sales, Marketing, and Service. The Kestrelflyer frequent flyer program registered a membership growth of 7.9% during the financial year 2017/18. The revenue contribution from Kestreflyers currently accounts for 10% of total passenger revenues. In order to reinforce the product offering, Air Mauritius has maintained its collaboration with all existing partners. New partnerships with Mauritius Helicopter Ltd and Blue Safari were developed. Kestrelflyer members can now accumulate miles on purchases at Mauritius Helicopter Ltd. Furthermore, Kestrelflyer members also benefit from discounts on services bought at Mauritius Helicopter Ltd with their Kestrelflyer cards. Blue Safari offers discounts to Kestrelflyer members on various submarine activities. In the context of the 50 th anniversary celebrations of Air Mauritius, a series of promotions was planned for Kestrelflyer members including a special card reprint project incorporating the commemorative logo specially created in this respect. In the forthcoming financial year 2018/19, the frequent flyer programme will continue its development through close collaboration with the overseas stations in terms of member acquisition, increasing miles exchangeability while keeping the customer at the centre of all its activities. E-Commerce Air Mauritius digital channel was further consolidated, and continued its growth during financial year 2017/18, registering yet another year where sales and online penetrations grew faster than the network. Such performance was the result of a series of actions, which were carried out to further stimulate and increase web traffic from all sources, including Direct, Organic, Paid Search, Display, Referral, , and Social Media, leading to more conversion to sales in the process. Digital marketing campaigns have been stepped up through Google and Facebook, in particular, so as to cover more Annual Report 2017/18 57

61 Management Discussion and Analysis E-Commerce (Cont d) markets, and joint marketing campaigns were run with partners in the travel and tourism industry. The payment process was also reviewed to improve conversions and sales, whilst still protecting against the risk of fraud. Furthermore, the Air Mauritius Mobile Application was released during the year under review, with a whole suite of features allowing customers to easily book and manage their travels from their mobile devices. The cost of sale was also the subject of attention, and in this regard, the marketing budget has been optimized with a view to achieve the highest return on investment. A new marketing application was implemented for the communication of special offers. More innovations are under way for the next financial year. The web site is being completely redesigned and redeveloped within a mobile-first strategy, and will adhere to the latest industry practices, so as to offer a new experience to the customer. It will, namely, be responsive to mobile devices, and will integrate content from the social media platforms. A new version of the engine will be implemented, as well as an upgraded payment gateway which will offer alternative forms of payment, such as Alipay and Online Banking. Branding, Marketing and Advertising During the financial year 2017/18, much focus has been laid on the promotion of the Air Mauritius brand, namely its unique Mauritian-ness aspect and its close association with Mauritius as a destination. This specificity of the airline has been translated in the development of the design which has been introduced in the aircraft cabins and in the inflight comfort items. The Mauritian food has also been included among the menus and beverages offered on board. The presence of the brand amongst all stakeholders has been reinforced through various co-branding and sponsorship initiatives. Further boost was given to the brand in Mauritius and across the network, in the context of the country s 50 th Anniversary celebrations where specific branding initiatives were taken jointly with the public and the private sectors. Projects for the further development of the Company brand have been initiated, namely the production of a jingle/ musical signature with a renowned artist of Mauritian origin and that of an olfactory signature, namely a perfume/smell to be extracted from the Rodrigues Lemon. The brand has also been systematically deployed across all new internal platforms and channels including new uniforms, website and offices. Technical and strategic marketing supports have been provided to all markets with a view to support sales and maintain brand consistency whilst ensuring cost effectiveness. Marketing messages in Mauritius and across the network have focused largely on the following commercial messages - Fly Direct, the new A350/A330 product, the close association of destination Mauritius and the development of Hub Mauritius. Marketing collaterals including brochures, photos and others have been developed for various markets, taking into account market specificities. Advertising campaigns have been initiated throughout the year to boost sales initiatives on the local market through traditional, digital and social media platforms. Advertising campaigns were successfully developed in Amsterdam for the launch of operations. Revenue, through advertising income, has been re-examined and advertising sales are now carried out directly in-house. This has resulted in increased advertising sales revenue namely for Islander inflight magazine and on the J Class new menu card. New mediums of advertising revenue including digital, inflight and the website are being explored. Social Media The Company continues to leverage on social media as an assisted conversion lever, helping to create brand awareness and active engagement with customers. Regular postings to maintain an active presence, and social media contests were run to build up and consolidate the fan base and followers on Facebook, Twitter, Instagram, as well as on Chinese social media platforms, Weibo and WeChat. The community base was then leveraged to promote special offers from various markets, thus leading to the assisted conversions. Air Mauritius remains one of the leading social airline brands in Africa with over 767,000 fans on Facebook. Customer, Product and Digitalisation During the financial year 2017/18, a new structure has been set up so as to place more emphasis on customercentricity in the organisation. In this respect, the scope of the Customer Experience function has been widenedto include Customer Analytics, a new Product Business Unit and a Process Improvement and innovation unit, all working closely with the Digitalisation division. 58 Air Mauritius

62 Management Discussion and Analysis Revenue Management, Pricing and Business Intelligence (Cont d) The new structure aims at increasing customer experience through optimal use of digitalization and a reinforcement of the Mauritian brand differentiation and the launching of innovative customer products and services. Customer Experience and Analytics The role of Customer Experience and Analytics is to enrich customer intelligence in the organisation across the value chain. In this respect, the new Customer Relationship Management system has enabled the Company to obtain a central view of its customers. Consequently, a number of service improvement projects have also been addressed during the year to further enhance the customer experience. A salient feature in 2017/18 was the involvement of some of the customers in the design of new product and services. In a Meal Tasting Preview exercise some customers were invited to express their views on the new menu cycle and this enabled the organisation to obtain the real value in the voice of the customers. Moving forward, the organisation has geared up to leverage on technology to enhance Customer Analytics capabilities to predict customer behaviour, increase loyalty and personalise service in an increasingly competitive environment. Air Mauritius will also differentiate itself as the Mauritian airline. Corporate Product Research and Development During the financial year 2017/18, major Request For Proposals had been worked out in conjunction with respective areas, towards a complete refresh of aircraft cabin interior, in line with new trim and finish, and new uniforms. There were two major objectives that had been set, namely: To capture the best market prices, whilst improving the quality standards; To reduce operating weight onboard. In parallel, all resources had been mobilised to sustain the A350 entry into service in November 2017, which will be followed by the arrival of A Neo scheduled in September 2018 and the cabin retrofit plan of the A and the A340 aircraft during the forthcoming year 2018/19. This will bring a marked improvement in the core product offering in both classes, mainly in terms of seats comfort, inflight entertainment systems, with an alignment of the cabin comfort items and amenities with the new cabin design, and new crew uniforms. The various procurement tenders have reached their final stages and the product development is nearing completion to enhance the Mauritian identity onboard, whilst focusing on the prime objectives in terms of operating costs, brand reinforcement, weight effectiveness, and customer comfort improvements. Process Improvement and Innovation Air Mauritius, having recognised the importance to instill a climate of continuous improvement and innovation, has setup the Process Improvement Innovation unit. It aims at performing as a strategic partner to bring improvement through business process re-engineering across the organisation and the introduction of innovative solutions to support the business objectives. It will focus on enhancing both the external and internal customer experience mainly through digitalisation and will lead multi-disciplinary project teams. Several projects have already started and will be completed in the forthcoming financial year. The first initiative concerns investment in a digital publications platform so as to meet the demand for more magazines and newspapers on customers own mobile devices whilst also providing more convenience. In the same breath, savings on weight on board aircraft and on logistics associated with physical publications will be achieved. The IATA New Distribution Capability (NDC) platform implementation project which aims at modernising the distribution of Air Mauritius is currently underway. It is requiring active involvement of process improvement and innovation for its accomplishment. Already, it has lead the business case preparation team and are participating in defining the scope and integration requirements so as to achieve the desired cost savings, provide more personalised offerings and enhance the brand image. Other initiatives are in the pipeline which include the process mapping in treasury processes with a view to bring more efficiency and working towards a centralised view of the customers thereby contributing to personalisation, improved service and engagement. Annual Report 2017/18 59

63 Management Discussion and Analysis Cargo Air Mauritius recognises that customers must be put first and that service excellence is key to sustainable growth of the Airline business. The rising expectations from customers act as an impetus to Air Mauritius and industry players to take major steps towards digitisation and innovation in order to streamline and simplify the cargo supply chain right from the shipper to the consignee at destination. This will improve efficiency and provide greater choice, convenience and control for customers and allow business to make more informed decisions. As such, Air Mauritius started a number of investments in its digital service. After the introduction of the Microsoft CRM system to manage cargo claims and complaints, Air Mauritius initiated the industry s push towards greater digitisation by driving the implementation of electronic airway bill (e-awb) across its network. The customers have started exchanging cargo shipment details electronically to the system contributing significantly to the elimination of paper airway bills. Air Mauritius is also turning towards the IATA XML Standards which is a digital messaging standard promoted by IATA for electronic transmission of data among Cargo stakeholders. With a view to further enhance internal controls and transparency, a Cargo Adhoc Rate Approval System (CARAS) was implemented to ensure that defined parameters and restrictions are enforced with proper audit trail during commercial exchanges. A new Cargo Invoicing System (CIS) was also introduced as a solution customised to the needs of Air Mauritius for its import and export processes. It was recently implemented at the new office in Reunion where the cargo activities have been taken over by Air Mauritius from its Cargo GSA. The CIS will also be extended to Mauritius, Rodrigues and Madagascar in the near future. Both CARAS and CIS were developed inhouse by the Information Systems Team. In terms of performance, air cargo is still a very tough and competitive business. However, changes in Cargo GSA in the main markets during financial year 2017/18 saw an upsurge in production. The growth is mainly attributed to the strong demand for perishables, pharmaceutical products and also manufacturing goods in the network. The Air Corridor has also led to an increase in freight volumes between Asia and Africa and vice versa and offers higher prospects for Air Mauritius. load factors and downward pressure on yields. In view of this volatile environment, Air Mauritius will continue to be flexible in deploying its resources, alert and proactive on all sales opportunities and vigilant in maintaining cost discipline. The Company will focus on quality as volume grows. Future growth will depend largely in consolidating Mauritius as the Hub. As the National Carrier, Air Mauritius will ensure an efficient network of cargo services in order to promote trade, support local industries and also continue to contribute towards the economic development of the country. Information and Communication Technology Today, the airline industry recognises the key role that digital technologies play to transform businesses, engage with customers, improve operations and enhance revenue potential. In this respect, Air Mauritius remains committed to providing innovative and cost-effective digital platforms and systems that are aligned to its business strategies. During the year 2017/18, the Company has pursued its efforts to harness new technology solutions to streamline its business processes, enrich customer experience, enhance operational efficiency and improve staff productivity. Enriching Customer Experience through enabling technologies Cognizant of the vital role that digital technologies have become to enrich customers travel experience and of the fact that modern millennial travellers are demanding a higher level of digital engagement, Air Mauritius is continuously developing new digital omni-channel platforms and products to better manage the life cycle of its customers. In addition to its online website marketing and sales channel, the Company has developed and rolled out a Business to Customer mobile application for both the Android and IOS platforms during the year 2017/18. This new application provides services such as flight availability, online booking, ticketing and check-in, flight status query, promotional broadcast as well as flight notifications in case of flight disruptions. As an Airline, there exist concerns about more competition, increased supply of capacity, escalating costs, weakening 60 Air Mauritius

64 Management Discussion and Analysis Information and Communication Technology (Cont d) The newly implemented Microsoft Dynamics CRM system is also being rolled out across the Company to improve customer service delivery at the Company s main points of interaction. The CRM application assists the Company to enhance customer loyalty and manage more efficiently its customer-facing activities in the Loyalty Marketing, Customer Service, Contact Centre, Sales, Marketing and Operations business units. The Air Mauritius Kestrel Flyer portal has also been revamped with new responsive web design technologies so as to integrate with the Dynamics CRM system and support different browser form factors. Furthermore, the CRM application has been extended to manage Business to Business (B2B) relationships and assist the Company s sales teams to record and follow up on interactions with business partners. In view of growing its online sales channel and revenues as well as providing its customers with more convenience in booking their online travel, Air Mauritius now offers insurance services on its website. The travel insurance product from Allianz Global Assistance has been integrated into the Company s online booking engine for a seamless booking experience with a single payment and transaction. To further strengthen the security of its online platforms, the Air Mauritius website is now protected with an Extended Validation Secure Socket layer (SSL) certificate. In this respect, online customers can interact and transact with the Company in a very secured and trusted environment. Moreover, the booking engine has been reinforced with the Distil software that provides a safeguard against the growing threat of advanced persistent bots which are automated programs self-indulging into unwarranted data mining and harvesting on websites. By being protected from these bots, the booking engine has a better response time and is less costly to operate as a result of the elimination of excessive bot transactions. Enterprise Resource Management The Company s Enterprise Resource Management systems that comprise of Oracle Financial and HR applications need to be regularly enhanced to cater for new business, user and regulatory requirements as well as assist in further streamlining back office processes. During the year 2017/18, the Human Resource Information System (HRIS) which is the central repository for Air Mauritius employee information has been extended to consolidate the payroll of all offices abroad. All Outstations staff salaries and wages information are now directly interfaced to the Payroll system and to the Company s central General Ledger in Oracle Financials. This allows Air Mauritius to have a complete view and monitoring of its employee costs. Furthermore, the payroll system has been enhanced to accommodate new government and Mauritius Revenue Authority (MRA) regulations such as the introduction of the minimum wage and changes in monthly tax returns in Mauritius. The Oracle ERP system has also been enhanced with a new inventory organisation and financial transaction processing functionalities to cater for the newly setup Air Mauritius Amsterdam office. In addition, the financial system has been customised with a new interface to allow the seamless flow of invoicing data from the new Dynamics CRM system to the Oracle system. A new integrated Access Control and Time and Attendance system is also being implemented across the Company to enhance the accuracy, security, reliability and ease of use of clock in and clock out timings. In addition, the implementation of a Manpower and Resource Planning system to optimise the activities of airport-based ground personnel is underway and interfaces for Ground Operations employee leaves and rosters have been developed to enable faster planning of staff activities. The Concessional Travel System which is used to process staff rebate travel requests and bring efficiency in processes carried out by HR and Ticketing Counters have been further enhanced to provide new self-service facilities such as indicative flight loads. Air Mauritius employees can now have an indication of flight loads thereby alleviating queries to the call centre and reservation control. Annual Report 2017/18 61

65 Management Discussion and Analysis Data Analytics and Digital Intelligence With data becoming one of the most valuable component in today s enterprises, Air Mauritius has continued to leverage on new Business Intelligence (BI) and Data Analytics technologies that extract, consolidate and simplify information to enable faster and easier decision making. Following the migration of the Company s Enterprise Budgeting and Planning system to the new IBM TM1 Planning Analytics cloud-based platform, the system has been further enhanced with the development of additional analytics models such as the new passenger and cargo budget revenue models. These systems assist the Company to carry out budgeting and forecasting activities as well as the preparation of short to long term operating plans with greater efficiency and in a shorter timeframe. Moreover, the development of Management and Executive Information Dashboards is being carried out with the latest data analytics technologies from IBM and Microsoft to assist the Company in harnessing the huge amounts of data being captured every day and in having better insights of its key financial and operational metrics. Enterprise Collaboration Air Mauritius uses the Microsoft SharePoint platform as its main Enterprise Collaboration System to increase staff productivity and enable efficient sharing of information and resources within the organisation. The Company has gradually built a wide range of collaborative facilities and document management solutions such as intranet portals, content management, workflows, business process integration and dashboarding applications. Several enhancements have been brought to existing services and new features have been implemented to meet new business requirements. For Aircraft Technical Services, Quality Assurance documentation has been migrated to SharePoint to provide quicker document search, indexing and automated backup and a reporting system has been implemented for Aircraft Stores to enhance despatch time, reduce misplacement and printing costs. In Flight Operations department, a leave management plan for Management pilots has been developed to provide a centralised repository to better manage planned leaves with in-built notifications. Furthermore, the Cabin Operations portal has been revamped with a new navigation and content structure to create a better electronic communication platform. With the arrival of the A350 aircraft, several systems on SharePoint were enhanced to support this new type of aircraft. The SharePoint technology platform has also been upgraded to ensure mainstream support from Microsoft. Systems to improve operational efficiency The development of new systems and the upgrade of several existing applications to enhance the efficiency of the Company s operations and of its back office activities is an on-going process. To support the Company s cargo commercial and operation activities, a new application has been developed in-house to support the newly setup Air Mauritius Cargo Office in Reunion island. This new web based system, developed with the latest technologies, caters for all the import and export back-office activities handled by the new cargo office encompassing the sending of advice of arrival, reminders for import, invoicing, collection of fees and charges and sales reporting to Air Mauritius. The Counter Invoicing System which integrates the ticketing function in Amadeus and the accounts receivables module in Oracle Financials is currently being used in the Company s sales offices located in Mauritius and abroad. This year, it was rolled out in Air Mauritius Mumbai office. Moreover, the erefund capability of the system has been enhanced to process refunds by Pay Office for Air Mauritius and Airmate employees. In the past, the reconciliation of online payments was a manual and labour intensive process. This has been automated through a web based application that automatically retrieves electronic payment advices from the Company s payment gateway for processing and reporting, thereby facilitating the reconciliation process by the Revenue Accounting section. The new Helicopter system automates most of the helicopter reservation, invoicing and accounting processes including booking requests made by agents, back office functions for planning of helicopter trips, ticketing and refund as well as revenue accounting. This application has been enhanced with new features such as agent management, pro-forma invoice creation, a new refund process and Ticket & Manifest reversal and new reporting capabilities to further streamline current processes. 62 Air Mauritius

66 Management Discussion and Analysis Aircraft and Flight Operation Systems The introduction of the Airbus A350 in the Company s fleet has necessitated a whole new set of technologies and systems to support the operation of this new generation of aircraft. These encompassed the implementation of Airbus new cloud based e-operations systems at IBM data centres and the setting up of data connectivity platforms to keep the aircraft connected to back-end systems. At the airport gates in Mauritius, the setting up of SITAOnAir Gatelink wireless connectivity technologies now allows the A350 aircraft to quickly and securely exchange important information generated during the flight with both the Company s internal systems as well as with Airbus and other stakeholders. Furthermore, the integration of Airbus applications with those of other service providers such as Rockwell Collins engine manufacturers, SITA Aircom and the Maintenix aircraft maintenance systems has been carried out. Similarly, the replacement of ageing laptops by tablet devices for pilot cockpit use has been carried out. This has enabled the upgrade of the Airbus FlySmart Electronic Flight Bag (EFB) system used by pilots to include new capabilities such as the integration of electronic navigational charts. Enterprise Information and Communication Technology (ICT) Infrastructure To cater for the growing number of systems deployed across the organisation and the increasingly complex enterprise computing resources required to support Air Mauritius operations worldwide, the Company s ICT Infrastructure and networks have been reinforced to provide higher performance, availability and security of information. With the entry into service of the Airbus A350 aircraft, the IT network infrastructure in the Technical Services department, aircraft hangars and on the tarmac has been enhanced with WIFI connectivity to provide instantaneous communication between the A350 aircraft and ground based systems. This upgraded network also provides more mobility to aircraft engineers and assists in the optimisation of aircraft maintenance activities. Furthermore, the Company s Wide Area Networks that link the buildings located at the airport, Ebene and Port Louis have been upgraded to increase the reliability and redundancy of Air Mauritius inter building connectivity. The ICT server and telephony systems in some of the Company s main Outstation offices have also been revamped. New IP telephony systems, fibre optical network connectivity, servers and data storage equipment have been implemented in offices abroad such as Air Mauritius Geneva, Antananarivo town and cargo offices, London and Paris airport workplaces. Moreover, the enhancement of systems in the Company s main Data Centre and Disaster Recovery site is an ongoing process. The high availability and recovery capabilities of the Company s critical systems have been strengthened through the replacement of ageing server hardware used for the Oracle ebusiness suite of applications. This has substantially improved the performance of these key financial and HR applications. The reinforcement of the IT security environment against new cyber threats and evolving malware remains a key priority of the Company to protect its information assets. During the year 2017/18, the implementation of the new generation firewalls has been carried out in all new Outstation offices. The deployment of latest windows and other system security patches is also systematically carried out on all critical hardware, software and applications whilst the security of the Company s end user computing equipment is continually enhanced. Furthermore, the renewal of the Company s end user computing equipment such as PCs, laptops, workstations, tablets, mobile devices and IT peripherals is an ongoing process to ensure that the user community can make optimum use of IT systems and services to enhance their productivity and efficiency. Flight Operations and Safety Air Mauritius holds an Air Operator s Certificate (AOC) issued by the Department of Civil Aviation (DCA) of the Republic of Mauritius in order to qualify for Commercial Air Transport Operations. For eligibility to this AOC, the Company must demonstrate that it can comply with the International Civil Aviation Organisation (ICAO) standards, which are set in the Civil Aviation Regulations of Mauritius. The safety of its customers and of its operations is the prime objective of the Company. Consequently the Flight Annual Report 2017/18 63

67 Management Discussion and Analysis Flight Operations and Safety (Cont d) Operations and Safety team sets the standards well above minimum compliance levels, and strives for continuous improvement. Through regular audits, the Department of Civil Aviation carries out oversight of all aspects of operations to ensure continued compliance has been achieved and safety standards remain high. Flight Operations Department is headed by the Executive Vice President-Flight Operations as the AOC nominated person for Flight Operations. The management team comprises of the Chief Pilot, the Head of Corporate Safety, Management pilots and Operations Managers. The Flight Operations Support team is responsible to provide the logistical back up for operations to all scheduled destinations and alternate airports where Air Mauritius operates. The team ensures that the relevant permits and approvals have been obtained from the different countries that the Airline overflies, and that necessary documentation, manuals and procedures are accurate. Air Mauritius holds approval from the Department of Civil Aviation to conduct initial type-rating courses, recurrent simulator training as well as ground courses and other specialist courses such as Extended Twin-engine Operations (ETOPS), Low Visibility Procedures (LVP). This year another facet of essential training known as Upset Prevention and Recovery Training (UPRT) will be introduced. Crew Training is mandatory and conducted throughout the year to ensure that both cockpit and cabin crew demonstrate that the required standards are met. Crew training also emphasizes on sharing industry best practices to continuously improve standards. Human factors and Safety Management Systems training are also included in the training syllabus. The Operations Control Centre (OCC) is the nerve centre for Aircraft operations, where all flights are monitored on a round the clock basis. OCC is headed by the Vice President- Irregular Operations and his team. OCC oversees the network and provide corrective actions when unforeseen circumstances disrupt scheduled operations. The primary aim is to minimize disruptions for the customers to ensure that they reach their destinations in the most convenient way. The dispatch and crew tracking teams within OCC also manage the day to day functions of flight dispatch, flight planning, crew control and flight monitoring whereby automatic updates of the aircraft position are available. Controlling cost is an important objective for the Flight Operations department, and a number of planning tools are used to optimize fuel consumption. The Fuel Office focuses on fuel conservation initiatives for all areas of operations of the Airline in order to manage this major cost item. Dynamic flight planning, negotiating optimum routings and cruising flight levels, and availability of more accurate load information, all contribute to optimal uplift of fuel for each mission. Crews are also regularly sensitized on fuel cost and saving initiatives. Safety is the first priority of the Company and therefore, a close collaboration between the Flight Safety section and Flight Operations is a prerequisite. A permanent communication flow exists between the two sections whereby all relevant events related to the operations of aircraft are analyzed and discussed. Promoting an open reporting culture is at the heart of the Safety Management System. As and when required, feedback from technical crews are considered and information permeated to the pilot community. Safety Risk Assessments are also regularly carried out throughout Flight operations. Cabin Operations continuously pursues its efforts to live up to its mission to providing high level of service with Mauritian hospitality. With the growth in operations of the Company, the Cabin operations team has been reinforced with additional flying personnel. Technical Services During the financial year 2017/18, two A have successfully been introduced into service. The Company has acquired all capabilities and approvals from the Department of Civil Aviation to be fully autonomous for the engineering and line maintenance of this latest generation aircraft. Extensive training were provided to Maintenance and Engineering personnel to ensure that the right competencies are readily available for a smooth operation and prompt resolution of technical issues that may arise. Air Mauritius has also undertaken a number of other challenging projects for the exit of three A340s from the fleet in 2018, the cabin retrofit of the existing A fleet as from June 2018 and the entry in service of two new generation A as from September Air Mauritius

68 Management Discussion and Analysis Technical Services (Cont d) Continuous improvement of processes and procedures has been the main focus throughout the year to be able to cope with operational growth and an ageing A340 fleet. Technical handling of foreign operators has also been a growing activity. The customer base has increased from 12 operators to 16 operators and the number of foreign operator flights handled increased from 716 to 1,302 (82%). Air Mauritius has recruited young trainee engineers and trainee technicians during financial year 2017/18 to accelerate the mauritianisation of its personnel. They were provided with in-house induction courses, customised basic maintenance training by accredited local partners and on-the-job training throughout the financial year with the objective of replacing all expatriate technicians by May Further training will be provided in the next two years for them to become full fledge technicians. On-time departure is a key performance indicator for the Company. Customer satisfaction is greatly influenced by delays, some of which could be of technical nature. The Company continuously monitors the health of the aircraft in order to anticipate failures that could prevent the aircraft from being released for flight. Air Mauritius, through its Maintenance Control Centre, follows each aircraft during all phases of flight and proactively organises maintenance actions required during transits and layovers so that flights disruptions are avoided or reduced to a minimum In line with the introduction of the Continuous Airworthiness Management Organisation (CAMO), Airworthiness Review Inspectors have been recruited with the specific responsibility of ensuring that continuous Airworthiness of all aircraft are maintained. The role is demanding and requires a deep and fundamental knowledge across a range of subject areas, including Maintenance Planning, CAMO Engineering, Technical Records and Reliability. Airworthiness Review Inspectors are conferred a specific approval by the Department of Civil Aviation (DCA) to perform Airworthiness Reviews on aircraft which are listed on the CAMO approval certificate. Availability of the right spare part at the right location at the right time is vital to ensure on time departures. During the financial year 2017/18, the Company has consolidated its supply chain into a 24/7 operation. Sourcing of spare parts and management of repairs have become more efficient and allow to better mitigate the risk of aircraft remaining on ground due to lack of spares. The travel process is widely regarded as part of an overall experience. Cabin products and comfort have become a significant differentiator for passengers and have a vital role to play in the battle for customer loyalty. With full flat premium seats, state of the art In-Flight-Entertainment (IFE) and In-Flight Internet connectivity available on the A , and forthcoming cabin retrofit plan in 2018, Air Mauritius is positioning itself to leverage with its competitors. The cabin maintenance team has been revamped to meet the existing and future challenges and has undergone extensive training that allows Technical Services to maintain these aircraft with the highest cabin standard currently available in the industry. Continuous preventive maintenance is carried out in all aircraft cabins to cope with wear and tear. The cabin maintenance program is regularly revisited by the maintenance and engineering team to increase its effectiveness, to adapt to changing customer expectations, whilst consistently meeting the stringent criteria for a 4-star SKYTRAX rated airline. Air Mauritius remains the leading Maintenance and Repair Organisation at SSR International Airport and its technical management team has the prime responsibility of ensuring that the safety of customers and crew are never jeopardised. Although maintenance of aircrafts represents a major cost for the Company, management relentlessly ascertain that adequate resources and competences are available in respect thereof. Air Mauritius holds approval as an Approved Maintenance Organisation from DCA Mauritius and European Aviation Safety Agency (EASA) and it is also approved by other non-european Aviation Authorities namely, UAE, South Africa, Turkey and Seychelles. As a further commitment to international standards, the Company has positively contributed to maintain its IOSA Certification. Human Resources and Organisational Development Air Mauritius acknowledges the fact that it runs a peoplecentered business. Efficient management of its human capital is therefore of significant importance in executing the airline s strategy, which hinges on delivering a seamless travel experience in line with the reputation of the destination it serves and providing unflinching level of quality and safety on board. The nurturing of its human capital is announced as one of the pillars of the Company s strategy going forward. Annual Report 2017/18 65

69 Management Discussion and Analysis Human Resources and Organisational Development (Cont d) Air Mauritius is therefore committed to attracting, training and retaining talents that best contribute to the Company s success. It also supports the management in the continuous transformation exercise that is required to sustain Air Mauritius competitiveness. The Human Resources action plan is therefore geared towards creating the conditions so that Air Mauritius is equipped with a trained and motivated workforce empowered to shoulder the Company s renewed ambitions. Employee and Industrial Relations The provision and maintenance of sound and trustworthy Employee and Industrial Relations are vital to Air Mauritius achieving its business objectives. The Company acknowledges the need to revisit such relations time and again in order to ensure the continual alignment of employees relations with the Company s strategic goals. The framework for relations is set out in formal agreements between management and the unions, which govern the customs and practices, thus nurturing good employeremployee relationships. Air Mauritius recognises 8 unions representing different categories of employees, namely: Airline Employees Association (AEA) representing the expatriate pilots. Mauritian Air Line Pilots Association (MALPA) representing the Mauritian pilots. Air Mauritius Staff Association (AMSA) representing employees in the staff grade. Private Transport Employees Union (PTEU) representing drivers in the Transport Department. Union of Employees of Air Mauritius Limited (UEAML) representing the manual employees. Air Mauritius Cabin Crew Association (AMCCA) representing the Cabin Crew. Licensed Aircraft Engineers Association (LAEA) representing interest of Licensed Aircraft Engineers. Air Mauritius Technical Services Staff Union (AMTSSU) representing support Engineers, Workshop Controllers and Certifying Workshop Technicians of the Technical Department. Financial year 2017/18 has witnessed the renegotiation of a number of key agreements with the trade unions. A series of meetings have been held with the unions, some of which are expected to lead to new revisited agreements in the near future. The new agreements are meant to ensure that effort is adequately rewarded and conditions of employment regulated in the Company, thus protecting the interests of both the employees and the employer. They also set the standards for expected employer and employee behaviours in the work place. The revised formal and informal processes in place will allow for continual interactions between higher management and other line management on the one hand, and the trade union representatives and employees on the other hand. Management and the trade unions have deployed their best efforts to bring a prompt conclusion to these negotiations. Mauritianisation of Technical Crew Fundamental to the airline s strategic objectives is the project to provide better opportunities for Mauritian nationals to contribute at all levels in the Company. The Company is therefore investing in a project that will enhance the technical abilities of its Mauritian employees as well as the provision of further training opportunities to Mauritians that wish to join the Company. It has therefore launched the Mauritian Pilot Development Program that will see a larger number of Mauritians pursuing a career as airline pilot, through the Air Mauritius Flying Academy. As at March 31, 2018, the technical crew was made up of 53% of Mauritians and this percentage is set to increase in the coming years. Air Mauritius Institute (AMI) and AMI Flying Academy The Air Mauritius Institute (AMI) was established during the financial year to cater for the learning needs of Air Mauritius employees. This project has been identified as a key enabler to educate and develop aviation professionals for the future. AMI is committed to offering world-class learning and development opportunities. AMI will continually develop and review curricula in airline technical and vocational training based on best practices, international standards and industry regulations. It will also offer a range of operational and management programmes to meet the training needs of the airline community. AMI will operate in partnership with other institutions and bodies to deliver training courses. AMI will also have a flying academy that will, for the first time in Mauritius, deliver pilots training in partnership with a recognized and approved Pilot Training Provider. 66 Air Mauritius

70 Management Discussion and Analysis Ground Services Air Mauritius provides efficient and safe handling of its flights at SSR International Airport and also provides third party handling services to a number of foreign carriers. These services include passenger, baggage, ramp, cargo and transit cleaning. During the financial year 2017/18, Air Mauritius handled more than 17,800 flights, 2.8 M passengers and about 54,000 tonnes of cargo. Safety remains the top priority, strict compliance to regulations and high standards of service is inherent in all the activities. The persistent commitment to safety and service is regularly assessed by self-audits, Customer Airlines audit and IATA approved auditors. Ground Handling standards are also recognised in the industry as confirmed by the IATA Operational Safety Audit (IOSA) and IATA Safety Audit for Ground Operations (ISAGO). The evolving regulatory framework, rising customer expectations and competition require a robust quality system and continued investment in training and development. Over the year, Air Mauritius internal trainers have delivered courses to Team members covering mandatory technical training as well as soft skills. The Amédee Maingard Lounge in Mauritius has been awarded the Indian Ocean Leading Airport Lounge at the 2017 World Travel Awards for the fourth consecutive year. The menu offering in the lounge is constantly reviewed and customised for different customer profiles whereas the beverages are aligned with the onboard offerings to provide a unique experience for customers, be it on ground or inflight. Communication and Corporate Affairs Air Mauritius is actively involved in the management of its corporate image and reputation thus contributing to safeguard shareholder value. This involves the building and maintaining of sound relationships with key stakeholders including shareholders, employees, media, government regulatory bodies, organisations, customers, business partners, providers of capital as well as the public in general. The Company s various audiences and the media are closely monitored and top management is provided with valuable insight on reputational issues while the organisation is kept abreast of the latest local and international industry news. Analysis of stakeholder positions based on systematic monitoring has better equipped management to deal with reputational issues as they arise. Broad Mission As a national airline, Air Mauritius fully embraces its mission to serve the interests of the Mauritian citizens as a whole. This philosophy therefore transpires in the approach to corporate communication and the management of stakeholder relations. In line with this philosophy, the celebrations of the Company s 50 th anniversary, which preceded the celebrations of the country s 50 years of independence, have provided an opportunity to reiterate Air Mauritius continued commitment to the country s development. Hence the activities organized by whole Air Mauritius Team included the anniversary gala night, promotions, media campaigns, a quiz competition for students, the Air Mauritius Award, on-board celebrations, a blood donation campaign, a football competition, and activities around the rehabilitation of wetlands in conjunction with government authorities. These events which helped in enhancing visibility and promoting Company image also provided Air Mauritius team members with platforms of exchange for engaging with key stakeholders and for the promotion of Company business. The emphasis has been put on the Company s stated objective to act as a liaison between Africa and Asia, and as a support to transforming Mauritius, from a home base into a strategic airline hub in the region. Its role as a provider of quality job opportunities for Mauritians has also been highlighted. Events The end of year 2017 was marked by the arrival in October of Air Mauritius first A350 aircraft, followed by a second one in November. This much-awaited event fostered a sense of revival within the Air Mauritius team and among its customers. In the same breath, this event has been an opportunity to communicate on the considerable investments in the reinvention of the airline s products which includes several modern features built in the new A350 as well as all Air Mauritius new aircraft. Digitalisation The year 2017/18 has seen Air Mauritius engage in the digitalisation of its processes in order to maintain close contact with its customers. The Communications and Corporate Affairs Department supports this development by providing a management of the Company s reputation on social media. Additional resources have been devoted to Annual Report 2017/18 67

71 Management Discussion and Analysis the close monitoring of the conversations and communities that gather around the brand in social media. This provides management with valuable insight on reputational issues. It also keeps the Company abreast of the latest local and international industry news. The use of social media channels has been explored for corporate communications as a complement to business communications with customers and stakeholders. Internal Communications For goal congruence across the organization, a spectrum of internal communications tools is deployed and maintained to ensure that colleagues in Mauritius and across the network understand the Company s values and strategic objectives. They give employees access to the latest news on the airline while providing them with a medium to promote internal community life. The internal communications function also endeavours to keep the organization focused on key performance indicators, fostering a performance-oriented culture. Brand Communications The Air Mauritius brand is continually reinforced with the design and dissemination of a strong and consistent corporate identity expressed in the Company product design language and all forms of messages circulated across both internal and external channels. Brand and marketing communication supports the commercial function as a strong brand image and also helps to build and maintain bonds with stakeholders. Brand communications play an important role in maintaining a competitive edge by expressing the Company s unique selling proposition through various advertising campaigns. Crisis Communications As crisis situations can have far reaching impacts on Company reputation and give rise to legal liabilities if not properly managed, a crisis-management function is in place to ensure a perpetual state of preparedness for a broad range of crisis situations. 68 Air Mauritius

72 Management Discussion and Analysis Performance and Development of the Business Financial Performance Profit of the Group for the financial year was Eur 4.9m compared to a profit of Eur 27.6m achieved in the previous year. Group Operating profit was Eur 18.9m for the financial year 2017/18 compared to a profit of Eur 23.6m for 2016/17. Business Segments Airline business The airline business segment result for the financial year 2017/18 was a profit of Eur 4.5m compared to a profit of Eur 26.9m in 2016/17. The operating profit for the financial year under review was Eur 18.5m compared to a profit of Eur 23.1m in 2016/17. Net Profit / (Loss) for the Company (Eur M) (23.7) 2013/ / / / /18 EBITDA for the Company ,729 15,431 51,981 64,240 33, / / / / /18 EBITDA (Eur'000) EBITDA/Turnover (%) Annual Report 2017/18 69

73 Management Discussion and Analysis Segmental Information 1. By Product (a) Aircraft Operations Revenue Composition 2017/18 Eur m 2016/17 Eur m % Change Passenger Revenue Freight Other Passenger related & Helicopter Revenue* Lease Receivable & Sundry Revenue (25.6) Excess Baggage, Mail & Courier Total * No Helicopter Revenue in 2017/18 ** Ticket fee revenue has been adjusted to Passenger Revenue from Other Passenger Related and Helicopter Revenue as it is directly related to passengers. Revenue Composition For the first time in the Company s history, Aircraft Operations Revenue exceeded the Eur 500M mark to reach Eur 501.3m, representing an increase of 3.1% over the previous financial year. Passenger revenue which represents 84% of total aircraft operations revenue increased by 1.4% from Eur 412.5m in 2016/17 to Eur 418.4m this year. Freight Revenue witnessed an important increase of 12.7% to Eur 46.9m attributable to a significant increase of 28.4% in cargo tonnage despite a fall of 12.1% in yield. Other Passenger related revenue amounted to Eur 26.6m, representing an increase of 27.9% over the previous financial year. On the other hand, Lease Receivable & Sundry Revenue dropped by 25.6% from Eur 8.6m to Eur 6.4m for the financial year under review. Income earned from the carriage of Excess Baggage, Mail & Courier was higher by 3.4% from Eur 2.9m in 2016/17 to Eur 3.0m this year. Freight 9% Passenger Revenue 84% Other Passenger related & Helicopter Revenue 5% Lease Receivable & Sundry Revenue 1% Excess Baggage, Mail & Courier 1% 70 Air Mauritius

74 Management Discussion and Analysis Segmental Information (Cont d) Travelled Revenue (Eur M) / / / / / 18 Passenger Freight (b) Ground Operations Air Mauritius provides Traffic and Technical handling services to foreign airlines operating to Mauritius. Income received from these services represented 1.7% of the total revenue for 2017/18. Annual Report 2017/18 71

75 Management Discussion and Analysis Segmental Information (Cont d) Travelled Revenue by Route 2. Geographical (i) Geographical by Route Travelled Revenue breakdown by route * Europe 34% Asia 31% Operating Region Eur M % Europe Asia Africa/Middle East/Indian Ocean Australia Africa/ Middle East/ Indian Ocean 29% Total * Excluding Lease Receivable & Sundry Revenue Europe - 34% Europe remains the top most region in terms of share of revenue at 34%. Both Revenue Tonne Kilometres and Available Tonne Kilometres recorded increases of 10.3% and 5.8% respectively. Asia - 31% Europe 40% Australia 6% Available Tonne Kilometres (ATK) Africa/ Middle East/ Indian Ocean 18% The Asian region comprises of the routes operating to India, mainland China, Hong Kong, Singapore and Malaysia. The share of revenue of this region dropped by 1 percentage point to 31%. Revenue Tonne Kilometres went up by 5.6% while Available Tonne Kilometres increased marginally by 1.4%. Africa / Middle East / Indian Ocean - 29% These segments include South Africa, Kenya, Mozambique, Tanzania, Dubai, Madagascar, Reunion and Rodrigues. These regions maintained their share of revenue at 29%. Revenue Tonne Kilometres were higher by 9.4% and Available Tonne Kilometres increased by 5%. Australia - 6% Australia recorded an increase of 1 percentage point in its share of revenue to 6%. Both Revenue Tonne Kilometres and Available Tonne Kilometres registered significant increases of 22.8% and 18.3% respectively. Africa & Middle East/ Indian Ocean 17% Australia 5% Revenue Tonne Kilometres (RTK) Asia 37% Asia 36% Australia 4% Europe 43% 72 Air Mauritius

76 Management Discussion and Analysis Segmental Information (Cont d) ii) Geographical by Destination Travelled Revenue breakdown by destination * Asia 22% Travelled Revenue by destination Destination Eur M % Mauritius Europe Asia Mauritius Other Indian Ocean Islands Africa & Middle East Australia 22 5 America Total * Excluding Lease Receivable & Sundry Revenue Europe 32% America 1% Australia 5% 20% Africa & Middle East Other Indian Ocean Islands 8% 12% Revenue by destination is defined as the income generated from the original point of sale, i.e. market contribution to the network. Europe comprises of online markets (with direct connections) such as France, United Kingdom, Netherlands and Switzerland and offline markets (with indirect connections) such as Germany, Italy, Spain, Sweden and Belgium. Its share of revenue grew by 1 percentage point to 32%. Asia is composed mainly of countries such as India, China, Malaysia, Singapore and Hong Kong. The share of revenue of this region recorded a fall of 1 percentage point from 23% in 2016/17 to 22% this year. Mauritius retained its share of revenue of 20%. Other Indian Ocean Islands group countries such as Madagascar, Reunion and Seychelles. Its share of revenue dropped by 1 percentage point to 12%. Africa and Middle East is comprised mainly of countries such as South Africa, Kenya, Tanzania, Mozambique and United Arab Emirates. The share of revenue of this region was same as last year at 8%. The share of revenue of Australia improved by 1 percentage point from 4% in 2016/17 to 5% this year. America is composed mainly of the northern countries of USA and Canada.This region maintained its share of revenue of 1%. Annual Report 2017/18 73

77 Management Discussion and Analysis Segmental Information (Cont d) Geographical by Routes (Passenger only) Operating Region Number % Change over Last Year Eur M % Change over Last Year Europe 311, Asia 439, (2.9) Africa & Middle East 285, Indian Ocean 599, (1.0) Australia 59, Total 1,694, Network The operating environment for the passenger business continued to be competitive in 2017/18 with the arrival of a new player and moreover with the injection of additional capacity by existing airlines. The Company pursued its strategy of consolidation of its existing market as well as investing in emerging markets with the deployment of additional capacity in the network which resulted in an increase of 5.9% in seats offered to 2,262,214 this year. The number of passengers carried in the network went up by 5.8% from 1,602,632 in 2016/17 to a new high of 1,694,956 for the Company. Passenger Revenue was 1.4% up on the previous financial year at Eur 418.4m. Passenger Yield declined by 4.1% as it continued to be under pressure on account of increased competition from other carriers. Passenger Load Factor slipped by 0.7 percentage point from 79.6% in 2016/17 to 78.9% this year. Europe Amsterdam was introduced as from winter 2017/18 as an extension of the existing MK/AF joint venture agreement, with KLM operating flights in winter and Air Mauritius in summer to ensure year-round operations. Air Mauritius started its operations with two weekly flights to Amsterdam on March 26, Seasonal operations were resumed to Geneva between November 2017 and February 2018 with a one weekly flight. Seat Capacity on the European routes reached 376,374, representing a growth of 7.6% over the previous financial year. Passenger Revenue registered an increase 3.3% to Eur 141.3m on account of an increase in the number of passengers carried by 6.5% despite a fall of 2.9% in yield. Passenger Load Factor went down by 0.9 percentage point from 83.6% in 2016/17 to 82.7% this year. Contribution by Operating Regions 100% 3% 6% 12% 36% 17% 17% 31% 26% 34% 18% 0% % No of Passengers % Revenue Europe Indian Ocean Asia Africa & Middle East Australia 74 Air Mauritius

78 Management Discussion and Analysis Segmental Information (Cont d) Asia Asia is composed of the routes operating to India, China, Hong Kong, Singapore and Malaysia. The weekly frequency to Beijing was suspended as from November 18, The number of seats offered in this region registered an increase of 4% to reach 549,136. Concurrently, the number of passengers carried went up by 3.4% from 425,146 to 439,412. On the other hand, Passenger revenue was down by 2.9% to Eur 130m on account of a decrease of 6% in passenger yield. Passenger Load Factor decreased by 0.6 percentage point to 79.4% this year. Africa & Middle East Services to Maputo was suspended in August 2017 and the flight was operated direct to Durban. These segments reported an increase of 5% in seats offered from 377,124 in 2016/17 to 396,034 this year. Similarly, the number of passengers carried was also on the rise with a 5.8% increase to 285,140 for this year. Passenger Revenue increased to Eur 71.3m, representing an increase of 4.7% over the previous financial year despite a dip of 1.1% in yield. Passenger Load Factor went up marginally by 0.3 percentage point to reach 72.3% this year. Indian Ocean The number of passengers carried climbed by 6.4% to 599,794 while seat capacity grew by 5.8% to 862,590. A decrease of 6.9% in passenger yield contributed to a fall of 1% in passenger revenue to Eur 51.5m. Passenger Load Factor stood at 67.4%, representing a decrease of 3.2 percentage points over the previous financial year.. Australia Seat Capacity rose by 17.8% from 66,297 in 2016/17 to 78,078 this year. Passenger demand was strong as the number of passengers carried on this route went up by 14.4% to reach 59,265. Passenger Revenue was 12% up on the previous year at Eur 24.3m. Passenger yield decreased by 1.9%. Passenger Load Factor was 75.9%, a decrease of 2.3 percentage points over last year.. Seats Offered/Pax Carried/Pax Load Factor 75.5% 73.7% 78.7% 79.6% 78.9% 1,913,249 1,330,003 1,947,766 1,370,423 2,013,568 1,499,411 2,136,394 1,602,632 2,262,214 1,694, / / / / /18 No. of Seats offered No. of Pax carried Pax Load Factor (%) Annual Report 2017/18 75

79 Management Discussion and Analysis Segmental Information (Cont d) Passenger Capacity and Output (Million) 8,887 8,399 8,400 8,009 7,074 7,366 6,612 6,046 6,186 9, / / / / /18 Revenue Passenger Kilometres (RPKs) Available Seat Kilometres (ASKs) Passengers Carried (Number) & Revenue (Eur M) ,330,003 1,370,423 1,499,411 1,602,632 1,694, / / / / /18 Passengers carried Passenger Revenue Load Factor (%) by region Africa & Middle East Asia Australia Europe Indian Ocean 2016/ /18 76 Air Mauritius

80 Management Discussion and Analysis Segmental Information (Cont d) Cargo Analysis Geographical by Routes Operating Region Tonnes % Change over Last Year Eur M % Change over Last Year Europe 11, Asia 10, Africa/Middle East/Indian Ocean 15, Australia 1, Total 39, Network The cargo business was robust with a 12.7% increase in cargo revenue to Eur 46.9m mainly attributable to a substantial increase of 28.4% in cargo uplift to 39,224 tonnes this year. On the other hand, cargo yield was under pressure with a drop of 12.1% owing to intense competition on the market. Europe Cargo Revenue recorded an important increase of 11.1% to Eur 18m mainly on account of an increase of 29.4% in cargo tonnage. Cargo yield plummeted by 14.3%. Asia Asia recorded an increase of 13.4% in its revenue to Eur 16.1m. The increase was attributable to a substantial increase of 34.7% in cargo uplift. On the other hand, Cargo Yield dropped by 15.5%. Africa / Middle East / Indian Ocean Revenue earned from these regions were up by 12.4% to Eur 11.8m due to a significant increase of 21.3% in cargo tonnage despite a fall of 7.6% in yield. Contribution by Operating Regions 100% % Tonnes (%) Cargo Revenue (%) Europe Australia Asia Africa/Middle East/Indian Ocean Australia Revenue earned on the Australian route soared by 42.9% to reach Eur 1m largely attributable to an increase of 86.9% in cargo tonnage. Cargo Yield was under pressure as it slipped by 21.3%. Annual Report 2017/18 77

81 Management Discussion and Analysis Segmental Information (Cont d) Cargo carried (Tonnes) & Revenue (Eur M) ,825 35,528 29,901 30,560 39, / / / / /18 Cargo carried Cargo Revenue Percentage Contribution of Cargo to Gross Travelled Revenue / / / / /18 Cargo Revenue Tonne Kilometres (Million) Air Mauritius 2013/ / / / /18

82 Management Discussion and Analysis Revenue Group revenue for the year increased from Eur 497.8m in 2016/17 to Eur 514.3m this year. Passenger revenue was up by 1.4% to Eur 418.4m. Passenger yield dropped by 4.1% compared to the previous financial year and Passenger Load factor was down by 0.7 point to 78.9%. Capacity in terms of ASKs increased by 5.1% compared to last year. Cargo revenue increased by 12.8% from Eur 41.6m to Eur 46.9m as compared to last year. Operating Expenses Total operating expenses increased by Eur 18.7m from Eur 448.4m to Eur 467.1m. Operating Expenditure 2017/ /17 Increase / (Decrease) Eur M Eur M % Fuel Costs Employee Costs (1.6) Maintenance & Overhaul * (1.5) Handling Charges, Ground Services, Catering and Other Inflight Costs Aircraft Operating/Wet Lease Costs Landing Fees and en route Charges Marketing and Distribution Costs Depreciation & Amortisation (13.9) Crew Costs & Other Operating Costs Total Group Operating Expenditure * Include Depreciation & Amortisation on Engine/Airframe overhauls Annual Report 2017/18 79

83 Management Discussion and Analysis Cost Composition /18 Crew Costs & Other Operating Costs 4% Depreciation & Amortisation 4% Marketing and Distribution Costs 6% Fuel Costs 28% Landing Fees and en route Charges 6% Aircraft Operating/Wet Lease Costs 10% Handling Charges, Ground Services, Catering and Other Inflight Costs 10% Employee Costs 17% Maintenance & Overhaul 15% Earnings per Share Profit attributable to shareholders for the year was Eur 4.7M. This is equivalent to a profit of Eur 0.05 per share or Rupees 1.99 per share as at March 31, Working Capital At March 31, 2018, net current liabilities were Eur 69m as compared to Eur 22.8M at March 31, The current liabilities include an amount of Eur 114.0M for the financial year 2017/18 compared to Eur 109.3M for 2016/17 in respect of sales in advance of carriage for tickets issued but not yet utilised. Cash Flow The cash & cash equivalents (after bank overdrafts) of the Group at March 31, 2018 showed an amount of Eur 32M (Mur 1.3 billion) compared to Eur 81.9M (Mur 3.1 billion) at March 31, Gearing ratio The gearing ratio at March 31, 2018 was 0.4:1 compared to 0.3:1 of the previous financial year. Debt (Eur '000) and Gearing Ratio ,953 65,783 53,834 31,551 30, / / / / /18 Debt Gearing Ratio 80 Air Mauritius

84 Management Discussion and Analysis Operating and Financial Statistics for the five years ended 31 March Traffic and Capacity Revenue passenger km (RPK) m 7,366 7,074 6,612 6,186 6,046 Available seat km (ASK) m 9,339 8,887 8,400 8,399 8,009 Passenger load factor (%) Cargo tonne km (CTK) m Revenue tonne kilometres (RTK) m Available tonne kilometres (ATK) m 1,376 1,316 1,258 1,256 1,201 Overall load factor (%) Passengers carried ( 000) 1,695 1,603 1,499 1,370 1,330 Tonnes of cargo carried 39,224 30,560 29,901 35,528 31,825 Revenue flights 12,483 11,429 10,677 10,093 9,987 Financial Net profit/(loss) margin (%) (5.1) 1.6 EBITDA Eur m Gearing Ratio 0.4:1 0.3:1 0.7:1 1.7:1 0.8:1 Total traffic revenue per RTK Eur Total traffic revenue per ATK Eur Total expenditure on operations per RTK Eur Total expenditure on operations per ATK Eur Passenger revenue per RPK Eur Passenger revenue per ASK Eur Revenue per ASK (RASK) Eur Cent Cost per ASK (CASK) Eur Cent Cargo revenue per CTK Eur Average fuel price (US cents/us gallon) Operations Aircraft in service at year end Punctuality - within 15 minutes (%) Dispatch Reliability overall (%) Annual Report 2017/18 81

85 Certificate from the Company Secretary I certify that, to the best of my knowledge and belief, the Company has filed with the Registrar of Companies all such returns as are required of the Company under the Mauritius Companies Act 2001 in terms of Section 166(d). Mr Vijay Seetul Company Secretary June 13, 2018 Directors Disclosure Statement The directors who are members of the Board at the time of approving the Annual Report and Business Review are listed on page 20 Having made enquiries of fellow Directors and of the Company s independent external auditors, each of these Directors confirms that: a) to the best of each Director s knowledge and belief there is no information relevant to the preparation of their report to which the Company s auditors are unaware; and b) each Director has taken all the steps a director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the Company s auditors are aware of that information. Approved by the board and signed on its behalf by: Dr Arjoon Suddhoo, FRAeS Chairman of the Board Mr Louis Rivalland Director and Chairman of Audit Committee June 13, Air Mauritius

86 Statement of Compliance (Section 75(3) of the Financial Reporting Act) Name of PIE: Air Mauritius Limited Reporting Period: April 01, 2017 to March 31, 2018 We, the Directors of Air Mauritius Limited, confirm that to the best of our knowledge the Company has complied with the Code of Corporate Governance except for the sections 2.2.3, and 3.9.1(b) which have been detailed below: 1. Section Two Executive Board Directors Only the CEO as part of the Management Team, sits on the Board. During the financial year 2017/18, the CEO as an Executive Director is in office as from July 14, The CEO together with other Senior Executives participates, as agreed, to all Board meetings and its deliberations. 2. Section Board and Director Appraisal Due to review of the Board composition, no individual assessment of Board Directors were carried out in financial year 2017/2018. However, collective assessment of Board Directors were performed. 3. Section (b) Composition of the Audit Committee The Chairperson of the Audit Committee was not an independent director but had the professional knowledge, expertise and experience in finance to head this committee. Dr Arjoon Suddhoo, FRAeS Chairman of the Board Mr Louis Rivalland Director and Chairman of Audit Committee June 13, 2018 Annual Report 2017/18 83

87 Directors Responsibility Statement The responsibilities of the Directors of Air Mauritius Limited in respect of the operations of the Group and the Company are set out below: Financial Statements The Directors are required by the Companies Act 2001 and Financial Reporting Act 2004 to prepare financial statements for the Group and the Company that provide a true and fair view of the financial position as at the end of the financial year and of the results of their operations for the year then ended. The Directors are responsible for the integrity of these annual financial statements and for the objectivity of any other information presented therein. The Directors confirm that, in preparing these financial statements, they have: kept proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and the Company; safe-guarded the assets of the Group and the Company by maintaining appropriate internal control systems and procedures; taken reasonable steps for the prevention and detection of fraud and other irregularities; prepared the financial statements on a going concern basis; made judgements and estimates that are reasonable and prudent; and, selected suitable accounting policies, in compliance with International Financial Reporting Standards, and have applied them consistently. Internal Control The Directors have an overall responsibility for taking such steps, as are reasonably open to them, to safeguard the assets of the Group and the Company and to prevent and detect fraud and other irregularities. The Group s internal control systems have been designed to provide the Directors with such reasonable assurance. Such systems should ensure that all transactions are authorised and recorded and that any material irregularities are detected and rectified within a reasonable time-frame. The Group has an established Internal Audit function which assists management in effectively discharging its responsibilities. Internal Audit is an independent function that reports directly to the Audit Committee. Business controls are reviewed on an on-going basis by Internal Audit using a cycle-based risk approach. Risk Management Through the Risk Management Steering Committee ( RMSC ), it is ensured that the Directors are made fully aware of the various issues and risks affecting the Group s business activities. The Directors are responsible for taking appropriate action to mitigate these risks using such measures, policies and procedures and other controls that they deem fit. Governance The Directors endeavour to apply principles of good governance at the level of the Group as well as within the Company. Dr Arjoon Suddhoo, FRAeS Chairman of the Board Mr Louis Rivalland Director and Chairman of Audit Committee June 13, Air Mauritius

88 Independent Auditors Report to the Members of Air Mauritius Limited Report on the Audit of the Consolidated and Separate Financial Statements Opinion We have audited the consolidated and separate financial statements of Air Mauritius Limited ( the Group and the Company ), which comprise the consolidated and separate statements of financial position as at March 31, 2018 and the consolidated and separate statements of profit or loss and other comprehensive income, consolidated and separate statements of changes in equity and consolidated and separate statements of cash flows for the year then ended, and the notes to the consolidated and separate financial statements, including a summary of significant accounting policies, as set out on pages 92 to 161. In our opinion, these consolidated and separate financial statements give a true and fair view of the consolidated and separate statements of financial position of Air Mauritius Limited as at March 31, 2018 and of its consolidated and separate financial performance and consolidated and separate statements of cash flows for the year then ended in accordance with International Financial Reporting Standards and in compliance with the requirements of the Companies Act 2001 and Financial Reporting Act Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Consolidated and Separate Financial Statements section of our report. We are independent of the Group and the Company in accordance with International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. These key audit matters are applicable to both the consolidated and separate financial statements. Annual Report 2017/18 85

89 Independent Auditors Report to the Members of Air Mauritius Limited Report on the Audit of the Consolidated and Separate Financial Statements (Cont d) Key audit matters (Cont d) Impairment of aircraft and related equipment Refer to notes 4.3(i), 4.4(c) and 6 to the consolidated and separate financial statements The key audit matter Aircraft and the related equipment are the most significant component of total assets for the Group and the Company, representing nearly 30% of the Group s and the Company s total assets as at March 31, Technological obsolescence and an ageing fleet of A340 aircraft together with recent decreasing yields and loss of market share due to an increase in competition from other airlines, are indicators of impairment of aircraft and its related equipment. This assessment of impairment, in terms of IAS 36 Impairment of Assets (IAS 36), involves significant use of estimates and judgements in determining the recoverable amount of the aircraft and related equipment which include: - forecasting specific aircraft information such as revenue per aircraft, load factor, average air ticket price, cargo yield and fuel cost; - the remaining useful lives of these assets and indicators of obsolescence; - the discount rate used; and - estimated selling price at the end of their useful lives. Due to the significance of aircraft and related equipment in the financial statements and the significant judgments applied by Management in their impairment assessment, the impairment of aircraft and related equipment was considered a key audit matter in our audit of the consolidated and separate financial statements. How the matter was addressed in our audit We have obtained Management s impairment assessment of aircraft and related equipment and assessed whether the impairment assessment has been performed in accordance with IAS 36. Our audit procedures included: We challenged and evaluated the assumptions and critical judgements made by Management in their impairment assessment with reference to historical trends and our own expectations based on the Group s and the Company s long term and strategic plans, including budgets approved by the Board, and on our knowledge of the business and the airline sector as a whole. We considered the accuracy of historical forecasts prepared by Management in the past three years and compared assumptions used in previous forecasts against actual results. We challenged Management on their determination of market values of the aircraft, used in the impairment assessment, and compared it to aircraft valuation data received from an external aircraft valuation expert. We have assessed the expert s competence, capabilities and objectivity before placing reliance on their work. We assessed reasonableness of the residual values used in the impairment assessment by benchmarking against externally derived data for comparable aircraft. We have checked the accuracy and reasonableness of the inputs used in determining the discount rate applied in the impairment assessment. We then applied a range of sensitivities to the significant inputs included in the cash flow models to assess the impact that reasonably possible changes of these main assumptions would have on the impairment assessment. 86 Air Mauritius

90 Independent Auditors Report to the Members of Air Mauritius Limited Report on the Audit of the Consolidated and Separate Financial Statements (Cont d) Key audit matters (Cont d) Valuation of provision for return conditions in respect of leased aircraft Refer to notes 4.3(vi) and 22 to the consolidated and separate financial statements The key audit matter The Group and the Company operated fifteen aircraft as at March 31, 2018 of which eight were held under external operating lease arrangements. In terms of the operating lease agreements, Air Mauritius Limited is contractually committed to return the aircraft in a certain condition as agreed with the lessors at the inception of each lease. A provision of Eur 16.1m, to return the aircraft in a certain condition, has been included within provisions in the statement of financial position at year end. Management based this provision on certain estimates and judgements in respect of the costs that could be incurred relating to the restitution of these aircraft as per the lessors` specifications. The calculation of such costs involves a number of variable factors and assumptions, including the anticipated utilisation and maintenance patterns of the aircraft and significant parts and costs of maintenance at the return date. How the matter was addressed in our audit Our audit procedures included the following: We evaluated and challenged the provisioning model, methodology applied and key assumptions adopted by Management in estimating the provisions. This included evaluating any changes therein from prior years and by agreeing the terms of the operating leases to the related contracts and comparing assumptions used by Management to external information and the Group s and the Company s past history of maintenance costs incurred. External information was compared to latest available market prices in respect of similar maintenance services. We obtained an understanding of the maintenance plans in place to return the aircraft, under operating leases, to the conditions stipulated in the agreements and evaluated whether this was aligned with the provisioning model. Due to the estimation and judgements applied by Management in determining the provision, we considered the provision for return conditions to be a key audit matter in our audit of the consolidated and separate financial statements. Revenue recognition Refer to notes 4.3 (v), 4.4 (r), 4.4(s), 23 and 24 to the consolidated and separate financial statements. The key audit matter Revenue comprises numerous categories which include passenger ticket sales and cargo airway bills, and redemption of miles in respect of the customer loyalty programme (KestrelFlyer). Revenue recognition is complex and involves a number of key judgements, particularly with regard to the timing of revenue recognition. IT systems are integral in supporting the revenue recognition process. Key judgements related to the recognition of revenue include: timing of recognising revenue in respect of unused tickets based on the terms and conditions of the tickets and historical trends determination of the fair value attributed to the awarded mileage credits in respect of the KestrelFlyer programme and the subsequent recognition as revenue based on the redemption of the miles. How the matter was addressed in our audit Our audit procedures included the following: We tested the key IT controls and the related interfaces that impact the recognition of revenue from passenger and cargo sales including the changes made to the systems and processes during the year. We tested a sample of the terms and conditions in respect of the various revenue streams in evaluating Management s judgements used to determine the timing of recognition of unused revenue. We performed analytical procedures on passenger and cargo sales and unearned transportation revenue by developing an expectation for each type of revenue using independent inputs and information generated from the Group s and the Company s IT systems and compared such expectations with recorded revenue. Annual Report 2017/18 87

91 Independent Auditors Report to the Members of Air Mauritius Limited Report on the Audit of the Consolidated and Separate Financial Statements (Cont d) Key audit matters (Cont d) Revenue recognition (Cont d) The key audit matter Due to the complexity of the IT systems used in the revenue process and the significant level of judgement required by management in determining the timing of recognition of revenue in respect of unused tickets and the fair value of deferred revenue related to the loyalty programme, revenue recognition was considered a key audit matter in our audit of the consolidated and separate financial statements. How the matter was addressed in our audit We evaluated the process by which deferred revenue is recognised and tested whether the data extracted from the system for use in the deferred revenue calculation is accurate. We validated the source data by selecting a sample of miles earned, burned and expired, and traced to supporting documents to ensure they have been accurately captured. We also tested the key assumptions used in the deferred revenue calculation and assessed whether the redemption rate is reasonable by comparing historical data on earned and redeemed miles for the last three years. We have calculated redeemed miles as a percentage of earned miles for the last three years and ensured that the redemption rate as per the past trend is consistent with the actual rate being used as at March 31, 2018 to calculate the deferred revenue. We have re-performed calculations used in the model and ensured that the accounting has been done in accordance with IFRIC 13 Customer Loyalty Programmes. We have inspected the key terms and conditions of contracts with major partners of the miles program to assess if there were any terms and conditions that could have affected the accounting treatment of the related miles. Other Information The directors are responsible for the other information. The other information comprises the Key results, Chairman s message, Message from the Chief Executive Officer, Glossary, Annual report and Business review (which include the Corporate Governance report), Management Discussion and Analysis, Certificate from the Company Secretary, Directors Disclosure Statement, Statement of Compliance, Directors` Responsibility Statement and Appendices to Annual report. The other information does not include the consolidated and separate financial statements and our auditors report thereon. Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon. In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Directors for the Consolidated and Separate Financial Statements The directors are responsible for the preparation of consolidated and separate financial statements that give a true and fair view in accordance with International Financial Reporting Standards and in compliance with the requirements of the Companies Act 2001 and Financial Reporting Act 2004, and for such internal control as the directors determine is necessary to enable the preparation of the consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error. 88 Air Mauritius

92 Independent Auditors Report to the Members of Air Mauritius Limited Report on the Audit of the Consolidated and Separate Financial Statements (Cont d) Directors Responsibility for the Consolidated and Separate Financial Statements (Cont d) In preparing the consolidated and separate financial statements, the directors are responsible for assessing the Group s and the Company s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group and/or Company or to cease operations, or have no realistic alternative but to do so. Auditors Responsibilities for the Audit of the Consolidated and Separate Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s and the Company s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group s and the Company s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Group and/or Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Annual Report 2017/18 89

93 Independent Auditors Report to the Members of Air Mauritius Limited Report on the Audit of the Consolidated and Separate Financial Statements (Cont d) Auditors Responsibilities for the Audit of the Consolidated and Separate Financial Statements (Cont d) We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors` report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Use of our report This report is made solely for the Company s members, as a body, in accordance with Section 205 of the Companies Act Our audit work has been undertaken so that we might state to the Company s members those matters we are required to state to them in an auditors report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company s members, as a body, for our audit work, for this report, or for the opinions we have formed. Report on Other Legal and Regulatory Requirements Companies Act 2001 We have no relationship with or interests in the Group and the Company other than in our capacities as auditors, tax advisors and dealings in the ordinary course of business. We have obtained all the information and explanations we have required. In our opinion, proper accounting records have been kept by the Company as far as it appears from our examination of those records. Financial Reporting Act 2004 The directors are responsible for preparing the Corporate Governance Report. Our responsibility is to report on the extent of compliance with the Code of Corporate Governance as disclosed in the annual report and on whether the disclosure is consistent with the requirements of the Code. In our opinion, the disclosures in the Annual Report are consistent with the requirements of the Code. ERNST & YOUNG Ebène, Mauritius ROGER DE CHAZAL, A.C.A Licensed by FRC KPMG Ebène, Mauritius John Chung, BSc FCA Licensed by FRC Date: June 13, Air Mauritius

94 Consolidated and Separate Financial Statements Annual Report 2017/18 91

95 Consolidated and Separate Statements of Financial Position as at March 31, 2018 THE GROUP THE COMPANY Notes ASSETS Non-current assets Property, plant and equipment 6 160, , , ,107 Investment property 7 9,744 10, Intangible assets 8 1, , Investment in subsidiaries ,314 27,155 Investment in an associate Available-for-sale investments Long term deposits 12(a) 52,168 30,054 52,168 30,054 Long term investments 12(b) 5, Long term receivables Deferred tax asset , , , ,323 Current assets Inventories 15 18,134 14,001 18,029 13,903 Trade and other receivables 16 81,513 73,160 80,978 73,846 Derivative financial assets 20 2, , Cash and cash equivalents 17 32,985 82,895 28,156 72,687 Short-term deposits 1,494 1, , , , ,732 Total assets 366, , , ,055 EQUITY AND LIABILITIES Equity Share capital 18 41,724 41,724 41,724 41,724 Share premium 18,869 18,869 18,869 18,869 Other reserves (11,772) (10,414) 175 (529) Retained earnings 33,664 37,218 27,153 31,137 Equity attributable to equity holders of the parent 82,485 87,397 87,921 91,201 Non-controlling interests 3,140 3, Total equity 85,625 90,552 87,921 91,201 Non-current liabilities Interest-bearing loans and borrowings 19 21,459 24,636 21,459 24,636 Employee benefit liabilities 21 49,717 43,725 48,723 42,617 Provisions 22 4,043 19,373 4,043 19,373 75,219 87,734 74,225 86,626 Current liabilities Trade and other payables , , , ,742 Interest-bearing loans and borrowings 19 8,994 6,915 8,973 6,826 Derivative financial liabilities 20 2, , Dividends payable 35-2,675-2, , , , ,228 Total liabilities 280, , , ,854 Total equity and liabilities 366, , , ,055 These consolidated and separate financial statements were approved and authorised by the Board of Directors for issue on June 13, 2018 and signed on its behalf by: Dr Arjoon Suddhoo, FRAeS Chairman of the Board Mr Louis Rivalland Director and Chairman of Audit Committee 92 The notes on pages 98 to 161 form an integral part of these consolidated and separate financial statements. Independent auditors report on pages 85 to 90. Air Mauritius

96 Consolidated and Separate Statements of Profit or Loss and Other Comprehensive Income for the year ended March 31, 2018 THE GROUP THE COMPANY Notes Revenue , , , ,788 Operating expenses 24 (467,062) (448,364) (464,732) (447,285) Gross profit 47,277 49,445 44,857 47,503 Administrative expenses 25 (33,108) (30,939) (30,905) (29,351) Impairment of investment in an associate 10 (102) - (102) - Other operating income 24 4,781 5,125 4,634 4,966 Fair value gain on investment property Operating profit 25 18,888 23,646 18,484 23,118 Share of results of an associate - (13) - - Finance income , ,122 Finance costs 27 (14,628) (1,135) (14,628) (1,308) Profit before tax 5,010 27,633 4,502 26,932 Income tax expense 28 (125) (81) - - Profit for the year 4,885 27,552 4,502 26,932 Other comprehensive income for the year Other comprehensive income which may be reclassified to profit or loss in subsequent periods: Fair value movement in available-for-sale investments * 11 (5) 40 (5) 40 Movement in cash flow hedges * 20(d) 709 5, ,023 Exchange differences on consolidation * (2,293) 1, Other comprehensive income which will not be reclassified to profit or loss in subsequent periods: Actuarial losses on defined benefit plans (8,252) (20,674) (8,486) (20,599) Income tax relating to the components of other comprehensive income (34) Other comprehensive income for the year, net of tax (9,875) (14,148) (7,782) (15,536) Total comprehensive income for the year, net of tax (4,990) 13,404 (3,280) 11,396 Profit for the year attributable to: - Owners of the Company 4,732 27,345 - Non-controlling interests ,885 27,552 Total comprehensive income attributable to: - Owners of the Company (4,912) 13,047 - Non-controlling interests (78) 357 (4,990) 13,404 Earnings per share (Eur) Basic Diluted * There is no tax effect on these components of other comprehensive income. The notes on pages 98 to 161 form an integral part of these consolidated and separate financial statements. Independent auditors report on pages 85 to 90. Annual Report 2017/18 93

97 Consolidated and Separate Statements of Changes in Equity for the year ended March 31, 2018 Other reserves Fair Translation Hedge Total Total Non- Share Share value reserve on equity other Retained shareholders controlling Total capital premium reserve consolidation reserve reserves earnings interest interests equity * ** *** **** THE GROUP At April 01, ,724 18, (11,192) (5,713) (16,775) 33,207 77,025 2,798 79,823 Profit for the year ,345 27, ,552 Other comprehensive income ,298 5,023 6,361 (20,659) (14,298) 150 (14,148) Total comprehensive income ,298 5,023 6,361 6,686 13, ,404 Transactions with owners of the Company Distributions Dividends (Note 35) (2,675) (2,675) - (2,675) At March 31, ,724 18, (9,894) (690) (10,414) 37,218 87,397 3,155 90,552 At April 01, ,724 18, (9,894) (690) (10,414) 37,218 87,397 3,155 90,552 Profit for the year ,732 4, ,885 Other comprehensive income - - (5) (2,062) 709 (1,358) (8,286) (9,644) (231) (9,875) Total comprehensive income - - (5) (2,062) 709 (1,358) (3,554) (4,912) (78) (4,990) Transactions with owners of the Company Distributions Dividends (Note 35) At March 31, ,724 18, (11,956) 19 (11,772) 33,664 82,485 3,140 85,625 Other reserves in the Group s consolidated statement of financial position include: * When shares are issued at a price above its par value, the excess between the issue price and the par value is recorded in share premium. ** Fair value reserve records unrealised gains or losses arising from changes in fair value of available-for-sale investments. *** Translation reserve on consolidation is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. **** Hedge equity reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge. The notes on pages 98 to 161 form an integral part of these consolidated and separate financial statements. Independent auditors report on pages 85 to Air Mauritius

98 Consolidated and Separate Statements of Changes in Equity for the year ended March 31, 2018 Other reserves Fair Hedge Total Retained Share Share value equity other earnings Total capital premium reserve reserve reserves reserves equity * ** *** THE COMPANY At April 01, ,724 18, (5,713) (5,592) 27,479 82,480 Profit for the year ,932 26,932 Other comprehensive income ,023 5,063 (20,599) (15,536) Total comprehensive income ,023 5,063 6,333 11,396 Transactions with owners of the Company Distributions Dividends (Note 35) (2,675) (2,675) At March 31, ,724 18, (690) (529) 31,137 91,201 At April 01, ,724 18, (690) (529) 31,137 91,201 Profit for the year 4,502 4,502 Other comprehensive income - - (5) (8,486) (7,782) Total comprehensive income - - (5) (3,984) (3,280) At March 31, ,724 18, ,153 87,921 Other reserves in the Company s statement of financial position include: * When shares are issued at a price above its par value, the excess between the issue price and the par value is recorded in share premium. ** Fair value reserve records unrealised gains or losses arising from changes in fair value of available-for-sale investments. *** Hedge equity reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge. The notes on pages 98 to 161 form an integral part of these consolidated and separate financial statements. Independent auditors report on pages 85 to 90. Annual Report 2017/18 95

99 Consolidated and Separate Statements of Cash Flows for the year ended March 31, 2018 THE GROUP THE COMPANY Notes '000 '000 '000 '000 Cash flows from operating activities: Profit for the year 4,885 27,552 4,502 26,932 Adjustments for: Depreciation on property, plant and equipment 6 30,111 36,796 29,112 36,429 Fair value gain on investment property 7 (40) (15) - - Amortisation of intangible assets Loss / (gain) on the sale of property, plant and equipment 721 (1,237) 362 (1,216) Equipment scrapped Impairment of investment in associate Effect of discounting on security deposits 1,076-1,076 - Employee benefit liabilities 21 (2,268) 988 (2,380) 764 Maintenance cost 22 3,600 8,339 3,600 8,339 Unrealised foreign exchange gain (4,181) (2,382) (4,181) (2,382) Interest and dividend income (750) (461) (646) (448) Interest expense and foreign currency hedge 27 6,127 1,135 6,127 1,308 Impairment of investment in financial assets Share of results after tax of associate Income tax expense 28(b) ,014 71,058 38,171 69,964 Changes in: Inventories (4,129) 379 (4,122) 407 Trade and other receivables (9,380) (13,970) (8,251) (17,266) Trade and other payables (7,116) 11,549 (8,603) 15,480 19,389 69,016 17,199 68,585 Interest received Tax paid (67) (203) - - Net cash flows from operating activities 20,051 69,255 17,749 69,014 Cash flows from investing activities Purchase of property, plant and equipment 6 (34,518) (9,967) (32,837) (9,805) Purchase of intangible assets 8 (1,369) (155) (1,369) (154) Addition in long term receivables (21) - (21) - Proceeds on sale of property, plant and equipment 5,612 1,262 5,605 1,232 Proceeds from short term deposit 4, Investment in short term deposit (4,493) (1,582) - - Deposits paid (31,864) (7,119) (25,785) (7,119) Dividends received Net cash flows used in investing activities (62,168) (17,542) (54,311) (15,827) Net cash flows (used in) / from operating and investing activities (42,117) 51,713 (36,562) 53, Air Mauritius

100 Consolidated and Separate Statements of Cash Flows for the year ended March 31, 2018 THE GROUP THE COMPANY Notes Net cash flows (used in) / from operating and investing activities (cont'd) (42,117) 51,713 (36,562) 53,187 Cash flows from financing activities Dividend paid (2,675) - (2,675) - Payments of finance lease liabilities 19(c) (7,236) (22,078) (7,236) (28,953) Interest paid and foreign currency hedge payout 27 (6,127) (1,135) (6,127) (1,308) Net cash flows used in financing activities (16,038) (23,213) (16,038) (30,261) Net (decrease) / increase in cash and cash equivalents (58,155) 28,500 (52,600) 22,926 Movement in cash and cash equivalents At April 01, 81,885 49,109 71,766 45,047 Exchange gain 8,281 4,276 8,037 3,793 Net (decrease) / increase in cash and cash equivalents (58,155) 28,500 (52,600) 22,926 At March 31, 17 32,011 81,885 27,203 71,766 The notes on pages 98 to 161 form an integral part of these consolidated and separate financial statements. Independent auditors report on pages 85 to 90. Annual Report 2017/18 97

101 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Corporate Information Air Mauritius Limited (the Company ) is a company limited by shares incorporated and domiciled in Mauritius whose shares are publicly traded and listed on the official market of the Stock Exchange of Mauritius. Its registered office is situated on the 19th Floor of Air Mauritius Centre, John Kennedy Street, Port Louis. The consolidated and separate financial statements of Air Mauritius Limited and its subsidiaries (collectively, the Group) for the year ended March 31, 2018 were authorised for issue by the Board of Directors on 13 June 2018 and the consolidated and separate statements of financial position were signed on the Board s behalf by Messrs SUDDHOO Arjoon and RIVALLAND Louis. The consolidated and separate financial statements will be submitted to the shareholders for approval at the annual meeting. 2. Principal Activities The principal activities of Air Mauritius Limited and its subsidiaries are: the operation of international air services for the carriage of passengers and cargo and the provision of ancillary services; the operation of a hotel in Rodrigues; the owning and operating of an investment property for rentals; and the operation of a call centre and provision of Human Resources; and. the provision of aerial tours for sight-seeing. There have been no changes in the above activities during the year. 3. Basis of Preparation The consolidated and separate financial statements of the Group and the Company are presented in Euro which is the Company s functional currency and all values were rounded to the nearest thousand (Euro 000) except when otherwise stated. The consolidated and separate financial statements have been prepared under the historical cost convention except for investment properties, derivative financial instruments, available-for-sale investments and deferred revenue for customer loyalty programme that have been measured at fair value. Air Mauritius Statement of Compliance The consolidated and separate financial statements of the Group and the Company have been prepared on a going concern basis in accordance with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ) and in compliance with the requirements of the Companies Act 2001 and the Financial Reporting Act Basis of consolidation The consolidated and separate financial statements comprise the financial statements of the Company and its subsidiaries as at March 31, each year. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has: i. Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee) ii. Exposure, or rights, to variable returns from its involvement with the investee, and iii. The ability to use its power over the investee to affect its returns The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group obtains control until the date the Group ceases to control the subsidiary. Non-controlling interests are measured at their proportionate share of the acquiree s identifiable net assets at the date of acquisition. Changes in the Group s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Profit or Loss and each component of Other Comprehensive Income (OCI) are attributed to the owners of the Company and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. All intra-group assets and liabilities, equity,

102 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Basis of Preparation (Cont d) Basis of consolidation (Cont d) income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it: Derecognises the assets (including goodwill) and liabilities of the subsidiary; Derecognises the carrying amount of any noncontrolling interest; Derecognises the cumulative translation differences, recorded in equity; Recognises the fair value of the consideration received; Recognises the fair value of any investment retained; Recognises any surplus or deficit in profit or loss; and Reclassifies the parent s share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as appropriate. 4. Accounting Policies The Group and the Company have consistently applied the following accounting policies to all periods presented in these consolidated and separate financial statements. 4.1 Changes in Accounting Policy and Disclosures The following relevant revised standards have been applied in these consolidated and separate financial statements as of April 01, 2017: AMENDMENTS - Disclosure Initiative (Amendments to IAS 7) April 01, Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12) April 01, 2017 The effects of these standards have been described below: Disclosure Initiative (Amendments to IAS 7) The amendments provide for disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes. This includes providing a reconciliation between the opening and closing balances for liabilities arising from financing activities. The additional disclosures following adoption of the amendments are provided in Note 19(c). There were no other impact on the consolidated and separate financial statements. Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12) The amendments provide additional guidance on the existence of deductible temporary differences, which depend solely on a comparison of the carrying amount of an asset and its tax base at the end of the reporting period, and is not affected by possible future changes in the carrying amount or expected manner of recovery of the asset. The amendments also provide additional guidance on the methods used to calculate future taxable profit to establish whether a deferred tax asset can be recognised. These amendments have no significant impact on the Group and the Company. Annual Report 2017/18 99

103 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.2 Accounting Standards and Interpretations Issued but not yet Effective Standards and interpretations issued but not yet effective up to the date of issuance of the Group s and the Company s consolidated and separate financial statements are listed below. This listing is of standards and interpretations issued, which the Group and the Company reasonably expect to be relevant and applicable at a future date. The Group and the Company intend to adopt those standards when they become effective. Effective for accounting period New or revised standards beginning on or after IFRS 15 Revenue from Contracts with Customers April 01, 2018 IFRS 9 Financial Instruments April 01, 2018 IAS 40 Transfers of Investment property April 01, 2018 IFRIC 22 Foreign Currency Transactions and Advance Considerations April 01, 2018 IFRS 16 Leases April 01, 2019 New or revised standards The effects of these standards have been described below: The assessment below is based on currently available information and may be subject to changes arising from further reasonable and supportable information being made available to the Group and the Company in the next financial year when the standards will be adopted. IFRS 15 Revenue from Contracts with Customers IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. The modified retrospective approach will be adopted by the Group and the Company. The amendment to IFRS 15 Clarifications to IFRS 15 Revenue Recognition from Contracts with Customers has been taken into account. The Group will adopt the modified retrospective method on transition to the new standard from April 01, 2018 and the comparatives will not be restated. The following change to revenue recognition has been identified on the adoption of IFRS 15: Passenger & Cargo revenue: The timing of revenue recognition for unused tickets will be affected. The Group is still assessing the financial impact on the recognition of unused tickets. Revenue from Joint Venture with Air France: reclassification from revenue to a separate line item (revenue from joint ventures). The table below depicts the possible impact arising from the adoption of IFRS 15 on the Company s figures. The impact on the subsidiaries is being assessed. 100 Revenue streams Air Mauritius Impact assessment Passenger Revenue 436,463 No impact is expected. Cargo Revenue 51,102 No impact is expected. Deferred Revenue from Frequent Flyer Program (3,834) The financial impact has been assessed as immaterial. Purging of Revenue 15,422 The timing of purging of revenue recognition will change following the adoption of IFRS 15. The financial impact is still being assessed. Wet Lease Joint venture 1,889 This revenue stream will be out of scope from IFRS 15 and therefore will be reclassified from revenue to a separate line item, income from joint venture in the Statement of Profit or Loss and Other Comprehensive Income. Other revenue 8,547 No impact is expected. Total 509,589

104 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.2 Accounting Standards and Interpretations Issued but not yet Effective (Cont d) IFRS 9 Financial Instruments IFRS 9 replaces the multiple classification and measurement models in IAS 39 [Financial instruments: Recognition and measurement] with a single model that has initially only two classification categories: amortised cost and fair value. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions. IFRS 9, introduces new requirements for classifying and measuring financial assets as follows: Classification of debt assets will be driven by the entity s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. A debt instrument is measured at amortised cost if: a) the objective of the business model is to hold the financial asset for collection of the contractual cash flow, and b) the contractual cash flows under the instrument solely represent payments of principal and interest. All other debt and equity instruments must be recognised at fair value. Debt instruments that are held for sale or to collect cash flows and whose contractual terms give rise to specified cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding are classified as fair value through other comprehensive income (FVOCI). While equity instruments are measured at fair value through profit or loss, except for equity instruments that are not held for trading, which may be designated at FVOCI without subsequent recycling to profit or loss. For financial liabilities that are measured under the fair value option entities will need to recognise the part of the fair value change that is due to changes in the their own credit risk in other comprehensive income rather than profit or loss. The new hedge accounting rules (released in December 2013) align hedge accounting more closely with common risk management practices. As a general rule, it will be easier to apply hedge accounting going forward. The new standard also introduces expanded disclosure requirements and changes in presentation. The changes introduce: a third measurement category (Fair Value through Other Comprehensive Income (FVOCI)) for certain financial assets that are debt instruments; a new expected credit loss (ECL) model which involves a three-stage approach whereby financial assets move through the three stages as their credit quality changes. The stage dictates how an entity measures impairment losses and applies the effective interest rate method. A simplified approach is permitted for financial assets that do not have a significant financing component (eg trade receivables). On initial recognition, entities will record a day-1 loss equal to the 12 month ECL (or lifetime ECL for trade receivables), unless the assets are considered credit impaired. The Group and the Company are currently assessing the potential impact on the consolidated and separate financial statements resulting from its application of IFRS 9. Adoption of IFRS 9 is not expected to result in significant classification changes. It is expected that impairment losses are likely to increase and become more volatile for assets in the scope of the IFRS 9 impairment model. However, the Group and the Company have not yet finalised the impairment methodologies that they will apply under IFRS 9. IAS 40 Transfers of Investment property The IASB has amended the requirements in IAS 40 Investment property on when a Company should transfer a property asset to, or from, investment property. The amendments state that a change in use occurs when the property meets or ceases to meet the definition of Investment Property and there is evidence of the change in use. The amendments apply for annual periods beginning on or after January 01, There has not been any change in the use of the investment property and as such there is no significant impact on the consolidated and separate financial statements. In December 2014, the IASB made further changes to the classification and measurement rules and also introduced a new impairment model. With these amendments, IFRS 9 is now complete. Annual Report 2017/18 101

105 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.2 Accounting Standards and Interpretations Issued but not yet Effective (Cont d) IFRIC 22 Foreign Currency Transactions and Advance Considerations When foreign currency consideration is paid or received in advance of the item it relates to which may be an asset, an expense or income IAS 21 The Effects of Changes in Foreign Exchange Rates is not clear on how to determine the transaction date for translating the related item. This has resulted in diversity in practice regarding the exchange rate used to translate the related item. IFRIC 22 clarifies that the transaction date is the date on which the Company initially recognises the prepayment or deferred income arising from the advance consideration. For transactions involving multiple payments or receipts, each payment or receipt gives rise to a separate transaction date. The interpretation applies for annual reporting periods beginning on or after January 01, The Group and the Company are still assessing the impact of adopting the IFRIC. So far, they have concluded that there will be no material impact. IFRS 16 Leases IFRS 16 was published in January It sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer ( lessee ) and the supplier ( lessor ). IFRS 16 replaces the previous leases standard IAS 17 Leases, and related Interpretations. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is twelve months or less or the underlying asset has a low value. Lessor continues to classify leases as operating or finance, with IFRS 16, approach to lessor accounting substantially unchanged from its predecessor, IAS 17. lessors. The Group and the Company have started an initial assessment of the potential impact on its consolidated and separate financial statements. The Group has elected to use the two exemptions proposed by the standard on the following contracts. Lease contracts with a duration of less than 12 months Lease contracts for which the underlying asset has a value in new of below Eur 5,000. The estimated impact of IFRS 16 on the opening balance as of April 01, 2018 would lead in: an increase in the property, plant and equipment for an amount between Eur 150M and Eur 190M. the booking of a lease liability for an amount between Eur 160M and Eur 180M. a decrease in the equity for an amount between Eur 14M and Eur 16M. These figures include only the impacts concerning leased aircraft and the impact of the other leases are still being assessed. Lease contracts adjustment has an impact of classification in the cash flow statements as follows: improvement in Net cash flow from operating activities due to the cancellation of lease costs partially compensated by the cash-out attributing to financial costs in lease debt. integration of the reimbursement of the lease debt in Net cash flow used in financing activities. the standard, based on the modified retrospective approach, will have no impact on the cash position of the Group. IFRS 16 has one model for lessees which will result in almost all leases being included on the Statement of Financial position. No significant changes have been included for lessors. The standard is effective for annual periods beginning on or after January 01, 2019, with early adoption permitted only if the entity also adopts IFRS 15. The transitional requirements are different for lessees and 102 Air Mauritius

106 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.3 Significant Accounting Judgements, Estimates and Assumptions The preparation of the Group s and the Company s consolidated and separate financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities and other information disclosed in certain notes at the reporting date. The Group and the Company regularly revise their estimates and assessments to take account of past experience and other factors deemed relevant in view of the economic circumstances. If changes in these assumptions or circumstances are not as anticipated, the figures reported in the Group s and the Company s future consolidated and separate financial statements could differ from the current estimates. In preparing these consolidated and separate financial statements the directors have used their best judgement and made estimates and assumptions about the future which are based on the current economic situation which is however highly volatile. In particular, these assumptions have had a significant impact on the following account balances in the consolidated and separate financial statements: (i) Property, plant and equipment: estimation of recoverable value, depreciation method, economic useful life and residual value of assets. (ii) Employee benefit liability: estimation of discount rates, expected return on plan assets, future salary increases and future pension increases. (iii) Fair value of derivative financial assets and liabilities: the volatility of the following underlying: foreign exchanges; oil prices; and future interest rates. (iv) Investment property: estimation of fair value of property. (v) Revenue recognition and deferred revenue for customer loyalty programme: estimation of fair value of loyalty points. (vi) Provisions for returned conditions: estimation of costs. (vii) Impairment of aircraft and related equipment. (viii) Whether an arrangement contains a lease refer to Note 4.4 (n). (i) These are discussed below: The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: Estimated recoverable values, useful lives and residual values of property, plant and equipment Determining the carrying amounts of property, plant and equipment requires the estimation of the useful lives and residual values of these assets. Certain property, plant and equipment of the Group and the Company, such as aircraft, are separated into their significant parts and estimates of the useful lives and residual values thereof are made for the purpose of calculating depreciation (refer to Note 4.4(c)). The estimates of useful lives and residual values carry a degree of uncertainty. The directors have used historical information relating to the Group and the Company and the relevant industries in which the Group s entities operate in order to best determine the useful lives and residual values of property, plant and equipment. Estimated recoverable value for impairment assessment purposes for certain items of property, plant and equipment related to aircraft and related equipment involves significant management estimate and judgement including: - forecasting specific aircraft information such as revenue per aircraft, load factor, average air ticket price, cargo yield and fuel cost; - the remaining useful lives of these assets and indicators of obsolesence; - the discount rate used; and - estimated selling price and costs to sell at the end of their useful life. (ii) Employee benefit liability The determination of employee benefit costs and related provisions, as described in Note 4.4(o) and as detailed in Note 21 to the consolidated and separate financial statements, requires the use of actuarial calculations or other assumptions that include significant estimates in respect of, inter alia, the discount rate, the expected return on plan assets, future salary increases and future pension increases. These significant estimates are assessed annually by the directors with the actuaries where applicable. Differences between actual and estimates are recorded as actuarial gains or losses in the year in which they occur in total. Annual Report 2017/18 103

107 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.3 Significant Accounting Judgements, Estimates and Assumptions (Cont d) (iii) Fair value of derivative financial assets and liabilities The Group and the Company enter into derivative financial contracts including currency forward contracts for hedging purposes and measure these instruments at fair value at the reporting date. The fair values of such contracts are determined using valuation techniques including discounted cash flows models. The input to those models is taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. The judgements include considerations of inputs such as volatility. Changes in assumptions about these factors could affect the reported fair value of these financial instruments. Further details on these derivative financial instruments are provided in Note 20. (iv) Fair valuation of investment property In preparing these consolidated and separate financial statements, the directors have obtained from an independent professional valuer the estimated fair value of the Group s and the Company s investment property which are disclosed in the notes to the consolidated and separate financial statements. These estimates have been based on market data regarding current yield on similar properties. The actual recoverable amount of the investment property could therefore differ significantly from the estimates. Further details are given in Note 7. (v) Revenue and Deferred revenue for customer loyalty programme Revenue comprise numerous categories which include redemption of miles on customer Loyalty Programme and passenger and cargo sale and (Refer to Notes 4.4 (r) and 4.4 (s)) respectively. The IT systems supporting the revenue process are complex and involve a number of key judgement over the timing of revenue recognition. The timing of revenue recognition for unused tickets also require judgement due to the time frame over which tickets can be utilised. The Group and the Company operate a Frequent Flyer programme, Kestrelflyer, which provides a variety of awards to members based on mileage credits on Air Mauritius Limited and other airlines that participate in the programme. Members can also accrue and redeem miles with non-airline partners. The Group and the Company account for award credits as a separately identifiable component of the sales transaction in which they are earned. The consideration in respect of the initial sale is allocated to award credits based on their fair value and is accounted for as a liability (deferred revenue) in the Group s and the Company s statements of financial position. Estimation techniques are used to determine the fair value of award credits. The estimation technique applied considers the fair value of a range of different redemption options by reference to their cash selling prices, such as airfares on different routes and in different classes of travel as well as flight upgrades and partner rewards. The fair value attributable to the awarded mileage credit has been calculated based on the lowest applicable fare price throughout the 12 months. Professional judgement is exercised by management due to the diversity of inputs that go into determining the fair value of the award credits and due to the possibility that the trend may change over time. Revenue is recognised on unredeemed miles when they expire. The carrying amount of the deferred revenue for the Kestrelflyer Programme was estimated at Eur 4.0M (2017: Eur 3.8M). Management has reassessed the redemption rate to 50% as at 31 March 2018 (2017: 50%). Further details have been provided in Note 23. (vi) Provisions for return conditions The Group and the Company are contractually committed to return the aircraft in adherence to conditions agreed under the terms of the operating lease arrangements. These provisions are determined based on the expected costs of meeting the conditions and incorporate a number of assumptions requiring significant judgements including: Past and expected future utilisation and maintenance patterns of aircraft and engines; and Expected costs of the maintenance at the time it is expected to occur. 104 Air Mauritius

108 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) (vii) Impairment of aircraft and related equipment Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on average price per ticket, number of flights, tonnage and yield. Value in use is based on the estimated future cash flows, discounted to their present value using a pretax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset or cash generating unit. Judgements In the process of applying the Group s accounting policies, management have made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements: (i) Going concern The consolidated and separate financial statements have been prepared on a going concern basis, which assumes that the Group and the Company will be able to meet their obligations. The Group and the Company reported a profit of Eur 4.8M and Eur 4.5M for the current financial year (2017: profit of Eur 27.6M and Eur 26.9M) respectively. At March 31, 2018, the Group and the Company had net current liabilities of Eur 69.0M (2017: Eur 22.8M) and Eur 76.0M (2017: Eur 35.5M) respectively. Included in the net current liabilities are non-financial liabilities which would not result in cash outflows of the Group and the Company and these include forward sales and frequent flyer provision which amount to Eur 113.9M (2017: Eur 109.3M) and Eur 4.0M (2017: Eur 3.8M) respectively. One of the main strategic plan of the Group and the Company is to undertake substantial projects such as major investment programs including acquisition of aircraft and fleet refurbishment of four wide body aircraft. The acquisition plan is detailed below: FY 2018/19, MK is acquiring two A330 Neo under operation lease; FY 2019/20, MK is acquiring two A as direct buy; and FY 2023/24, MK is acquiring two A as direct buy. The Group and the Company have further plans in terms of the development of their sales network through the introduction of Amsterdam (AMS) Operations, and the Double daily flights to Saint Pierre (ZSE) to consolidate their operations in the south of Reunion Island as well as optimizing connectivity with the Company s flight network. Furthermore, the Group and the Company are planning to increase the frequency on existing routes such as India, China and South Africa, and thereby projecting a rise in contribution in the future.the Group and the Company currently have undrawn facility of Eur 64.7M as at March 31, 2018 (2017: Eur 67.8M). In light of the above and taking into account the Group and the Company s five year forecast and projections, and reasonably possible changes in operational variables such as passenger load factor, ticket prices, number of flights, cargo yield, operating expenses such as fuel costs amongst others. The Directors believe that the Group and the Company will be able to operate within the level of their current financing and undrawn facilities available at the reporting date up to the next 12 months. The drop in the working capital of the Group and the Company was principally due to the use of cash resources for pre-delivery payments made for the acquisition of A350 aircraft expected to be delivered during the financial year 2019/2020 and additional rental paid on the new two A350 s under operating lease in the year under review. Those pre-delivery payments will be refunded from Airbus upon the delivery of the aircraft. Annual Report 2017/18 105

109 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.3 Significant Accounting Judgements, Estimates and Assumptions (Cont d) Going concern (Cont d) Based on the above, management therefore concludes that they are not aware of any material uncertainties that may cast significant doubt upon the Group s and the Company s ability to continue as a going concern. Therefore, the consolidated and separate financial statements continue to be prepared on the going concern basis. (ii) Determination of hedging relationship The determination of the accounting treatment of the Group s and the Company s hedging relationships is critical since the recording of gains or losses on remeasurement of hedging instruments to fair value at the reporting date gives rise to adjustments directly in profit or loss or other comprehensive income where such relationship is treated as fair value hedge or cash flow hedge respectively. Hedge accounting under IFRS is a complex area and the Group and the Company have entered into a number of hedge contracts, necessitating a sophisticated system to record and track each contract and calculate the related valuations at each financial reporting date. The valuation of hedging instruments and consideration of hedge effectiveness involve a significant degree of both complexity and management judgement. As described in Note 4.4 (j), there are criteria that need to be considered in determining the nature of hedging relationship. Hedging has only been undertaken by the Group and the Company due to the significant volume of transactions involving the purchase of jet fuel and financial commitments involving varying currencies. The directors have determined that the criteria for cash flow hedging have been adequately met to justify their judgement in the application of cash flow hedge accounting. Additional information is provided in Note 20. the sales prices of the entity s goods and services; the currency that mainly influences the determination of costs of providing goods and services; the currency in which funds from financing activities are generated; and, the currency in which proceeds from operating activities are usually retained. 4.4 Summary of Significant Accounting Policies The following is a summary of the significant accounting policies adopted by the Group and the Company during the year. (a) Functional and presentation currency The functional currency of each entity within the Group and the Company has been determined by reference to, inter alia: the primary economic environment in which the entity operates; the geographical location whose competitive forces mainly determine the sales prices of the Group s goods and services; the currency that mainly influences the determination of costs of providing goods and services; the currency in which funds from financing activities are generated; and, the currency in which proceeds from operating activities are usually retained. For the purpose of these consolidated and separate financial statements, the results and financial position of each entity are expressed in Euro, which is the functional currency of the Company, and the presentation currency used for the Group s and the Company s financial statements. For those entities in the Group whose functional currencies differ from the presentation currency, the following exchange rates were applicable: 106 (iii) Functional currency The Group and the Company have exercised significant judgement in determining the functional currency of the Group and the Company and each of its subsidiaries. In making this judgement, the Group and the Company have considered the primary economic environment in which each entity operates; the geographical location whose competitive forces mainly determine Air Mauritius

110 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.4 Summary of Significant Accounting Policies (Cont d) Functional and presentation currency (Cont d) Closing Average Closing Average Eur / ZAR Eur / MUR (b) Foreign currency translation In preparing the financial statements of the individual entities, transactions in currencies other than the entity s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities denominated in foreign currencies are retranslated into the entity s functional currency at the rate of exchange prevailing on the reporting date. Exchange differences arising on the settlement and the retranslation of monetary items are recognised in profit or loss. Exchange differences arising on the following items are recognised in other comprehensive income: available-for-sale equity investments (except on impairment, in which case foreign currency differences that have been recognised in other comprehensive income are reclassified to profit or loss); and qualifying cash flow hedges to the extent that the hedges are effective. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as the initial transactions. Nonmonetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. In order to hedge its exposure to certain foreign exchange risks, the Group and the Company entered into forward contracts, for which the Group and the Company apply hedge accounting if appropriate, see Note 4.4(j). For the purpose of presenting consolidated financial statements, the assets and liabilities of foreign operations are expressed in Euro using exchange rates prevailing on the reporting date. The income and expenses for the year are translated into Euro at the average exchange rate for the year. The exchange differences arising from the translation of the foreign operations are recognised in other comprehensive income and taken to the Group s translation reserve. The cumulative translation differences recognised in other comprehensive income are reclassified to profit or loss in the year in which the foreign operation is disposed of. If the Group disposes of part of its interest in a subsidiary, then the relevant proportion of the cumulative amount is reattributed to NCI. When the Group disposes of only part of an associate while retaining significant influence, the relevant proportion of the cumulative amount is reclassified to profit or loss. (c) Property, plant and equipment An item of property, plant and equipment is initially recognised at the cost at the time it is incurred. All property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value. Such costs include the cost of replacing part of an asset when that cost is incurred, if recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at intervals, the Group and the Company recognise such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major inspection is performed on an aircraft or its engines which is required in order for the aircraft to be operational, its cost is recognised in the carrying amount of the asset as a replacement if recognition criteria are met. All other repair and maintenance costs are recognised in profit or loss as incurred. Annual Report 2017/18 107

111 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.4 Summary of Significant Accounting Policies (Cont d) (c) Property, plant and equipment (Cont d) Depreciation is calculated on the straight-line method to write off the cost of each asset to its residual value over its estimated useful life. Residual value is the estimated amount that the Group and the Company would currently obtain from disposal of the asset after deducting the estimated cost of disposal as if the asset were already of the age and in the condition expected at the end of its useful life. The depreciation method, useful lives and residual values of all property, plant and equipment are reviewed and prospectively adjusted if appropriate at each financial year end. The principal annual rates of depreciation for the years ended March 31: Rate (%) Aircraft on finance lease (frame and engine) Aircraft and accessories: - Aircraft 5 - Galley equipment In-flight entertainment equipment Cabin interior and seating Aircraft rotables spares 5 50 Buildings and hangars on leasehold land 2 10 Plant and equipment Furniture and fittings 10 Computer and office equipment Motor vehicles Airframe and engine overhaul See note below Leasehold land is not capitalised and the lease payments are charged to profit or loss on a straight line basis. Items of property, plant and equipment acquired under finance lease contracts are depreciated over the shorter of the lease term and useful life of the asset. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. Aircraft and engine overhaul Costs incurred in respect of heavy maintenance and overhaul of aircraft engines and airframes are capitalised and depreciated over the period to the next scheduled maintenance ranging from 1.5 to 5 years. Other non-heavy maintenance and overhaul costs are charged to profit or loss on consumption or as incurred. 108 Air Mauritius

112 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.4 Summary of Significant Accounting Policies (Cont d) (d) Investment property Investment property is measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day to day servicing of an investment property. Subsequent to initial recognition, investment property is stated at fair value, which reflects market conditions at the reporting date. Information on the fair value determination is provided in Note 7. Gains or losses arising from changes in the fair values of investment property are included in profit or loss in the year in which they arise. Investment property is derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year of retirement or disposal. Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use. No assets held under operating lease have been classified as investment property. (e) Investments in subsidiaries and associate Subsidiaries The accounting policy of the Group in respect of the consolidation of subsidiaries is presented in the basis of consolidation in Note 3. In the separate financial statements, investments in subsidiary companies are carried at cost which is the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer, in exchange for control of the acquiree. The carrying amount is reduced to recognise any impairment in the value of individual investments. Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated and separate financial statements from the date on which control commences until the date on which control ceases. When the Group disposes a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and other components of equity. Any resulting gain or loss is recognised in profit or loss. Associate An associate is an entity in which the Group has significant influence. In the Group financial statements, the Group s investment in its associate is accounted for using the equity method. In the separate company financial statements, the investment in the associate is carried at cost less any impairment losses. Under the equity method, the investment in the associate is carried in the statement of financial position at cost plus post acquisition changes in the Group s share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. The share of the results of operations of the associate is shown in profit or loss. Where there has been a change recognised directly in the other comprehensive income of the associate, the Group recognises its share of any changes and discloses this, when applicable, in other comprehensive income. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated in the extent of the interest in the associate. The financial statements of the associate are prepared for the same reporting year as the parent company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group. Annual Report 2017/18 109

113 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.4 Summary of Significant Accounting Policies (Cont d) (e) Investments in subsidiaries and associate (Cont d) (f) Associate (Cont d) After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group s investment in its associate. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in profit or loss. Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognised in profit or loss. In the Company s financial statements, the associate is carried in the statement of financial position at cost less any impairment charges. Financial assets Initial recognition and measurement The Group and the Company classify their financial assets as financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables, and available-for-sale investments. When financial assets are recognised initially, they are measured at fair value, plus, in case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group and the Company determine the classification of their financial assets on initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year-end. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, (i) (ii) (iii) i.e., the date that the Group and the Company commit to purchase or sell the asset. The Group s and the Company s financial assets include cash and cash equivalents, short-term deposits, trade and other receivables (excluding prepayments), long term investments, long term receivables, available-forsale investments, long term deposits and derivative financial assets. Subsequent measurement The subsequent measurement of financial assets depends on their classification as follows: Financial assets at fair value through profit or loss (FVTPL) Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes derivative financial instruments entered into by the Group and the Company that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets at fair value through profit and loss are carried in the consolidated and separate statements of financial position at fair value with changes in fair value recognised in profit or loss Held-to-maturity financial assets These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method. Loans and receivables Loans and receivables are non-derivative financial assets with fixed and determinable payments that are not quoted in an active market. After initial measurement, such assets are carried at amortised cost using effective interest method less any allowance for impairment. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability (or group of financial assets 110 Air Mauritius

114 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.4 Summary of Significant Accounting Policies (Cont d) (f) Financial assets (Cont d) Subsequent measurement (Cont d) or financial liabilities) and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. Cash and cash equivalents and short term deposits Cash and cash equivalents in the consolidated and separate statements of financial position comprise cash at bank and in hand and short term deposits with an original maturity of three months or less. Short term deposits with original maturity of more than three months are not part of cash and cash equivalents and are shown separately on the face of the consolidated and separate statements of financial position. For the purpose of the consolidated and separate statements of cash flows, cash and cash equivalents consist of cash and short term deposits as defined above, net of outstanding bank overdrafts. (iv) Available-for-sale investments Available-for-sale investments include equity securities which are neither classified as loans and receivables, held-to-maturity investment nor held for trading or designated at fair value through profit or loss. After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income and accumulated in the fair value reserve in equity until the investment is derecognised, at which time the cumulative gain or loss is recognised in profit or loss, or determined to be impaired, at which time the cumulative loss is recognised in profit or loss and removed from the available-for-sale reserve. The Group and the Company evaluate their availablefor-sale investments whether the ability and intention to sell them in the near term are still appropriate. When the Group and the Company are unable to trade these financial assets due to inactive markets and management intent significant changes to do so in the foreseeable future, the Group and the Company may elect to reclassify these financial assets in rare circumstances. Derecognition A financial asset (or, where applicable a part of financial asset or part of a group of similar financial assets) is derecognised when: the right to receive cash flows from the assets has expired; the Group and the Company retain the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a pass-through arrangement; or the Group and the Company have transferred their right to receive cash flows from the asset and either (a) have transferred substantially all the risks and rewards of the asset, or (b) have neither transferred nor retained substantially all the risks and rewards of the asset, but have transferred control of the asset. When the Group and the Company have transferred their rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group s and the Company s continuing involvement in the asset. In that case, the Group and the Company also recognise an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group and the Company have retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group and the Company could be required to repay. Annual Report 2017/18 111

115 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.4 Summary of Significant Accounting Policies (Cont d) (g) Impairment of financial assets The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets not classified at fair value through profit or loss is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred loss event ) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of the financial assets that can be reliably estimated. Objective evidence that financial assets are impaired includes: a. default or delinquency by a debtor; b. restructuring of an amount due to the Group and Company on terms that the Group and the Company would not consider otherwise; c. indications that a debtor or issuer will enter bankruptcy; d. adverse changes in the payment status of borrowers or issuers; e. the disappearance of an active market for a security because of financial difficulties; or f. observable data indicating that there is a measurable decrease in the expected cash flows from a group of financial assets. Financial assets carried at amortised cost For financial assets carried at amortised cost the Group and the Company first assess individually whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group and the Company determine that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial assets original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in profit or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in profit or loss. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group and the Company. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to profit or loss. Available-for-sale investments In the case of equity investments classified as availablefor-sale objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. Significant is evaluated against the original cost of the investment and a fall of over 20% of cost is considered to be significant. Prolonged is evaluated against the period in which the fair value has been below its original cost and a more than twelve months period is considered as prolonged. Where there is evidence of impairment, the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in profit 112 Air Mauritius

116 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.4 Summary of Significant Accounting Policies (Cont d) (g) Impairment of financial assets (Cont d) Available-for-sale investments (Cont d) or loss, is removed from the available-for- sale reserve and recognised in profit or loss. Impairment losses on equity investments are not reversed through profit or loss. Increases in their fair value after impairment are recognised directly in other comprehensive income. (h) Financial liabilities Initial recognition and measurement The Group and the Company classify their financial liabilities as financial liabilities at fair value through profit or loss, other financial liabilities, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group and the Company determine the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus directly attributable transaction costs. The Group s and the Company s financial liabilities include trade and other payables, interest-bearing loans and borrowings, derivative financial liabilities and dividend payable. Derivative financial liabilities are classified as financial liabilities at fair value through profit or loss. All other financial liabilities are classified as other financial liabilities. Subsequent measurement The measurement of financial liabilities depends on their classification as follows: Other financial liabilities Subsequent to initial recognition, other financial liabilities are measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the effective interest rate (EIR). The EIR amortisation is included in finance cost in the statement of profit or loss. (i) (j) Financial liabilities at fair value through profit or loss (FVTPL) Financial liabilities at fair value through profit or loss includes financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Gains or losses on liabilities held for trading are recognised in profit or loss. Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss. Offsetting of financial assets and liabilities Financial assets and financial liabilities are offset and the net amount is shown in the consolidated and separate statements of financial position when and only when, the Group and the Company have a legally enforceable right to offset the amounts and intends to settle them on a net basis or to realise the asset and settle the liability simultaneously Hedge accounting A hedging relationship exists where: at the inception of the hedge there is formal documentation of the hedge; the hedge is expected to be highly effective; the effectiveness of the hedge can be reliably measured; the hedge is highly effective throughout the reporting year; and for hedges of a forecasted transaction, the transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect profit or loss. Where there is a hedging relationship between a derivative instrument and a related item being hedged, the hedging relationship is clasified as cash flow hedge Annual Report 2017/18 113

117 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.4 Summary of Significant Accounting Policies (Cont d) (j) Hedge accounting (Cont d) or fair value hedge. A fair value hedge is hedge of the exposure to changes in fair value of a recognised asset or liability or an unrecognised firm commitment, or an identified portion of such an asset, liability or firm commitment, that is attributable to a particular risk and could affect profit or loss whereas a cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability (such as all or some future interest payments on variable rate dept) or a highly probable forecast transaction and could affect profit or loss. The hedging relationships meet the conditions of cash flow hedges during the year and are therefore accounted as cash flow hedges. Cash flow hedge The effective portion of the gain or loss on the hedging instrument is recognised directly as other comprehensive income and accumulated in the hedge equity reserve, while any ineffective portion is recognised immediately in the statement of profit or loss under finance costs. The Group and the Company use forward currency contracts as hedges of its exposure to foreign currency risk in forecast transactions and firm commitments, as well as forward commodity contracts for its exposure to volatility in the fuel prices. The ineffective portion relating to foreign currency contracts is recognised in finance costs and the ineffective portion relating to commodity contracts is recognised in other operating income. Refer to Note 20 for more details. Amounts recognised as other comprehensive income are reclassified to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs. If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or loss previously recognised in other comprehensive income are reclassified to profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognised in hedge equity reserve remains there until the forecast transaction or firm commitment affects profit or loss. (k) Provisions (i) (ii) (iii) (l) General Provisions are recognised when the Group and the Company have a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group and the Company expect some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in profit or loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. Major overhauls Major overhauls involve maintaining the aircraft in a serviceable condition in line with the aircraft maintenance manual. The Company makes provisions for the future maintenance events based on the maintenance programme. Provisions are recognised on a monthly basis in relation to these events which are then released to profit or loss upon completion of the overhaul. Provision for return conditions The measurement of the provision for aircraft return conditions includes assumptions relating to the expected cost of meeting the maintenance and non-maintenance return conditions, having regard to the current fleet plan and long-term maintenance schedules. Please refer to Note 22 for more details. Intangible assets Intangible assets which comprise computer software and goodwill on acquisition are initially recorded at cost. Intangible assets are subsequently measured at cost less accumulated amortisation and impairment losses. Computer software is amortised using the straight-line method over its estimated useful life 114 Air Mauritius

118 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) (l) 4.4 Summary of Significant Accounting Policies (Cont d) Intangible assets (Cont d) of three years. Goodwill acquired in a business combination is not amortised and is assessed for impairment every year. The amortisation method, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised. (m) Inventories Inventory items are valued at the lower of cost and net realisable value. Cost comprises purchase cost from suppliers and any other costs incurred in bringing such inventory to its present condition and location. In general, cost is determined on a weighted average basis. Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses. Redundant and obsolete inventories are identified on a regular basis and written down to their realisable values as and when it is deemed necessary. Consumables are written down with regards to their age, condition and utility. (n) Leases The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one of the following applies: (a) there is a change in contractual terms, other than a renewal or extension of the arrangement; (b) a renewal option is exercised or extension granted, unless the term of the renewal or extension was initially included in the lease term; (c) there is a change in the determination of whether fulfilment is dependent on a specified asset; or (d) there is a substantial change to the asset. Where a reassessment is made, lease accounting shall commence or cease from the date when the change in circumstances gives rise to the reassessment for scenarios (a), (c) or (d) and at the date of renewal or extension period for scenario (b). Group and the Company as lessee Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All the other leases are classified as operating leases. Assets held under finance leases are recognised at an amount equal to the lower of their fair value at the date of acquisition and present value of minimum lease payments. The corresponding liability to the lessor is included in the consolidated and separate statements of financial position as a finance lease obligation. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are charged to profit or loss over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period. The property, plant and equipment acquired under finance leasing contracts are depreciated over the shorter of the lease term and useful life of the asset. Payments made under operating leases are charged to profit or loss on a straight-line basis over the terms of the leases. Group as lessor Leases where the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. Contingent rents are recognised as revenue in the period in which they are earned. Sale and leaseback Any gain arising on sale and leaseback transaction resulting in a finance lease and where the sale price is at fair value, same is classified as a deferred credit and amortised over the period for which the asset is expected to be used. If a loss arise on a sale and lease back transaction and where the sale price is at fair value, the loss is recognised in profit or loss, unless the asset is impaired. Annual Report 2017/18 115

119 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.4 Summary of Significant Accounting Policies (Cont d) (n) Leases (Cont d) Sale and leaseback (Cont d) No loss is recognised unless the asset is impaired, in which case it is added to the carrying amount of the leased asset and depreciated over the shorter of the lease term and useful life of the asset. (o) Employee benefit liability (i) Defined benefit plans Passenger ticket and cargo airway bills, net of The Company contributes to a pension scheme, which is a Defined Benefit plan. Under this plan the qualifying employees are entitled to retirement benefits up to a maximum of 66.6% of final salary on attainment of a retirement age of 65. The assets of the fund are held and administered by a trust specifically created for that purpose. The cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at each reporting date. Actuarial gains and losses are recognised in full in the period in which they occur in other comprehensive income. Such actuarial gains and losses are also immediately recognised in other comprehensive income and are not reclassified to profit or loss in subsequent periods. (ii) which the obligations are to be settled. Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance policies. Plan assets are not available to the creditors of the Group, nor can they be paid directly to the Group. Fair value is based on market price information and, in the case of quoted securities, it is the published bid price. The value of any defined benefit asset recognised is restricted to the sum of any unrecognised past service costs and the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan. Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding net interest (not applicable to the Group) and the return on plan assets (excluding net interest), are recognised immediately in the statement of financial position with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Defined contribution plans The Company operates a defined contribution scheme, created in April 2002, the assets of which are held separately from the Group and are administered by an independent fund administrator. All new employees of the Company from that date become members of the defined contribution plan. Payments by the Company to the defined contribution retirement plan are charged as an expense in profit or loss as they fall due. Unvested past service costs are recognised as an expense on a straight line basis over the average period until the benefits become vested. Past service costs are recognised immediately if the benefits have already vested immediately following the introduction of, or changes to, a pension plan. Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group and Company have a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. The defined benefit asset or liability comprises the present value of the defined benefit obligation (using a discount rate based on government bonds, as explained in Note 4.3), less unrecognised past service costs and less the fair value of plan assets out of (iii) Other post-retirement benefits Other post-retirement benefits include unused, accumulated sick leave benefits that are refunded to employees on retirement and the severance allowance payable to employees of its subsidiaries in accordance with Labour Laws. The net present value of benefits payable is calculated by a qualified actuary and provided for. The severance allowance payable and the accumulated sick leaves are unfunded. (iv) End of contract gratuity for pilots The terms of employment for pilots employed on a fixed, long-term contract basis include a condition for the payment of gratuity which is calculated based on a percentage of the total basic salary paid to the pilots on each anniversary date of their contract over its duration. 116 Air Mauritius

120 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.4 Summary of Significant Accounting Policies (Cont d) (o) Employee benefit liability (Cont d) (iv) End of contract gratuity for pilots (Cont d) The Company s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognised in profit or loss in the period in which they arise. (p) Income tax The principal temporary differences arise from depreciation on property, plant and equipment, employee benefit liability and on provisions. Deferred tax assets relating to the carry forward of unused tax losses are recognised to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxation authority. (i) (ii) Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income. Current income tax Current income tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. It is measured using the tax rates enacted at the reporting date. Current tax is recognised in correlation to underlying transactions either in profit and loss or, other comprehensive income or directly in equity. Current tax assets and liabilities are offset only if certain criteria are met. Deferred tax Deferred tax is provided, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date that are expected to apply in the year when the asset is realised or the liability is settled. Deferred tax items are recognised in correlation to underlying transactions either in profit and loss, other comprehensive income or directly in equity. Under this method the Group and Company are required to make provision for deferred taxes on the revaluation of certain non-current assets and, in relation to an acquisition, on the difference between the fair values of the net assets acquired and their tax base. (iii) Value added taxes Revenues, expenses and assets are recognised net of the amount of value added taxes except: Where the value added tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the value added tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and Receivables and payables that are stated with the amount of value added tax included. For assets and liabilities that are recognised in the The net amount of value added tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the consolidated and separate statements of financial position. (iv) Corporate Social Responsibility In line with the definition within the Income Tax Act 1995, Corporate Social Responsibility (CSR) is regarded as a tax and is therefore subsumed with the income tax shown within the consolidated and separate statements of profit or loss and other comprehensive income and the income tax liability on the consolidated and separate statements of financial position. The CSR charge for the current period is measured at the amount expected to be paid to the Mauritian tax authorities. The CSR rate and laws used to compute the amount are those charged or substantively enacted by the reporting date. Annual Report 2017/18 117

121 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.4 Summary of Significant Accounting Policies (Cont d) (q) Impairment of property, plant and equipment (r) The Group and Company review the carrying amounts of its assets other than investment property, inventories and deferred tax assets at each reporting date to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). An asset s recoverable amount is the higher of an asset s or cash generating unit s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Customer loyalty programme The Group and the Company operate a customer loyalty programme, the Kestrelflyer Programme that entitles customers to accumulate mileage credits that entitle them to a choice of various awards, primarily free travel and upgrading of tickets. The fair value attributed to the awarded mileage credits is deferred as a liability and recognised as revenue on redemption of the miles by the participants to whom the miles are issued. The deferred revenue is reduced to reflect the outstanding obligation as participants redeem award credits or as their entitlement expires after 3 years. (s) Revenue recognition (i) Passenger and cargo sales Passenger ticket and cargo airway bills, net of discounts are recorded as current liabilities in the Sales In Advance of Carriage account until recognised as revenue when the transportation service is provided. Revenue is recognised on a gross basis. Commission costs are recognised at the same time as the revenue to which they relate and are charged to operating expenses. (ii) Room revenue, sale of food and beverages and income from other normal hotel services (iii) Revenue is recognised upon consumption and acceptance of services, net of Value Added Tax and discounts. Rental income Rental income arising from operating leases on investment property is accounted for on a straight line basis over the lease terms. (iv) Redemption of miles on Customer Loyalty Programme (Kestrelflyer) (v) Redemption revenue received for the issuance of points is deferred as a liability (sales in advance on carriage) until the miles are redeemed or the passenger is uplifted in the case of flights redemptions. Redemption revenue is measured based on management s estimate of the fair value of the expected awards for which the miles will be redeemed. The fair value of the awards is reduced to take into account the proportion of miles that are expected to expire (purged). Purged revenue Unsued tickets included in Sales in advance of carriage are recognised as revenue (purged) after twelve months from the date the ticket was supposed to be uplifted. (vi) Operating segment For management purposes, the Group is organised into business units based on their services and the operating segments are aircraft operations, ground operations, investment property, hotel and restaurant services and call centre. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. 118 Air Mauritius

122 (i) Credit risk (Cont d) Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Accounting Policies (Cont d) 4.4 Summary of Significant Accounting Policies (Cont d) (t) Finance income and finance cost The Group s and the Company s finance income and finance costs include: other interest income; interest expense; dividend income; the foreign currency gain or loss on financial assets and financial liabilities; and the gains or losses on hedging instruments. Interest income or expense is recognised as it accrues using the effective interest method. Dividend income is recognised as finance income when the Company s right to receive payment has been established. (u) Fair value measurement The Group and the Company measure financial instruments, such as, derivatives, and non-financial assets such as investment property, at fair value at each reporting date. Also, fair values of financial instruments measured at amortised cost are disclosed in Note 34. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: in the principal market for the asset or liability; or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to by the Group and the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group and the Company use valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the consolidated and separate financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable For assets and liabilities that are recognised in the consolidated and separate financial statements on a recurring basis, the Group and the Company determine whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. For the purpose of fair value disclosures, the Group and the Company have determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. (v) Share capital Ordinary shares are classified as equity. Incremental cost directly attributable to the issue of ordinary shares are recognised as a deduction from equity. When shares are issued at a price above its par value, the excess between the issue price and par value is recorded in share premium. Annual Report 2017/18 119

123 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Financial Risk Management Objectives and Policies As an airline with worldwide operations, the Group and Company are exposed to financial risks relating to fluctuations in exchange rate, jet fuel price and interest rate movements, as well as credit and liquidity risks. The fundamental objective of financial risk management at Group level is to protect and, where possible, improve on future budgeted and forecast cash flows, and the financial performance and financial position of the Group and the Company by: Protecting the Group and the Company from adverse market movements that manifest as financial downside for the business and endanger stakeholders (shareholder, employees and the community), and threaten the sustainability and competitive position and reputational risk of the Group in the market; and Reducing the volatility and resultant uncertainty of operating revenues and cash flows that result from financial market volatility. The Board of Directors sets the Risk Management policies and objectives of the Group and the Company, and lays down the parameters within which the various aspects of treasury risk management are operated. The Board through its Risk Management Steering Committee (RMSC) has approved a Risk Management Manual which outlines the Group s and the Company s policies and procedures for managing corporate and asset financing and financial risks. The Group and Company have various financial assets such as cash and cash equivalents, short-term deposits trade and other receivables (excluding prepayments), long term deposits, long term investments, long term receivables, available for sale investments, and derivative financial assets which arise directly from its operations. (i) The main risks arising from the Group s and the Company s financial instruments are cash flow interest rate risk, liquidity risk, foreign currency risk, credit risk and fuel price risk. The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below. The Group and the Company enter into derivative transactions, primarily forward currency contracts and forward comodity contracts. The purpose is to manage the currency risks and jet fuel price risk arising from the Group s and the Company s operations and its sources of finance. Credit risk Credit risk is the risk of financial loss to the Group and the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group s and the Company s cash and cash equivalents, short-term deposits trade and other receivables (excluding prepayments), long term deposits, long term investments, long term receivables, available for sale investments, and derivative financial assets. Receivable balances are monitored on an ongoing basis with the result that the Group s and the Company s exposure to bad debts is not significant. Cash and cash equivalents, excluding petty cash, and derivative financial assets are placed in banks with good credit rating. Exposure to credit risk At the reporting date, the Group s and the Company s maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the consolidated and separate statements of financial position. Maximum credit exposure Maximum credit exposure The Group Trade and other receivables 41,289 41,289 41,620 41,620 Cash and cash equivalents 32,703 32,703 82,865 82,865 Short-term deposit 1,494 1,494 1,582 1,582 Available-for-sale investments Long term deposit 8,611 8,611 7,924 7,924 Long term investments 5,843 5, Long term receivables Derivative financial assets 2,316 2, ,936 92, , , Air Mauritius

124 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Financial Risk Management Objectives and Policies (Cont d) Maximum credit exposure Maximum credit exposure The Company Trade and other receivables 41,216 41,216 42,556 42,556 Cash and cash equivalents 28,121 28,121 72,658 72,658 Available-for-sale investments Long Term Deposit 8,611 8,611 7,924 7,924 Long Term Receivables Derivative financial assets 2,316 2, ,944 80, , ,141 Trade and other receivables The Group s sales are made principally through International Air Transport Association (IATA), Cargo Accounts Settlement System (CASS) and Billing Settlement Plan (BSP) settlement systems. As such, the credit risk arising from defaults from travel agents, other airlines, forwarding agents and tour operators is considerably reduced. The Group and the Company also trade directly with recognised creditworthy third parties. It is the Group s and the Company s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group s and the Company s exposure to bad debts is not significant. The maximum exposure is the carrying amount as disclosed in Note 16. There are no significant concentrations of credit risk within the Group and the Company. An analysis of the credit quality of trade receivables is included in Note 16. Cash and cash equivalents and short term deposits The Group and the Company held cash and cash equivalents amounting to Eur 32,985K and Eur 28,121K at March 31, 2018 (2017: Eur 82,865K and Eur 72,658K) and short-term deposits amounting to Eur 1,494K (2017: Eur 1,582K) for the Group. Cash and cash equivalents and short-term deposits are held with bank and financial institution counterparties, which are rated at least investment grade based on Moody s (Baa3), Fitch (BBB-) and Standard & Poor (BBB-). (ii) Derivatives The derivatives are entered into with bank and financial institution counterparties, which are rated at least investment grade based on Moody s (Baa3), Fitch (BBB-) and Standard & Poor (BBB-). Liquidity risk Liquidity risk is the risk that the Group and the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group s and the Company s approach to managing liquidity is to ensure, as far as possible, that they will have sufficient liquidity to meet their liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group s and the Company s reputation. The Group and the Company monitor their risk to a shortage of funds using a recurring liquidity planning tool. This tool considers the maturity of its financial obligations and approved projected cash flows from operations. Management also carries out a regular review of the facilities it has in place with its banking partners to ensure it has access to sufficient financing in case of liquidity needs at all times. The table below summarises the maturity profile of the Group s and the Company s financial liabilities at March 31, based on contractual undiscounted payments. Annual Report 2017/18 121

125 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Financial Risk Management Objectives and Policies (Cont d) (ii) Liquidity risk (Cont d) The Group At March 31, 2018 Carrying amount On demand Less than 3 months Contractual cash flows 3 to 12 months 1 to 5 years Above 5 years Total Interest bearing loans and borrowings 30, ,512 7,557 20,923-31,945 Derivative financial liabilities 2, , ,297 Trade and other payables 170, ,554 1, ,013 Total 202, ,752 10,391 21, ,255 At March 31, 2017 Non-derivative financial liabilities Contractual cash flows Carrying Less than 3 3 to 12 Above 5 amount On demand months months 1 to 5 years years Total Interest bearing loans and borrowings 31, ,597 6,633 24,377-33,528 Derivative financial liabilities Trade and other payables 175, , ,048 Dividend payable 2,675-2, ,675 Total 210, ,999 7,939 24, ,236 The Company At March 31, 2018 Non-derivative financial liabilities Contractual cash flows Carrying Less than 3 3 to 12 Above 5 amount On demand months months 1 to 5 years years Total Interest bearing loans and borrowings 30, ,512 7,557 20,923-31,945 Derivative financial liabilities 2, , ,297 Trade and other payables 170,076 1, , ,076 Total 202,805 2, ,426 8,932 21, ,318 Contractual cash flows Carrying Less than 3 3 to 12 Above 5 At March 31, 2017 amount On demand months months 1 to 5 years years Total Interest bearing loans and borrowings 31, ,597 6,544 24,377-33,439 Derivative financial liabilities Trade and other payables 176,598 2, , ,598 Dividend payable 2,675-2, ,675 Total 211,720 3, ,901 7,151 24, , Air Mauritius

126 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Financial Risk Management Objectives and Policies (Cont d) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group s and the Company s income or the value of their holdings of financial instruments. The objective of market risk is to manage and control market risk exposures within acceptable parameters while optimising return. terms. The Group and the Company mitigate this risk by having a loan portfolio which carries both fixed and floating rates. As at March 31, 2018, none of the Group s and the Company s borrowings were at a fixed rate of interest (2017: Nil). (iv) Interest rate risk table The Group and the Company make use of derivative financial instruments to manage market risks. All such transactions are carried out within the guidelines set by the Risk Management Steering Committee (RMSC). Normally, the Group seeks to apply hedge accounting to manage volatility in profit or loss. The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group s and the Company s profit or loss and equity (through the impact on floating rate borrowings). There is no impact on the Group s and the Company s equity. (iii) Interest rate risk The Group s and the Company s earnings are exposed to changes in interest rates as they finance their aircraft principally in Euro and US dollars. Changes in interest rates of the Euro zone and US will therefore impact on the cash flows, profits and equity of the Group and the Company, when the financing is based on floating rate The Group and the Company Increase/ decrease in basis points Effect on profit or loss/ equity Financial instruments denominated in Eur +15 (35) Financial instruments denominated in Mur +10 (8) Financial instruments denominated in Eur Financial instruments denominated in Mur Financial instruments denominated in Eur +15 (43) Financial instruments denominated in Mur +10 (6) Financial instruments denominated in Eur Financial instruments denominated in Mur (v) Commodity price risk One of the Group s and the Company s principal variable cost components is jet fuel. The price of jet fuel is indexed according to international commodity prices and accordingly the Group s and the Company s profitability are exposed to commodity price risk. The risk associated to fluctuations in the price of jet fuel is managed by various hedging techniques as well as the use of a fuel surcharge, whereby some of the cost is passed on to the customer. The following table demonstrates the sensitivity to a reasonably possible change in fuel price, with all other variables held constant, of the Group s and the Company s profit or loss and equity. As at March 31, 2018, the fair value of the Group s and the Company s derivative financial assets relating to commodity hedges was Eur 2,316k (2017: derivative financial liabilities Eur 969k). Annual Report 2017/18 123

127 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Financial Risk Management Objectives and Policies (Cont d) (v) Commodity price risk (Cont d) The Group and the Company Increase/ decrease in USD Effect on profit or loss Effect on equity Increase in fuel price +10 (16,531) (17,693) Decrease in fuel price ,531 18, Increase in fuel price +10 (17,102) (22,138) Decrease in fuel price ,102 22,134 (vi) Foreign currency risk Revenue is generated principally in Euro because the principal market of the Group is Europe, while USD mainly influences the determination of costs as fuel expenses are borne in USD. Therefore, the prospective cost in non-euro operations will be hedged in this manner to a level of between 30% and 70%. The Group has transactional currency exposures. Such exposure arises from sales or purchases by an operating unit in currencies other than the unit s functional currency. Approximately 34% of the Group s sales are denominated in the functional currency of the operating unit making the sale, whilst almost 43% of costs are denominated in USD. The forward currency contracts must be in the same currency as the hedged item. The Group manages its foreign currency risk by hedging transactions that are expected to occur in mainly USD by using foreign currency swaps and forwards. It is the Group s policy to negotiate the terms of the hedge derivatives to match the term of the hedged item to maximise hedge effectiveness. The following table demonstrates the sensitivity to a reasonably possible change in the US dollar exchange rate, with all other variables held constant, of the Group s profit or loss (due to changes in the fair value of monetary assets and liabilities) and the Group s equity (due to changes in the fair value of forward exchange contracts). The Group and the Company Increase/ decrease in US dollar rate Effect on profit or loss Effect on equity % (3,568) (9,261) -5% 3,944 7, % (8,672) (6,193) -5% 7,846 5, Air Mauritius

128 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Financial Risk Management Objectives and Policies (Cont d) (vii) Hedging by the Company The Risk Management Steering Committee sets out the objectives and policies for hedging transactions in order to mitigate exposure on changes in foreign exchange rates and fuel prices. The Company s hedging policies are risk averse. As such, derivatives are not used to generate profits but to hedge against anticipated exposures. As derivatives are only used for the purposes of risk management, they do not expose the Group and the Company to market risk because gains and losses on the derivatives offset losses and gains on the matching asset, liability, revenues or costs being hedged, except to the extent that the hedge is ineffective. Foreign currency risks in relation to expected disbursements denominated in Usd are hedged by using forward contracts and options based on the budgeted Usd cash outflow in the future. These forward contracts and options are rarely taken for a period of more than one year. Fuel-hedging instruments are used to protect the Company against sudden and significant increases in fuel prices while ensuring that the Company is not significantly affected in the event of a substantial fall in the price of fuel. When a derivative is entered into for the purpose of being a hedge, the Group and the Company negotiate the terms of the derivative to match the terms of the hedged exposure. For hedges of forecast transactions, the derivative covers the period of exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting receivable or payable that is denominated in the foreign currency. The movement in derivative financial instruments are as follows: Currency derivatives Commodity derivatives Currency derivatives Commodity derivatives At April 01, 280 (969) (544) (5,169) Movement during the year Hedge (receipts) / payouts 4,119 (2,152) (1,191) 3,780 Fair value movement (6,696) 5,437 2, At March 31, (2,297) 2, (969) (viii) Capital risk management The primary objective of the Group s and the Company s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. In order to achieve overall capital management objectives, the Group and the Company, amongst other things, aim to ensure that they meet financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. There have been no breaches of the financial covenants of any interest bearing loans and borrowing in the current period. The Group and the Company were not subject to any externally imposed capital requirements during the years ended March 31, 2018 and March 31, Annual Report 2017/18 125

129 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Financial Risk Management Objectives and Policies (Cont d) (viii) Capital risk management (Cont d) The Group and the Company manage their capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group and the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended March 31, 2018 and March 31, The Group and the Company monitor capital using a gearing ratio, which is interest bearing loans and borrowings divided by equity. The Group s and the Company s policy are to keep the gearing ratio at a reasonable level which is 1:1. Interest bearing loans and borrowings exclude derivatives. The Group The Company Interest bearing loans and borrowings 30,453 31,551 30,432 31,462 Equity 85,625 90,552 87,921 91,201 Debt to equity ratio 36% 35% 35% 34% The Group and the Company did not pledge any financial assets as collateral for liabilities or contingent liabilities as at March 31, 2018 (2017: Nil). (ix) Fair value of financial instruments The fair value details of financial assets and liabilities are disclosed in Note 34. The tables below set out comparison by category and class of carrying amounts and fair values of all of the Group s and the Company s financial instruments. The Group Category Carrying amount Fair value Financial assets Cash and cash equivalents L.R 32,985 82,865 32,985 82,865 Short-term deposits L.R 1,494 1,582 1,494 1,582 Long-term deposits L.R 8,611 7,924 8,611 7,924 Long term investments H.T.M 5,843-5,914 - Long term receivables L.R Available-for-sale investments A.F.S Trade and other receivables L.R 41,289 41,620 41,289 41,620 Derivative financial assets F.V.T.P.L 2, , Financial liabilities Bank overdraft O.L (974) (1,010) (974) (1,010) Interest-bearing loans and borrowings: - Obligations under finance lease O.L (29,479) (30,541) (29,479) (30,541) Derivative financial liabilities F.V.T.P.L (2,297) (985) (2,297) (985) Trade and other payables O.L (170,013) (175,048) (170,013) (175,048) Dividend payable O.L - (2,675) - (2,675) 126 Air Mauritius

130 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Financial Risk Management Objectives and Policies (Cont d) (ix) Fair value of financial instruments (Cont d) The Company Category Carrying amount Fair value Financial assets Cash and cash equivalents L.R 28,121 72,658 28,121 72,658 Long-term deposits L.R 8,611 7,924 8,611 7,924 Long-term receivables L.R Available-for-sale investments A.F.S Trade and other receivables L.R 41,216 42,556 41,216 42,556 Derivative financial assets F.V.T.P.L 2, , Financial liabilities Bank overdraft O.L (953) (921) (953) (921) Interest-bearing loans and borrowings: - Obligations under finance lease O.L (29,479) (30,541) (29,479) (30,541) Derivative financial liabilities F.V.T.P.L (2,297) (985) (2,297) (985) Trade and other payables O.L (170,076) (176,598) (170,076) (176,598) Dividend payable O.L - (2,675) - (2,675) Market values have been used to determine the fair value of listed available-for-sale financial assets. The fair values of derivatives and loans and borrowings have been calculated by discounting the expected future cash flows at prevailing interest rate. The fair values of other financial assets have been calculated using market interest rates. The carrying values of the short-term financial instruments are a reasonable approximation of their fair values. Long term loans and borrowings have been contracted with financial institutions and carry variable interest rates which are at par with market rates. Therefore, the amortised cost approximates the fair value. As such, their carrying value approximates their fair value. However, the fair value of the long term investments amounting to Eur 5,914k (2017: nil) differs from its carrying value which amounts to Eur 5,843k (2017: nil) as their maturity periods range from 2 to 4 years. The fair value of the long term investments is currently classified under Level 2. The fair value has been determined by discounting the future cash flows using the latest yield on treasury bonds issued by the Bank of Mauritius. The estimated fair value would increase / (decrease) if the yield on treasury bonds falls or rises accordingly. L.R - Loans and receivables A.F.S - Available-for-sale H.T.M - Held-to-maturity F.V.T.P.L - Fair value through profit or loss O.L - Other financial liabilities The Group and the Company have cash flow hedges which are classified under level 2. Annual Report 2017/18 127

131 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, PROPERTY, PLANT AND EQUIPMENT Buildings & Airframe hangars on Computer The Group Aircraft Aircraft & Aircraft & engine leasehold Plant & Furniture & office Motor vehicles on lease accessories spares overhaul land equipment & fittings equipment Owned Leased Total Cost At April 01, , ,756 26,153 50,997 39,017 21,412 7,318 10,280 2, ,235 Additions , ,967 Disposals - (7,099) (543) (13,291) (5) (404) (130) (204) (291) - (21,967) Exchange differences At March 31, , ,657 26,361 45,370 39,381 21,756 7,299 10,854 2, ,695 At April 01, , ,657 26,361 45,370 39,381 21,756 7,299 10,854 2, ,695 Additions 9,070 1,139 6,671 18,773 1,514 2, ,409 Disposals - (76,558) (197) (26,453) (1) (1,191) (42) (375) (109) (223) (105,149) Exchange differences - (86) (8) - (500) (178) (59) (17) (10) - (858) At March 31, , ,152 32,827 37,690 40,394 23,330 7,408 11,457 2, ,097 Accumulated Depreciation At April 01, , ,104 20,607 31,081 26,603 19,726 6,841 9,590 1, ,435 Charge for the year 1,989 17,775 1,091 13, ,796 Disposals - (7,099) (496) (13,291) (4) (403) (130) (201) (272) - (21,896) Exchange differences At March 31, , ,780 21,202 31,298 27,552 19,929 6,954 10,122 1, ,627 At April 01, , ,780 21,202 31,298 27,552 19,929 6,954 10,122 1, ,627 Charge for the year 4,160 13,399 1,562 8, ,111 Disposals - (69,303) (137) (24,028) (1) (1,149) (37) (369) (109) (223) (95,356) Exchange differences - (28) (2) - (284) (103) (56) (17) (7) - (497) At March 31, , ,848 22,625 15,686 28,001 19,460 7,104 10,410 1, ,885 Carrying amounts At March 31, ,875 70,304 10,202 22,004 12,393 3, , ,212 At March 31, ,965 89,877 5,159 14,072 11,829 1, ,068 (a) Aircraft and accessories amounting to Eur 25.6M have been pledged as security against borrowings of the Group (2017: Eur 25.2M). (b) Refer to Note 30 for capital expenditure commitments. (c) There are no temporarily idle property, plant and equipment. (d) Refer to accounting policy 4.4 for the change in estimate with respect to re-assessment of useful life. (e) Additions made during the year includes assets under finance lease amounting to Eur 6.9M. (f) The disposal of Eur 9.7M includes the sale of an aircraft to Aero Capital Solutions Inc in November In principle, the transaction has been accounted as a finance sale and leaseback arrangement. A corresponding liability was recognised in interest-bearing loans and borrowings at an amount of Eur 6.8M and the interest rate has been estimated at LIBOR %. 128 Air Mauritius

132 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, PROPERTY, PLANT AND EQUIPMENT (Cont d) Buildings & Airframe hangars on Computer The Company Aircraft Aircraft & Aircraft & engine leasehold Plant & Furniture & office Motor vehicles on lease accessories spares overhaul land equipment & fittings equipment Owned Leased Total Cost At April 01, , ,756 26,153 50,997 32,685 19,463 6,574 10,017 2, ,799 Additions , ,805 Disposals - (7,099) (543) (13,291) (5) (404) (130) (201) (259) - (21,932) At March 31, , ,657 26,361 45,370 32,757 19,542 6,514 10,576 1, ,672 At April 01, , ,657 26,361 45,370 32,757 19,542 6,514 10,576 1, ,672 Additions 9,070-6,566 18,773 1,475 2, ,728 Disposals - (76,558) (197) (26,453) (1) (1,176) (37) (325) (73) (223) (105,043) At March 31, , ,099 32,730 37,690 34,231 20,976 6,652 11,242 1, ,357 Accumulated Depreciation At April 01, , ,104 20,607 31,081 23,297 18,545 6,255 9,345 1, ,007 Charge for the year 1,989 17,775 1,091 13, ,429 Disposals - (7,099) (496) (13,291) (4) (403) (130) (198) (250) - (21,871) At March 31, , ,780 21,202 31,298 23,968 18,541 6,241 9,852 1, ,565 At April 01, , ,780 21,202 31,298 23,968 18,541 6,241 9,852 1, ,565 Charge for the year 4,160 12,827 1,518 8, ,112 Disposals - (69,303) (137) (24,028) (1) (1,134) (37) (319) (73) (223) (95,255) At March 31, , ,304 22,583 15,686 24,600 18,026 6,351 10,200 1, ,422 Carrying amount At March 31, ,875 69,795 10,147 22,004 9,631 2, , ,935 At March 31, ,965 89,877 5,159 14,072 8,789 1, ,107 (a) Aircraft and accessories amounting to Eur 25.6M have been pledged as security against borrowings of the Company (2017: Eur 25.2M). (b) Refer to Note 30 for capital expenditure commitments. (c) There are no temporarily idle property, plant and equipment. (d) Refer to accounting policy 4.4 for change in estimate with respect to re-assessment of useful life. (e) Additions made during the year includes assets under finance lease amounting to Eur 6.9M. (f) The disposal of Eur 9.8M includes the sale of an aircraft to Aero Capital Solutions Inc in November In principle, the transaction has been accounted as a finance sale and leaseback arrangement. A corresponding liability was recognised in interest-bearing loans and borrowings at an amount of Eur 6.8M and the interest rate has been estimated at LIBOR %. Annual Report 2017/18 129

133 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Investment Property The Group At April 01, 10,820 10,083 Exchange differences (1,116) 722 Fair value gain At March 31, 9,744 10,820 The investment property is held by Mauritius Estate Development Corporation Limited ( MEDCOR ), a subsidiary of the Company. The investment property is stated at fair value, which has been determined based on a valuation performed as at March 31, 2018 by an independent Valuer, NP Jeetun Chartered Valuation Surveyors, an accredited independent Chartered Valuer. The valuer is an industry specialist in valuing this type of investment property. The fair value of the property has been determined using the open market value approach and has been classified under Level 3 in the fair value hierarchy. There has been no transfers into or out of Level 3 of the fair value hierarchy, during the financial year. There is no restriction on the realisability of investment property or the remittance of income and proceeds of disposal. There are no contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements (a) Rental income from the investment property (Note 25 (a)) 1,198 1,127 (b) Operating expenses arising on the investment property: - that generated rental income during the year that did not generate rental income during the year (c) Description of valuation techniques used and key inputs to valuation on investment properties: Valuation technique Significant unobservable Inputs Range Ground Floor properties DCF method Estimated rental value per sqm per month Rent growth p.a. Long-term vacancy rate Discount rate Second floor properties DCF method Estimated rental value per sqm per month Rent growth p.a. Long-term vacancy rate Discount rate Office properties DCF method Estimated rental value per sqm per month Rent growth p.a. Long-term vacancy rate Discount rate Eur 7.28 Nil 5-10% 8-8.5% Eur Nil 5-10% 8-8.5% Eur 9.28 Nil 5-10% 8-8.5% 130 Air Mauritius

134 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Investment Property (Cont d) (c) Description of valuation techniques used and key inputs to valuation on investment properties: (Cont d) Under the DCF method, fair value is estimated using assumptions regarding the benefits and liabilities of ownership over the asset s life including an exit or terminal value. This method involves the projection of a series of cash flows on a real property interest. To this projected cash flow series, a market-derived discount rate is applied to establish the present value of the income stream associated with the asset. The exit yield is normally separately determined and differs from the discount rate. collection losses, lease incentives, maintenance cost, agent and commission costs and other operating and management expenses. The series of periodic net operating income, along with an estimate of the terminal value anticipated at the end of the projection period, is then discounted. Significant increases / (decreases) in estimated rental value per annum in isolation would result in a significantly higher / (lower) fair value of the properties. Significant increases / (decreases) in long-term vacancy rate and discount rate (and exit yield) in isolation would result in a significantly (lower) / higher fair value. The duration of the cash flows and the specific timing of inflows and outflows are determined by events such as rent reviews, lease renewal and related re-letting, redevelopment, or refurbishment. The appropriate duration is typically driven by market behaviour that is a characteristic of the class of real property. Periodic cash flow is typically estimated as gross income less vacancy, non-recoverable expenses, 8. Intangible Assets The Group The Company Carrying amount Computer software (see below) 1, , Goodwill on acquisition of subsidiary , , Computer software Cost At April 01, 4,673 6,811 4,567 6,710 Additions 1, , Disposals - (2,297) - (2,297) Exchange differences (6) At March 31, 6,036 4,673 5,936 4,567 Amortisation At April 01, 4,470 6,559 4,369 6,473 Charge for the year Disposals - (2,297) - (2,297) Exchange differences (7) At March 31, 4,969 4,470 4,870 4,369 Carrying amount At March 31, 1, , Annual Report 2017/18 131

135 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Intangible Assets (Cont d) Management has reviewed the carrying amount of goodwill and does not consider it to be impaired. There are no restrictions on the title of the intangible assets and no amount pledged as security for liabilities. There are no contractual commitments for the acquisition of intangible assets. 9. Investment in Subsidiaries The Company Cost At April 01, and March 31, 28,314 27,155 Details of the subsidiaries included in the Group financial statements are as follows: Name of companies and activities Country of incorporation and operation Class of shares held Nominal value of investment Percentage holding % % Management company Air Mauritius (S.A.) (Proprietary) Limited South Africa Ordinary % 100% Air Mauritius Holidays (Pty) Limited (Dormant)* Australia Ordinary % 100% Mauritian Holidays Limited (Dormant)* England Ordinary % 100% Investment property Mauritius Estate Development Corporation Limited (MEDCOR) Mauritius Ordinary 25,707 25, % 93.70% Hotel and restaurant Pointe Coton Resort Hotel Co. Ltd Hotel Company Limited Mauritius Ordinary 1,263 1, % 54.19% Call centre Airmate Ltd Mauritius Ordinary % 100% Helicopter operations Mauritius Helicopter Limited Mauritius Ordinary 1, % 100% * The figures of Air Mauritius Holidays (Pty) Limited and Mauritian Holidays Limited are not considered to be material both individually and in aggregate to the Group figures. Therefore, these immaterial subsidiaries have not been consolidated. ** Air Mauritius Holidays Limited is in the process of voluntary liquidation. Non-controlling interest ( NCI ) NCI has been recognised at the proportionate share of the net assets of Pointe Coton Resort Hotel Company Limited and Mauritius Estate Development Corporation Limited. The following table summarises the information relating to each of the Group s subsidiaries that has material NCI, before any intra-group eliminations: 132 Air Mauritius

136 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Investment in Subsidiaries (Cont d) Non-controlling interest ( NCI ) (Cont d) Mauritius Estate Development Corporation Limited March 31, 2018 March 31, 2017 Pointe Coton Resort Hotel Co. Ltd Mauritius Estate Development Corporation Limited Pointe Coton Resort Hotel Co. Ltd NCI percentage 6.30% 45.81% 6.30% 45.81% Non-current assets 19,537 2,017 14,773 2,097 Current assets 4,320 2,226 10,677 1,980 Non-current liabilities - (185) - (337) Current liabilities (412) (565) (406) (296) Net assets 23,445 3,493 25,044 3,444 Dividend payable to NCI Net assets attributable to NCI 1,477 1,663 1,578 1,577 Revenue 1,198 2,347 1,198 2,324 Profit OCI 1, , Total comprehensive income 2, , Profit allocated to NCI OCI allocated to NCI Cash flows from operating activities Cash flows (used in) / from investing activities (5,924) (415) 5,280 (148) Net (decrease) / increase in cash and cash equivalents (5,594) 468 5, Investment in an Associate The Group Carrying value of investment in associate Cost Impairment of investment in associates (102) - Share of post-acquisition profits - 4 Carrying value The Company The Company has accounted for the investment in associate at cost less impairment. As at year end, the investment held in The Mauritius Shopping Paradise Co. Ltd had been fully impaired. The details on the associate, which is incorporated in Mauritius, are as follows: Name of company Activity Country of operation Class of shares held Nominal value of investment Percentage holding 2018 & & % The Mauritius Shopping Paradise Co. Ltd Dormant Mauritius Ordinary % Annual Report 2017/18 133

137 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Available-for-Sale Investments The Group and the Company At April 01, Fair value movement (5) 40 At March 31, Available-for-sale - quoted unit trust The Group and the Company hold units in some unit trusts. The fair value of the units has been calculated based on the official valuation performed by the Fund administrator at year end. These investments amounting to Eur 563k have been classified as Level 1 of the fair value hierarchy (2017: Eur 568k). 12. (a) Long Term Deposits THE GROUP THE COMPANY Security deposits on operating leases 8,611 7,924 8,611 7,924 Effect of discounting on security deposits (1,076) - (1,076) - Advance payments to aircraft manufacturers 44,633 22,130 44,633 22,130 52,168 30,054 52,168 30,054 In terms of the contractual arrangement governing the lease / purchase of aircraft, deposits are paid to the lessors / aircraft manufacturer. The deposits bear no interest and are reimbursable at the end of the lease period for operating leases. The effect of discount on security deposits relates to the fall in value. Advance payments relate to pre-delivery payments made to the aircraft manufacturer for the acquisition of new aircraft. 12. (b) Long Term Investments The Group and the Company Purchases made during the year 5,864 - Amortised discount on bonds 6 - Amortised premium on bonds (27) - 5,843 - The Company s subsidiary purchased treasury bonds of Eur 5.9M during the year with SBM Bank (Mauritius) Ltd. The treasury bonds term are for a period of 2 years, 3 years and 4 years and are non-renewable. The bonds bear fixed interest ranging from 2.9% to 5.2%. 134 Air Mauritius

138 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Long Term Receivables The Group and the Company The Group and the Company Loans The loans are unsecured, bear interest at a rate of LIBOR+1% per annum and are repayable in terms ranging between 2 to 10 years. 14. Deferred Tax Asset THE GROUP At April 01, Exchange differences 42 7 Charge to profit or loss (Note 28) (27) 25 Charge to other comprehensive income (Note 28) (34) 15 At March 31, Deferred tax assets are attributable to the following items: Provisions for bad debts Employee benefit liabilities Accelerated depreciation (6) (6) The deferred tax asset relates to accelerated depreciation and provisions in Airmate Ltd and Mauritius Estate Development Corporation Limited and has been computed at the current tax rate of 17% (2017: 17%). The current tax rate includes income tax rate of 15% and charge for corporate social responsibility of 2%. Tax exemption of the Company The Company is not taxable by virtue of an agreement with the Government of Mauritius. As a result, no current or deferred tax has been provided for in the separate financial statements of the Company. Annual Report 2017/18 135

139 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Inventories THE GROUP THE COMPANY At cost Aircraft spares 21,645 17,977 21,645 17,977 Cabin services 1,109 1,071 1,109 1,071 Ground support services 1,814 1,671 1,814 1,671 Others Provision for obsolete inventory (7,270) (7,395) (7,270) (7,395) 18,134 14,001 18,029 13,903 During the year, Eur 11.8M (2017: Eur 9.8M) was recognised as an expense for inventories. Inventory write down during the year amounted to nil (2017: Eur 1M). No inventories were pledged as security for liabilities during the financial year. 16. Trade and Other Receivables THE GROUP THE COMPANY Trade receivables (net of allowances) 41,289 41,528 40,517 40,996 Receivable from subsidiaries ,560 Other receivables and prepayments 40,224 31,632 39,762 31,290 81,513 73,160 80,978 73,846 Outstanding balances receivable from related parties, identified in Note 32, are included under trade and other receivables. Trade receivables are non-interest bearing and are generally due on days terms. At March 31, 2018, trade receivables at nominal value of Eur 4.2M (2017: Eur 3.9M) for the Group and Eur 4.0M (2017: Eur 3.7M) for the Company were impaired and fully provided for. In assessing provision for impairment, the Group and the Company consider the historical factors for debtors exceeding 90 days who do not repay their debt. Movements in the provision for impairment of trade receivables were as follows: THE GROUP THE COMPANY Individually impaired Individually impaired At April 01, ,865 3,725 Charge for the year (Note 25(a)) Utilised (103) (100) At March 31, ,854 3,678 At April 01, ,854 3,678 Charge for the year (Note 25(a)) Utilised (26) (17) At March 31, ,194 3,999 At March 31, the ageing analysis of trade receivables is as follows: 136 Air Mauritius

140 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Trade and Other Receivables (Cont d) Total Neither past due nor impaired Past due but not impaired <30 days days >90 days The Group ,289 40, ,528 38, ,110 The Company ,517 39, ,996 38, ,863 The Group The Company At reporting date, other receivables were neither past due nor impaired. 17. Cash and Cash Equivalents Cash at bank 32,703 82,865 28,121 72,658 Cash in hand Bank overdraft (Note 19) (974) (1,010) (953) (921) 32,011 81,885 27,203 71,766 Cash resources of the Company include deposits totalling Eur 4.3M (2017: Eur 50M) which earn interest at rates ranging between 0.01% and 1.82% per annum (2017: 0.9% and 1.85% per annum). 18. Share Capital The Group and the Company Number Number Authorised Ordinary shares of Rs 10 each 200,000, ,000,000 81,566 81,566 Issued and fully paid Ordinary shares of Rs 10 each 102,305, ,305,000 41,724 41,724 The ordinary shares are denominated in Mauritian rupees (Rs). Any share in the Company may be issued either at par or at a premium or at a discount or by way of bonus and may, in accordance with any applicable enactment or rule of law, issue shares of no par value, and any shares issued by the Company may be issued with such preferred, deferred, other special rights or restrictions, whether in regard to dividend, voting, return of capital, or otherwise, on such terms and conditions and at such times and in such manner as the Company may by ordinary resolution determine. Annual Report 2017/18 137

141 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Interest-Bearing Loans and Borrowings The Group The Company Non-current Obligations under finance leases (Note (b)) 21,459 24,636 21,459 24,636 21,459 24,636 21,459 24,636 Current Bank overdraft (Notes 17 & 33 (a)) 974 1, Obligations under finance leases (Note (b)) 8,020 5,905 8,020 5,905 8,994 6,915 8,973 6,826 Total interest-bearing loans and borrowings 30,453 31,551 30,432 31,462 (a) Details of the interest-bearing loans and borrowings are given in Note 33 (a). (b) Obligations under finance leases The Group and the Company Amounts payable under finance leases Minimum lease payments Interest Present value of minimum lease payments within one year 8,624 6, ,020 5,905 - after one year and before two years 10,082 6, ,702 6,236 - after two years and before five years 12,036 19, ,757 18,400 30,742 32,444 1,263 1,903 29,479 30,541 Less: Amount due for settlement within 1 year (8,020) (5,905) Amount due for settlement after 1 year 21,459 24,636 The Company has acquired certain aircraft under finance leases. The average remaining lease terms of these contracts are 1 to 4 years (2017: 1 to 5 years). Borrowings rates vary according to LIBOR and EurIBOR on which the lease agreements have been negotiated. (c) Reconciliation of opening and closing balance for liabilities arising from financing activities: The Group The Company Opening balance (excluding bank overdraft) 30,541 52,880 30,541 59,355 Assets purchased under finance lease 6,891-6,891 - Repayment of borrowing (7,236) (22,078) (7,236) (28,953) Unrealised foreign exchange (gain) / loss (717) (261) (717) ,479 30,541 29,479 30, Air Mauritius

142 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Interest-Bearing Loans and Borrowings (Cont d) (d) Guarantees and securities Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default. The Company s borrowings are secured by fixed charges over all aircraft on lease, aircraft and accessories. 20. Derivative Financial Assets and Liabilities Derivatives designated as hedging instruments reflect the change in fair value of foreign exchange forward contracts, designated as cash flow hedges to hedge highly probable future purchases in USD. Derivatives designated as hedging instruments also include the change in fair value of commodity forward contracts open at year end. The Group and the Company are exposed to changes in the price of jet fuel on its forecast fuel purchases. The forward contracts do not result in physical delivery of jet fuel, but are designated as cash flow hedges to offset the effect of price changes in jet fuel. The Group and the Company hedge approximately 30% of their expected fuel cost in the next reporting period. The remaining volume of jet fuel purchases is exposed to price volatility. (a) Hedging activities and derivatives The Group and the Company Assets Liabilities Net Assets Liabilities Net Cash flow hedge Forward foreign exchange agreements - (2,297) (2,297) 296 (16) 280 Commodity derivatives 2,316-2,316 - (969) (969) 2,316 (2,297) (985) (689) The Group uses foreign exchange forward contracts to manage some of its foreign currency risk exposures. The foreign exchange forward contracts are designated as cash flow hedges and are entered into for periods consistent with foreign currency exposure of the underlying transactions, generally from 1 to 12 months. (b) Foreign currency risk Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of forecast transactions in mainly US dollar. These forecast transactions are highly probable, and they comprise about 30% of the Group s total expected dealings in US dollars. The terms of the foreign currency forward contracts match the terms of the expected highly probable forecast transactions. As a result, there is no hedge ineffectiveness to be recognised in the profit or loss. The cash flow hedges of the expected future transactions were assessed to be highly effective and a net unrealised loss of Eur 6.7M (2017: net unrealised gain Eur 2.0m) relating to the hedging instruments, is included in OCI (Note 20 (d)). The amount removed from OCI during the year and included in the carrying amount of the hedged items as a basis adjustment for 2018 is detailed in Note 20(d) totalling Eur 4.1m (2017: (Eur 1.2m)). The amounts retained in OCI at 31 March 2018 are expected to mature and affect the consolidated and separate statements of profit or loss in financial year March 31, Reclassifications of gains or losses to profit or loss during the year included in OCI are shown in Note 20(d). Annual Report 2017/18 139

143 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Derivative Financial Assets and Liabilities (Cont d) (c) Commodity price risk The Group purchases jet fuel on an ongoing basis as its operating activities require a continuous supply of jet fuel for the airline services. The Group uses forward contracts and swaps to hedge against the increased volatility in jet fuel prices. These contracts are expected to reduce the volatility attributable to price fluctuations of jet fuel. Hedging the price volatility of forecast jet fuel purchases is in accordance with the risk management strategy outlined by the Board of Directors. The hedging relationships are for a period between 1 and 12 months, based on existing purchase agreements. As at March 31, 2018 the fair value of outstanding commodity forward contracts amounted to a liability of Eur 2.3M (2017: liability of Eur 1M). No ineffectiveness was recognised current year (2017: nil). The cumulative effective portion of Eur 5.4M (2017: Eur 0.4M) is reflected in OCI and will affect the profit or loss in (d) Components of OCI Cash flow hedges: Gains arising during the year - - Currency forward contracts Reclassification during the year to profit or loss 4,119 (1,191) Net (loss) / gain during the year of the not-yet matured contracts (6,695) 2,015 Commodity forward contracts Reclassification during the year to profit or loss (2,152) 3,780 Net gain of the not-yet matured commodity forward contracts 5, , Employee Benefit Liabilities The Group The Company Amount of provisions recognised in the consolidated and separate statements of financial position: Defined benefit pension schemes (Note (a)) 47,425 41,442 47,425 41,442 Other post retirement benefits (Note (b)) 2,292 2,283 1,298 1,175 At March 31, 49,717 43,725 48,723 42,617 For the year ended March 31, 2018 the valuation exercise was carried out by Aon Hewitt Ltd. The Company contributes to a defined benefit pension plan in respect of some employees and has recognised a net liability of Eur 47.4M for such employees as at March 31, 2018 (2017: Eur 41.4M). Employees of the Company are entitled to unused, accumulated sick leave benefit paid upon retirement. The Company has recognised a net liability of Eur 1.3M for them as at March 31, 2018 (2017: Eur 1.2M). The employees of Airmate Ltd and Pointe Coton Resort Hotel Company Limited are entitled to paid sick leave benefits upon retirement. 140 Air Mauritius

144 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Employee Benefit Liabilities (Cont d) (a) Defined benefit pension schemes (i) Reconciliation of net defined benefit liability THE GROUP AND THE COMPANY At April 01, 41,442 20,623 Amount recognised in profit or loss (Note (iv)) 5,147 4,075 Employer contributions (4,422) (4,922) Amount recognised in other comprehensive income (Note (v)) 8,388 20,605 Exchange differences (3,130) 1,061 At March 31, 47,425 41,442 Amount recognised in the consolidated and separate statements of financial position THE GROUP AND THE COMPANY Present value of funded obligations (Note (iii)) 119, ,911 Fair value of plan assets (Note (ii)) (71,917) (73,469) At March 31, 47,425 41,442 (ii) Reconciliation of fair value of plan assets THE GROUP AND THE COMPANY At April 01, 73,469 66,788 Interest income 4,450 5,263 Employer contributions 4,422 4,922 Benefits paid (3,325) (5,039) Exchange differences (5,552) 3,436 Loss on plan asset excluding interest (Note (v)) (1,547) (1,901) At March 31, 71,917 73,469 (iii) Reconciliation of present value of defined benefit obligation THE GROUP AND THE COMPANY At April 01, 114,911 87,411 Current service cost 2,799 2,630 Interest expense 6,798 6,708 Benefits paid (3,325) (5,039) Exchange differences (8,682) 4,497 Liability experience loss (Note (v)) - 6,984 Liability loss due to change in financial assumptions (Note (v)) 6,841 11,720 At March 31, 119, ,911 Annual Report 2017/18 141

145 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Employee Benefit Liabilities (Cont d) (a) Defined benefit pension schemes (Cont d) (iv) Components of amounts recognised in profit or loss THE GROUP AND THE COMPANY Current service cost 2,799 2,630 Net interest on net defined benefit liability 2,348 1,445 Total 5,147 4,075 (v) Components of amounts recognised in other comprehensive income THE GROUP AND THE COMPANY Return on plan assets below interest income 1,547 1,901 Liability experience loss - 6,984 Liability loss due to change in financial assumptions 6,841 11,720 Total 8,388 20,605 (vi) Distribution of plan assets at March 31, THE GROUP AND THE COMPANY Allocation of plan assets at end of year % % Equities - overseas quoted - 39 Equities - overseas unquoted - 4 Equities - local quoted Debt - overseas quoted 5 - Debt - local unquoted Property - overseas - 1 Investment funds 35 4 Cash and other The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled. (vii) The principal actuarial assumptions (in Mauritian rupees terms) used for the defined benefit pension schemes were: THE GROUP AND THE COMPANY Principal assumptions used at end of period Discount rate 6.1% 6.5% Future salary increases 3.0% 3.0% Future pension increases 3.0% 3.0% Average retirement age (ARA) Average life expectancy for: - Male at ARA 17.7 years 17.7 years - Female at ARA 22.1 years 22.1 years 142 Air Mauritius

146 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Employee Benefit Liabilities (Cont d) (a) Defined benefit pension schemes (Cont d) (vii) The principal actuarial assumptions (in Mauritian rupees terms) used for the defined benefit pension schemes were: (Cont d) Sensitivity analysis on defined benefit obligation at end of year: - Increase due to 1% decrease in discount rate: Eur 20.3M (2017: Eur 18.7M). - Decrease due to 1% increase in discount rate: Eur 15.5M (2017: Eur 15.1M). - Increase due to 1% rise in future salary increases: Eur 7.2M (2017: Eur 7.0M). - Decrease due to 1% decrease in future salary increases: Eur 6.0M (2017: Eur 6.3M). - Increase due to 1% rise in future pension increases: Eur 11.9M (2017: Eur 10.1M). - Decrease due to 1% decrease in future pension increases: Eur 9.5M (2017: Eur 8.7M). The above sensitivity analysis has been carried out by recalculating the present value of obligation at end of year after increasing or decreasing the discount rate, the future salary increases or the future pension increases while leaving all other assumptions unchanged. Any similar variation in the other assumptions would have shown immaterial variations in the defined benefit obligation. Future cashflows - The funding policy is to pay contributions to an external legal entity at the rate recommended by the entity s actuaries. - Expected employer contribution for next year: Eur 7.1M - Weighted average duration of the defined benefit obligation: 15 years (b) Other post retirement benefits (i) Reconciliation of net defined benefit liability The Group The Company At April 01, 2,283 1,438 1, Amount recognised in profit or loss (Note (iii)) Amount recognised in other comprehensive income (Note (iv)) (128) (6) Less Employer contributions (17) (18) (17) (17) Exchange differences (172) 73 (89) 32 At March 31, 2,292 2,283 1,298 1,175 Annual Report 2017/18 143

147 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Employee Benefit Liabilities (Cont d) (b) Other post retirement benefits (Cont d) (ii) Reconciliation of present value of defined benefit obligation The Group The Company At April 01, 2,283 1,438 1, Current service cost (Note (iii)) Interest expense (Note (iii)) Past service cost Other benefits paid (17) (18) (17) (17) Exchange differences (172) 73 (89) 32 Liability experience gain (Note (iv)) - (133) - (117) Liability gain due to change in demographic assumptions (Note (iv)) - (32) - - Liability (gain) / loss due to change in financial assumptions (Note (iv)) (128) At March 31, 2,292 2,283 1,298 1,175 (iii) Components of amounts recognised in profit or loss The Group The Company Current service cost Past service cost Net interest on net defined benefit liability Total (iv) Components of amounts recognised in other comprehensive income The Group The Company Liability experience gain - (133) - (117) Liability gain due to change in demographic assumptions - (32) - - Liability (gain) / loss due to change in financial assumptions (128) Total (128) (6) 144 Air Mauritius

148 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Employee Benefit Liabilities (Cont d) (b) Other post retirement benefits (Cont d) (v) The principal actuarial assumptions (in Mauritian rupees terms) used for both the defined benefit pension schemes and the other post retirement benefits were: THE GROUP AND THE COMPANY Discount rate 5.75% to 6.4% 6.5% Future salary increases 3.0% to 5.0% 3.0% to 6.0% Average retirement age (ARA) Sensivity analysis on defined benefit obligation at end of year - Increase due to 1% decrease in discount rate: Eur 428k (2017: Eur 434k). - Decrease due to 1% increase in discount rate: Eur 332k (2017: Eur 339k). Future cashflows - The funding policy is to pay contributions to an external legal entity at the rate recommended by the entity s actuaries. - Expected employer contribution for next year: Eur 18k - Weighted average duration of the defined benefit obligation: 19 years (c) Additional information (i) The employee benefit liabilities have been provided based on the report from Aon Hewitt Ltd. increases was 5%. Exposure to risks The key risks that the Group and the Company face are as follows: - Interest rate - all else remaining unchanged, a reduction in the interest rate on which the discount rate is based will lead to an increase in liabilities. - Inflation - an increase in the rate of inflation may increase the scheme s liabilities through higher salary increases and higher pension increases. - Longevity - an increase in the members life expectancy means that funds set aside to meet future benefit obligations are no longer sufficient. As at March 31, 2018, the scheme s assets were invested in various major asset classes, including local equities, overseas equities, property, local government bonds and cash and so the Group and the Company were not exposed to significant concentration of risks. (ii) Post retirement mortality has been assumed to be in line with the UK standard table PA (90) rated down by one year. (iii) The future salary increases has been estimated to be 3% for the Company. For subsidiaries of the Group, the assumption used for future salary Annual Report 2017/18 145

149 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Provisions Contractual maintenance expenses THE GROUP AND THE COMPANY At April 01, 24,747 25,379 Net accrued for the year 7,921 8,339 Reversal of provision (4,321) - Payment (3,192) (9,459) Exchange differences (992) 488 At March 31, 24,163 24,747 Provided as follows: - less than one year (Note 23) 20,120 5,374 - after one year and before two years 1,402 15,861 - after two years and before five years 2,402 1,449 - after five years 239 2,063 4,043 19,373 24,163 24,747 Provisions also include restoration and handback costs to meet the contractual return conditions on aircraft held under operating leases. The provision made for these return conditions amounted to Eur 16.1M (2017: Eur 16.7M) at the reporting date. The remaining provision of Eur 8.1M (2017: Eur 8.0M) relates to planned major overhaul such as airframe maintenance, landing charge and C-Checks in line with the agreements. 146 Air Mauritius

150 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Trade and Other Payables The Group The Company Trade payables 53,452 57,756 52,413 57,320 Deferred revenue for customer loyalty programme 4,030 3,770 4,030 3,770 Sales in advance of carriage (see note below) 113, , , ,269 Amounts due to subsidiaries - - 1,848 2,347 Other payables and accruals 2,623 8,023 1,877 7,662 Contractual maintenance expenses (Note 22) 20,120 5,374 20,120 5, , , , ,742 Outstanding balances due to related parties, as detailed in Note 32, are included under trade and other payables. Trade payables are non-interest bearing and are normally settled on days term. Sales in advance of carriage represent tickets issued but not yet utilised. Deferred revenue for customer loyalty programme has been fair valued in the consolidated and separate financial statements and is classified as Level 3 in the fair value hierarchy. The fair value is calculated using a model incorporating a number of factors such as historical average ticket fares by route and past redemption rates. The significant unobservable input in the valuation is the redemption rate assumed at 50% (2017: 50%). An increase or decrease in the redemption rate by 5% will increase or decrease the fair value by Eur 202k (2017: Eur 189k). Reconciliation of Level 3 fair values - Deferred revenue for customer loyalty programme THE GROUP AND THE COMPANY At April 01, 3,770 4,212 Net transactions in miles Movement due to change in assumptions in profit or loss - (754) At March 31, 4,030 3,770 The Company maintained a redemption rate of 50% during the current year. Annual Report 2017/18 147

151 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Operating Segments (a) THE COMPANY TOTAL SUBSIDIARIES TOTAL Aircraft operations Ground operations THE COMPANY Investment property Hotel & restaurant Call centre Helicopter Adjustment / Unallocated THE GROUP '000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000 '000 Revenue 501, ,693 7,879 8, , ,788 1,198 1,197 2,346 2,324 5,553 4,136 1,682 - (6,029) (4,636) 514, ,809 Operating expenses (457,051) (440,348) (7,681) (6,937) (464,732) (447,285) (1,068) (800) (910) (835) (5,295) (4,080) (1,086) - 6,029 4,636 (467,062) (448,364) Segment results 44,659 46, ,158 44,857 47, ,436 1, ,277 49,445 Administrative expenses (30,905) (29,351) - - (1,276) (1,262) (259) (197) (668) - - (129) (33,108) (30,939) Share of results of an associate (13) - (13) Other operating income 4,634 4, ,781 5,125 Impairment in an associate (102) (102) - Fair value gain on investment property Finance income 646 5, (75) (173) 750 5,135 Finance cost (14,628) (1,308) (14,628) (1,135) Profit before tax 4,502 26, (141) (72) - (75) (142) 5,010 27,633 Income tax expense - - (60) (105) (67) (125) (81) Profit for the year 4,502 26, (117) (139) - (75) (142) 4,885 27,552 Profit attributable to: - Equity holders of the parent 4,502 26, (117) (139) - (75) (142) 4,732 27,345 - Non-controlling interests ,502 26, (117) (139) - (75) (142) 4,885 27,552 Assets Segment assets 324, ,483 10,722 7, , ,709 23,857 25,450 4,243 4,135 1,321 1,093 1, , ,387 Investment in associate Unallocated corporate assets , ,053 Equity and liabilities Segment liabilities 255, ,323 22,400 19, , , , , ,501 Capital and reserves ,485 87,397 82,485 87,397 Non-controlling interests ,477 1,578 1,663 1, ,140 3, , ,053 Capital additions * 38,997 8,415 3,350 1,544 42,347 9, ,778 10,122 Depreciation and amortisation 28,900 34, ,259 29,860 36, ,617 37,000 The Group presents segmental information using business segments and geographical segments. This is based on the internal management and financial reporting systems and reflects the risks and earnings structure of the Group. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated and separate financial statements. * Capital additions comprise of additions to property, plant and equipment and intangible assets during the years. 148 Air Mauritius

152 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Operating Segments (Cont d) (b) Secondary reporting geographical segments The Group and the Company Traffic revenue by destination Africa and Middle East 37,176 35,829 America 6,469 5,761 Asia 103, ,956 Australia 22,013 17,061 Europe 153, ,871 Indian Ocean 56,828 60,400 Mauritius 130, ,910 Total Company 509, ,788 Revenue from subsidiaries - Mauritius 4,750 3,021 Total Group 514, ,809 (c) Main analysis of revenue The Group % 000 % Passenger (including helicopter revenue) 418,355 81% 411,426 83% Cargo 46,888 9% 41,573 8% Others* 49,096 10% 44,810 9% Total traffic revenue 514, % 497, % * Others include room revenue, sale of food and beverages and income from other normal hotel services as well as redemption of miles on customer loyalty programme. 25. Depreciation, Amortisation, Foreign Exchange Differences and Costs of Inventories included in Profit or Loss The Group The Company (a) Operating profit is arrived after: Crediting: Revenue from redemption of miles 1,248 1,469 1,248 1,469 Rental income 1,246 1, (Loss) / gain on disposal of property, plant and equipment (721) 1,237 (362) 1,216 Ticket cancellation and penalty fees 1,618 1,369 1,618 1,369 Service charges 2,760 2,385 2,760 2,385 - Included in operating expenses: Depreciation of property, plant and equipment 28,848 34,561 27,858 34,540 (Note 6) Fuel costs 129, , , ,452 Operating lease rental 35,952 26,292 35,952 26,292 Cost of inventories recognised as expenses 11,810 9,828 11,810 9,828 (Decrease) / increase in provision for obsolete inventory (125) 1,037 (125) 1,037 Employee costs 79,028 80,273 74,189 76,381 Annual Report 2017/18 149

153 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Depreciation, Amortisation, Foreign Exchange Differences and Costs of Inventories included in Profit or Loss (Cont d) The Group The Company (a) Operating profit is arrived after: (Cont d) Included in administrative expenses: Depreciation of property, plant and equipment (Note 6) 1,263 2,235 1,254 1,889 Increase in provision for impairment on trade receivables (Note 16) Amortisation of intangible assets (Note 8) Outside service costs 4,136 3,644 3,491 3,622 Professional fees 3,037 3,328 2,976 3,270 Motor vehicle running expenses 1,982 1,823 1,889 1,709 Communication cost services 1,474 1,375 1,465 1,352 Employee costs 12,488 8,476 10,792 8,068 The Group The Company (b) Analysis of employee costs Salaries and wages 82,350 80,851 75,710 76,708 Social security costs 2,618 2,513 1,853 2,328 Defined benefit pension schemes (Note 21(a)(iv)) 5,147 4,075 5,147 4,075 Other post retirement benefits (Note 21(b)(iii)) Defined contribution pension scheme ,341 88,961 83,741 84, Finance Income The Group The Company Other interest income Unrealised gain on translation of monetary assets and liabilities - 3,483-3,483 Gain on currency hedge - 1,191-1,191 Dividend income , , Air Mauritius

154 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Finance Costs The Group The Company Foreign exchange: Loss on currency hedging 4,119-4,119 - Unrealised loss on translation of monetary assets and liabilities 8,501-8,501-12,620-12,620 - Interest expense: Finance leases 2, , Bank overdraft Other loans ,008 1,135 2,008 1,308 Total 14,628 1,135 14,628 1, Income Tax Expense The Group The Company (a) Income tax In profit or loss: Deferred tax charge for the year (Note 14) (27) Corporate Social Responsibility Corporate Social Responsibility underprovided Underprovision of income tax in prior year (4) (1) - - Current income tax charge 138 (514) In other comprehensive income: Deferred tax credit related to items recognised in other comprehensive income during the year (34) (b) Tax reconciliation Profit before tax 5,010 27,633 4,502 26,932 Tax at the rate of 15% (2017: 15%) 752 4, ,040 Corporate Social Responsibility Corporate Social Responsibility underprovided Expenses not allowable for tax purposes 2, , Exempt income (32) (598) (16) (596) Additional relief obtained on salaries paid to resident staff (100) (95) - - Over provision of income tax in previous year (4) (1) - - Deferred tax movement for the year not recognised Effect of tax holiday* (2,979) (4,156) (2,979) (4,156) Tax charge for the year Expenses not allowable for tax purposes comprise of depreciation of property, plant and equipment, amortisation of intangible asset and loss on foreign exchange. Exempt income consists of interest on loans. * The Company is not taxable by virtue of an agreement with the Government of Mauritius. Annual Report 2017/18 151

155 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Earnings Per Share The Group Earnings per share is based on: Profit for the year 4,732 27,345 Weighted average number of shares 102,305, ,305,000 Basic and diluted earnings per share were the same for both years since there was no potential dilutive ordinary shares at March Commitments (a) Operating lease commitments (i) The Group as lessor The Group has entered into leases on its investment property. The commercial property leases have lease terms between three and five years with renewable option of further periods of three years and include clauses to enable periodic upward revision of the rental charge according to prevailing market conditions. The future minimum rentals receivable under non-cancellable operating leases as at March 31, are as follows: Within 1 year 1, After 1 year, but not more than five years 3, ,103 1,039 (ii) The Group and the Company as lessees The Group and the Company have the following commitments under non-cancellable operating leases: - within one year 51,036 44,322 - after one year and before two years 47,073 60,908 - after two years and before five years 134, ,039 - after five years 294, , , ,338 The Group has entered into commercial leases on certain aircraft and accessories. The remaining lease duration period ranges from 1 to 12 years with a renewable option as at March 31, Included in the non-cancellable commitments are commitments relating to operating leases for two new aircraft A330 Neo. The above commitments exclude costs to be incurred for the reconditioning of aircraft prior to return to lessor. The above lease rentals are subject to changes in market interest rates which are recognised when they arise. (b) Capital commitments The Group has entered into contractual arrangements for the purchase of 6 new aircraft. Two of the aircraft are under operating lease which have already been delivered in The remaining four will be financed under loan arrangement and are yet to be delivered. 152 Air Mauritius

156 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Substantial Shareholders At March 31, the following shareholders held more than 5% of the ordinary share capital of the Company & 2017 Direct Indirect Effective % % % Air Mauritius Holding Ltd Government of Mauritius State Investment Corporation Ltd Rogers & Co Ltd Compagnie Nationale Air France Air India Related Party Transactions For the purposes of these consolidated and separate financial statements, parties are considered to be related to the Group and the Company if they have the ability, directly or indirectly, to control the Group or exercise significant influence over the Group in making financial and operating decisions, or vice versa, or where the Company is subject to common control or common significant influence. Related parties may be individuals or other entities. (i) Entities with significant influence over the Group State-controlled entities The Government of Mauritius has a 30.72% effective interest (including both direct and indirect holdings) in the share capital of Air Mauritius Limited. The amounts paid to and received from the Government of Mauritius and its statecontrolled entities relate generally to taxes, civil aviation and related charges, utility costs and amounts relating to pension and pension administration. The Group Income for the year 6,323 5,712 Expenses for the year 9,372 8,387 Amount receivable as at March 31, 1,166 2,042 Amount payable as at March 31, 803 1,594 The Group and the Company have deposits and MUR denominated loans with State Bank of Mauritius Limited, another entity under common control by the Government of Mauritius. (ii) Key management personnel Key management personnel are persons having authority and responsibility for planning, directing and controlling the activities of the Group and the Company, including directors. THE GROUP THE COMPANY Compensation Short-term benefits 2,530 2,131 2,473 2,094 Post-employment benefits: - Defined benefit ,732 2,318 2,675 2,281 Annual Report 2017/18 153

157 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Related Party Transactions (Cont d) (iii) Other related parties (1) Mr Philippe Espitalier-Noël who is a Director of the Company, is also a director of Rogers & Co. Ltd ( Rogers ), a shareholder of the Company. The Group has paid incentive commission on sale of tickets to Rogers during the year and the summary of transactions are as follows: The Group and the Company Income for the year 6,616 22,254 Expenses for the year 1, Amount receivable Amount payable (2) Mr Pradeep Singh Kharola, who is a Director of the Company, is also the Chairman and Managing Director of Air India, a shareholder of the Company. Air India has provided handling services to the Group during the year and the summary of transactions are as follows: The Group and the Company Expenses for the year 1,290 1,259 Amount payable 19 - (3) Mr Etienne Rachou, who is a Director of the Company, is also a member of the Air France Executive Committee. Air France has provided handling and maintenance services to the Group and the Company during the year and the summary of transactions are as follows: The Group and the Company Income for the year 1,032 1,044 Expenses for the year 52,547 58,210 Amount receivable Amount payable 11,585 6, Air Mauritius

158 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Related Party Transactions (Cont d) (iv) Terms and conditions of transactions with related parties Outstanding balances at year end are interest free and settlement occurs in cash. For the year ended March 31, 2018, the Group and the Company have not made any provision for doubtful debts relating to amounts owed by related parties (2017: Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates. (v) Subsidiaries and associates The Company holds investments in subsidiaries and in an associate as described in Notes 9 and 10. The Company had no related party transactions with its associate. Transactions with subsidiaries are in respect of rent of office space from MEDCOR, revenue from cleaning services provided to MEDCOR, call centre services and provision of human resources services by Airmate Ltd and sale of tickets to Pointe Coton Resort Hotel Co. Ltd. The Company Airmate Ltd Mauritius Estate Development Corporation Limited (MEDCOR) Pointe Coton Resort Hotel Co. Ltd Mauritius Helicopter Limited Air Mauritius (S.A.) (Proprietary) Limited Income for the year Expenses for the year 5, ,320 Amount receivable Amount payable ,396 Total Airmate Ltd Mauritius Estate Development Corporation Limited (MEDCOR) Pointe Coton Resort Hotel Co. Ltd Air Mauritius (S.A.) (Proprietary) Limited Income for the year Expenses for the year 4, ,660 Amount receivable ,560 1,560 Amount payable ,052 2,347 Total 33. Holding Company and Ultimate Controlling Entity Air Mauritius Holding Ltd, whose registered office is Air Mauritius Centre, President John Kennedy Street Port Louis, is the holding company of Air Mauritius Limited. The ultimate controlling entity is the Government of Mauritius. 34. Events Subsequent to Reporting Date No material adjusting and non-adjusting events have arisen between the reporting date and the date the financial statements were approved. Annual Report 2017/18 155

159 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Details Of Borrowings and Financial Derivatives (a) Borrowings and financial derivatives Base currency Interest rate % Variable interest bearing loans Loans, borrowings, overdraft and obligations under finance leases Fair value of financial derivative liability Loans, borrowings, overdraft and obligations under finance leases Fair value of financial derivative liability Eur Euribor +1.2% 19,494-24,520 - Mur PLR + 2% 4,606-6,021 - Leased aircraft under sales and leaseback arrangement Usd 5, Bank overdraft Mur 5.75% to 7.35% Financial derivatives (Note 20) - 2, COMPANY TOTAL 30,432 2,297 31, Bank overdraft Mur 6.65% to 8.25% GROUP TOTAL 30,453 2,297 31, All the above loans have variable market rates. For the other loan and borrowings and derivatives, the carrying amount approximates the fair value since they are at market interest rates. For further details on the fair value measurement, refer to Note Air Mauritius

160 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Details Of Borrowings and Financial Derivatives (Cont d) (b) Derivative financial instruments The Group and the Company Currency derivatives (Note 20 (a)) - Assets Liabilities (2,297) (16) Fair value of commodity derivatives (Note 20 (a)): - Assets 2, Liabilities - (969) 19 (689) (i) Fair value of currency derivatives Less than three months Amount with remaining life Between three months and one year More than one year Total OTC traded forward rate agreements At March 31, 2018 (686) (1,375) (236) (2,297) At March 31, The currency derivatives have been classified as Level 2 of the fair value hierarchy in both 2018 and (ii) Fair value of commodity derivatives Amount with remaining life Less than three months Between three months and one year More than one year Total OTC traded forward rate agreements At March 31, 2018 Assets - OTC Traded - Call Swap Collar 1, ,206 1, ,316 At March 31, 2017 Assets - OTC Traded - Swap (370) (599) - (969) These derivative financial instruments have been accounted for as cash flow hedges and have been classified as Level 2 of the fair value hierarchy in both 2018 and Annual Report 2017/18 157

161 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Fair Value Measurement The following table provides the fair value measurement hierarchy of the Group s assets and liabilities Fair value measurement using The Group Date of valuation Total Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets measured at fair value: Investment property (Note 7) March 31, , ,744 Available-for-sale investments * March 31, Derivative financial instruments March 31, ,316-2,316 - Liabilities measured at fair value: Derivative financial instruments March 31, 2018 (2,297) - (2,297) - Deferred revenue for customer loyalty March 31, 2018 (4,030) - - (4,030) programme (Note 23) Interest-bearing loans and borrowings: - Floating rate borrowings March 31, 2018 (30,453) - (30,453) - * There have been no transfers between Level 1 and Level 2 during the year (2017: none) Fair value measurement using The Company Date of valuation Total Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets measured at fair value: Available-for-sale investments * March 31, Derivative financial instruments March 31, ,316-2,316 - Liabilities measured at fair value: Derivative financial instruments March 31, 2018 (2,297) - (2,297) - Deferred revenue for customer loyalty March 31, 2018 (4,030) - - (4,030) programme (Note 23) Interest-bearing loans and borrowings: - Floating rate borrowings March 31, 2018 (30,432) - (30,432) - * There have been no transfers between Level 1 and Level 2 during the year (2017: none) Fair value measurement using The Group Date of valuation Total Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets measured at fair value: Investment property (Note 7) March 31, , ,820 Available-for-sale investments * March 31, Derivative financial instruments March 31, Liabilities measured at fair value: Derivative financial instruments March 31, 2017 (985) - (985) - Deferred revenue for customer loyalty March 31, 2017 (3,770) - - (3,770) programme (Note 23) Interest-bearing loans and borrowings: - Floating rate borrowings March 31, 2017 (31,551) - (31,551) - * There have been no transfers between Level 1 and Level 2 during the year (2016: none). 158 Air Mauritius

162 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Fair Value Measurement (Cont d) 2017 Fair value measurement using The Company Date of valuation Total Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets measured at fair value: Available-for-sale investments * March 31, Derivative financial instruments March 31, Liabilities measured at fair value: Derivative financial instruments March 31, 2017 (985) - (985) - Deferred revenue for customer loyalty March 31, 2017 (3,770) - - (3,770) programme (Note 23) Interest-bearing loans and borrowings: - Floating rate borrowings March 31, 2017 (31,462) - (31,462) - * There have been no transfers between Level 1 and Level 2 during the year (2016: none). Management has assessed that cash and short-term deposits, trade receivables, trade payables, bank overdrafts and other current liabilities to approximate their carrying amounts largely due to the short-term maturities of these instruments. Security deposits accounted under long term deposits, trade receivables, trade payables, bank overdrafts and other current liabilities to approximate their fair values. The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values: Fair value of available-for-sale investments is derived from quoted market prices in active markets. The Group enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. Derivatives valued using valuation techniques with market observable inputs are foreign exchange forward contracts and commodity forward contracts. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, interest rate curves and forward rate curves of the underlying commodity. All derivative contracts are fully cash collateralised, thereby eliminating both counterparty and the Group s own non-performance risk. As at March 31, 2018 the marked-to-market value of derivative asset positions is net of a credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognised at fair value. Fair values of the Group s interest-bearing borrowings and loans are determined by using discounted cash flow method using discount rate that reflects the issuer s borrowing rate as at the end of the reporting period. The own non-performance risk as at March 31, 2018 was assessed to be insignificant. Annual Report 2017/18 159

163 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Dividends Payable The Company Declared during the year: Dividends on ordinary shares: Nil per share (2017: Rs 1.00 per share) - 2,675 The subsidiary of the Group, Pointe Coton Resort Hotel Co. Ltd, declared a dividend of Eur 138k during the year, out of which Eur 63K has been allocated to NCI. 36. Contingent Liabilities Litigation There are currently a number of lawsuits that have been filed against the Company for diverse reasons. The timing and outcome of these claims are dependent upon the judicial system and cannot be reliably assessed. The amount of liability recognised at March 31, 2018 with respect to those litigations amounts to Eur 750k (2017: Eur 381k). 37. Holding Company and Ultimate Controlling Entity Air Mauritius Holding Ltd, whose registered office is Air Mauritius Centre, President John Kennedy Street Port Louis, is the holding company of Air Mauritius Limited. The ultimate controlling entity is the Government of Mauritius. 38. Events After the Reporting Date No material adjusting and non-adjusting events have arisen between the reporting date and the date the consolidated and separate financial statements were approved. 160 Air Mauritius

164 Notes to the Consolidated and Separate Financial Statements for the year ended March 31, Financial Summary (a) The Group Statements of Profit and Loss and Other Comprehensive Income Revenue 514, ,809 Share of results of associates - (13) Profit before tax 5,010 27,633 Profit for the year 4,885 27,552 Other comprehensive income (9,875) (14,148) Total comprehensive income attributable to the shareholders (4,990) 13,404 Statements of Financial Position Non-current assets 229, ,119 Current assets 136, ,934 Current liabilities 205, ,767 Non-current liabilities 75,219 87,734 Share Capital Authorised Ordinary shares of Mur 10 each 81,566 81,566 Issued and fully paid Ordinary shares of Mur 10 each 41,724 41,724 Reserves Share premium 18,869 18,869 Other reserves (11,772) (10,414) Retained earnings 33,664 37,218 (b) The Company Revenue 509, ,788 Profit for the year 4,502 26,932 Statements of Financial Position Non-current assets 238, ,323 Current assets 129, ,732 Current liabilities 205, ,228 Non-current liabilities 74,225 86,626 Share Capital Authorised Ordinary shares of Mur 10 each 81,566 81,566 Issued and fully paid Ordinary shares of Mur 10 each 41,724 41,724 Reserves Share premium 18,869 18,869 Other reserves 175 (529) Retained earnings 27,153 31,137 Annual Report 2017/18 161

165 Translation of the Consolidated and Separate Statements of Financial Position as at March 31, 2018 THE GROUP THE COMPANY Mur m Mur m Mur m Mur m ASSETS Non-current assets Property, plant and equipment 6,617 6,073 6,440 5,922 Investment property Intangible assets Investment in subsidiaries - - 1,169 1,037 Investment in an associate Available-for-sale investments Long term deposits 2,155 1,147 2,155 1,147 Long term investments Long term receivable Deferred tax asset ,493 7,678 9,836 8,145 Current assets Inventories Trade and other receivables 3,366 2,793 3,344 2,819 Short-term deposits Other financial asset Cash and short-term deposits 1,362 3,165 1,163 2,775 5,635 6,564 5,348 6,136 Total assets 15,128 14,242 15,184 14,281 EQUITY AND LIABILITIES Equity Share capital 1,724 1,724 1,724 1,724 Share premium Other reserves (366) (589) 97 (213) Retained earnings 1,279 1,421 1,030 1,189 Equity attributable to equity holders of the parent 3,417 3,336 3,631 3,480 Non-controlling interests Total equity 3,536 3,456 3,631 3,480 Non-current liabilities Interest-bearing loans and borrowings Employee benefit liabilities 2,053 1,669 2,012 1,627 Provisions ,106 3,350 3,065 3,308 Current liabilities Trade and other payables 8,020 7,032 8,022 7,092 Interest-bearing loans and borrowings Other financial liabilities Dividend ,486 7,436 8,488 7,493 Total equity and liabilities 15,128 14,242 15,184 14,281 The above consolidated and separate statements of financial position translated to Mauritian rupees using the Eur/Mur rates prevailing at each respective reporting date are provided for information purposes only and do not form part of the audited consolidated and separate financial statements. 162 Air Mauritius

166 Cascade Holding Structure

167 Cascade Holding Structure Air Mauritius Holding Ltd 100% Airmate Ltd 51% 100% Air Mauritius Holidays Limited (in voluntary liquidation) 100% Air Mauritius (S.A.) (Proprietary) Limited 100% Air Mauritius Holidays (Pty) Ltd (Australia) Air Mauritius Limited 100% Mauritius Helicopter Limited 100% Mauritian Holidays Ltd (UK) 100% Air Mauritius Institute Co Ltd 41.7% Mauritius Shopping Paradise Company Ltd (in voluntary liquidation) 54.2% Pointe Coton Resort Hotel Co. Ltd 93.7% Mauritius Estate Development Corporation Limited Shareholders of Air Mauritius Holding Ltd % of Shareholding The Government of Mauritius The State Investment Corporation Ltd Rogers & Company Limited Compagnie Nationale Air France Air India Air Mauritius

168 Directors in Subsidiaries Annual Report 2017/18 165

169 Directors in Subsidiaries Mauritius Estate Development Corporation Limited (MEDCOR) Air Mauritius Limited holds 93.7% of the shares of Mauritius Estate Development Corporation Limited (MEDCOR), a real estate Company. The Board Directors of MEDCOR are: Dr Arjoon Suddhoo, FRAeS - Chairman Mr Somas Appavou (as from Nov 16, 2017) Mr Balakrishna Seetaramadoo (as from Nov 16, 2017) Mrs Banoomatee Veerasamy (up to Mar 29, 2018) Mrs Anista Ramphul Punchoo (alternate Director to Mrs B. Veerasamy as from Sep 25, 2017) Mr Indradev Buton Mr Dindoyal Sookun Mr Vijay Seetul Secretary Mr Vijay Seetul Pointe Coton Resort Hotel Co. Ltd Air Mauritius Limited has a shareholding of 54.2% in Pointe Coton Resort Hotel Co. Ltd, which owns a hotel in Rodrigues. The Board Directors of Pointe Coton Resort Hotel Co. Ltd are as follows: Dr Arjoon Suddhoo, FRAeS - Chairman Mr Somas Appavou (as from Dec 01, 2017) Mrs Anishta Ramphul Punchoo Mrs Banoomatee Veerasamy (up to Mar 29, 2018) Airmate Ltd The Company is a 100% subsidiary, which provides call centre services to the airline. The Board members are as follows: Dr Arjoon Suddhoo, FRAeS - Chairman Mr Somas Appavou (as from Nov 16, 2017) Mr Ramprakash Maunthrooa Mr Balakrishna Seetaramadoo Mr Donald Payen Mr Vijay Seetul Secretary Mr Vijay Seetul Air Mauritius Holidays Limited The company was a fully owned subsidiary and ceased its operation on 31 March The activities of the subsidiary have been merged with Air Mauritius Ltd. The Board members were as follows: Dr Arjoon Suddhoo, FRAeS - Chairman Mr Somas Appavou (as from Nov 16, 2017) Mr Ramprakash Maunthrooa Mr Balakrishna Seetaramadoo Mr Megh Pillay, C.S.K. (from April 15, 2016 to November 10, 2016) Secretary Mr Vijay Seetul Mr Balakrishna Seetaramadoo (as from Dec 01, 2017) Mr Manickchand Beejan (as from May 03, 2018) Mr Indradev Buton Mr Patrice Leal Mr Dindoyal Sookun Mr Vijay Seetul Secretary Mr Vijay Seetul 166 Air Mauritius

170 Directors in Subsidiaries Mauritius Helicopter Limited The Company is a fully owned subsidiary and the Board members are as follows: Dr Arjoon Suddhoo, FRAeS - Chairman Mr Somas Appavou (as from Dec 01, 2017) Mr Garth Gray (up to Apr 01, 2018) Mr Ramprakash Maunthrooa Mr Balakrishna Seetaramadoo Mr Vijay Seetul Secretary Mr Vijay Seetul Air Mauritius (S.A.) (Proprietary) Limited In South Africa the Company operates through a 100% owned subsidiary, Air Mauritius (S.A.) (Proprietary) Ltd which acts as an agent for Air Mauritius Limited. This Company operates on a cost reimbursement basis with its expenses being directly accounted for in the books of the parent Company. The Board Directors of Air Mauritius (S.A.) (Proprietary) Ltd are: Air Mauritius Holidays (Pty) Ltd (Australia) The Company is a fully owned subsidiary and it is intended to operate the tour packaging business in these markets. The Board member is: Mr Donald Payen Air Mauritius Institute Co Ltd The Company is a fully owned subsidiary and is not yet operational. The Board members are as follows: Dr Arjoon Suddhoo, FRAeS - Chairman Mr Somas Appavou Secretary Mr Jean Bernard Sadien Mr Isidore Bronstein Mrs Carla Da Silva Mr Donald Payen Secretary Mazars Audit Firm Mauritian Holidays Ltd (UK) The company was set up with the objective of conducting a tour operating business in the UK. The Board member is: Mr Ian Nash Secretary Mrs Dhanwantee Bucktowonsing Annual Report 2017/18 167

171

172 Shareholders Information

173 Shareholders Information 2017/ /17 Key Data per Share Amount (Mur) Amount (Mur) Market Capitalisation 1,483,422,500 1,483,422,500 Highest Closing Price Lowest Closing Price Closing Price Average Price Value of Shares traded 92,294,207 74,646,179 Dividend per share Net worth per share Share Price/Equity per share at year end 41.9% 42.9% P/E ratio (average) Earnings per share Dividend as % of earnings after tax No. of shares traded during the year 6,231,673 5,302,074 No. of shares at year end 102,305, ,305,000 Air Mauritius Share Price v/s Semdex , Share Price (Mur) ,200 2,000 1,800 Semdex (Points) ,600 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 MK SHARE SEMDEX Share Listing Air Mauritius was the first company with a majority of shares owned by the state to offer its shares to the public. The company was granted listing in November 1994 and its partly-paid shares were first traded on the Stock Exchange of Mauritius in February Air Mauritius

174 Shareholders Information Share Price Development The share price of the Company was stable during most trading sessions on the Stock Exchange of Mauritius. It oscillated between Mur and Mur during the major part of the financial year under review. It peaked at Mur on August 08, 2017 and was valued at Mur at the close of business on March 30, 2018.The highest number of shares traded during one session was 617,800 for a value of Mur 8,958,100. Market capitalisation stood at Mur 1.5 billion at March 31, 2018 which was comparable to the previous financial year Air Mauritius Share Price: 2017/18 v/s 2016/ Mur Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2016 / / 18 Shareholders Diary Financial Year End March 31, 2018 Annual Meeting July 12, 2018 Abridged Financial Statements 1st Quarter Apr-Jun 2017 Published August 08, 2017 Half Year Apr-Sept 2017 Published November 09, rd Quarter Oct-Dec 2017 Published February 14, 2018 Annual Financial Statements Published June 13, 2018 Registered Office Air Mauritius Limited Air Mauritius Centre President John Kennedy Street Port Louis Website: airmauritius.com Company Information For any information regarding Air Mauritius, please consult our website - airmauritius.com Annual Report 2017/18 171

175 Notice of Meeting AIR MAURITIUS ANNUAL MEETING Notice is hereby given that the Annual Meeting of the Shareholders of Air Mauritius Limited will be held at Hennessy Park Hotel, Ebène, on Thursday July 12, 2018 at hours for the following purposes: (1) To adopt the Minutes of Proceedings of the last Annual Meeting held on July 24, 2017 (2) To receive the Annual Report (3) To receive the Auditors Report (4) To adopt the Group s and the Company s Annual Report, including the Financial Statements for the year ended March 31, 2018 (5) To elect the Directors who are already in place and who offer themselves for re-election, namely: - Dr Arjoon Suddhoo, FRAeS - Mr Somas Appavou - Mr Nayen Koomar Ballah, G.O.S.K. - Mr Dev Manraj, G.O.S.K. - Mr Ramprakash Maunthrooa - Mrs Ammanah Ragavoodoo - Mr Anwar Abbasakoor - Mr Philippe Espitalier-Noël - Mr Derek Lam Po Tang - Mr Bissoon Mungroo, G.O.S.K. - Mr Louis Rivalland - Mr Patrick Roux - Mr Muhammad Yoosuf Salemohamed (6) To elect the following directors who have been nominated by the Board and who offer themselves for election: - Mr Pradeep Singh Kharola - Mr Manickchand Beejan (7) To fix the remuneration of the Directors. (8) To authorize the Directors to fix the remuneration of the Auditors. By Order of the Board Mr Vijay Seetul Company Secretary Air Mauritius Limited June 20, 2018 N.B: Members entitled to attend and vote at the meeting may appoint proxies to attend and vote on their behalf. The instrument appointing a proxy or any general power of attorney shall be deposited at the Registered Office of the Company not less than twenty-four hours before the day fixed for the meeting or else the instrument of proxy shall not be treated as valid. Registration of Shareholders at the meeting will start as from hours. 172 Air Mauritius

176 Proxy Form I/We... of... being a member of the above-named Company, hereby appoint... of... or failing him/her,... as my/our proxy to vote for me/us on my/our behalf at the Annual Meeting of the Company to be held at Hennessy Park Hotel, Ebène, on Thursday July 12, 2018 at hours and at any adjournment thereof. I/We desire my/our vote(s) to be cast on the Resolutions as follows: For Against (1) To adopt the Minutes of Proceedings of the last Annual Meeting held on July 24, 2017 (2) To receive the Annual Report (3) To receive the Auditors Report (4) To adopt the Group s and the Company s Annual Report, including the Financial Statements for the year ended March 31, 2018 (5) To elect the Directors who are already in place and who offer themselves for re-election, namely: - Dr Arjoon Suddhoo, FRAeS - Mr Somas Appavou - Mr Nayen Koomar Ballah, G.O.S.K. - Mr Dev Manraj, G.O.S.K. - Mr Ramprakash Maunthrooa - Mrs Ammanah Ragavoodoo - Mr Anwar Abbasakoor - Mr Philippe Espitalier-Noël - Mr Derek Lam Po Tang - Mr Bissoon Mungroo, G.O.S.K. - Mr Louis Rivalland - Mr Patrick Roux - Mr Muhammad Yoosuf Salemohamed (6) To elect the following directors who have been nominated by the Board and who offer themselves for election: - Mr Pradeep Singh Kharola - Mr Manickchand Beejan (7) To fix the remuneration of the Directors (8) To authorize the Directors to fix the remuneration of the Auditors Dated this... day of Signature/s Notes: 1. A member of the Company entitled to attend and vote at this meeting may appoint a proxy of his/her own choice (whether a member or not) to attend and vote on his/her behalf. 2. Please mark in the appropriate box how you wish to vote. If no specific direction as to voting is given, the proxy will exercise his/her discretion as to how he/she votes. 3. The instrument appointing a proxy or any general power of attorney shall be deposited at the Registered Office of the Company not less than twenty-four hours before the day fixed for the meeting or else the instrument of proxy shall not be treated as valid. Annual Report 2017/18 173

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178 Designed & Printed by Précigraph Limited. - Mauritius Air Mauritius Centre President John Kennedy Street Port Louis Mauritius T F E contact@airmauritius.com W airmauritius.com