T Air MauritiusCentre President John KennedyStreet -PortLouisMauritius +2302077070 F +2302088331 E [email protected] W www.airmauritius.com

Communications & Corporate Affairs - June 2016 - Designed & Printed : Précigraph Ltd. - Mauritius

Annual Report 2015/16 Annual Report 2015/16 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.

Air Mauritius Annual Report 2015/16

Table of Contents

02 Key Results 04 Chairman’s Message 06 Chief Executive Officer’s Review 10 Glossary 12 Annual Report and Business Review 12 - Results for the year 12 - Overview of the Business 14 - The Board of Directors 22 - Corporate Governance 36 - Sustainability Report 40 - Enterprise Risk Management 50 - Remuneration Report

54 Management Discussion and Analysis 94 Certificate from the Company Secretary 94 Directors’ Disclosure Statement 95 Statement of Compliance 96 Directors’ Responsibility Statement 97 Independent Auditors’ Report 100 Financial Statements 100 - Statements of Financial Position 101 - Statements of Profit or Loss and Other Comprehensive Income 102 - Statements of Changes in Equity 104 - Statements of Cash Flows 106 - Notes to the Financial Statements

176 Translation of the Statements of Financial Position 178 Cascade Holding Structure 180 Directors in Subsidiaries 184 Shareholders’ Information 187 Notice of Meeting 189 Proxy Form 02 Air Mauritius Annual Report 2015/16

Key Results

2014/15 Group Financial Results 2015/16 Restated

Revenue Eur m 490.8 465.7

Gross profit Eur m 46.7 12.5

Net profit / (loss) Eur m 16.5 (23.6)

Attributable profit / (loss) to equity holders of the parent Eur m 16.3 (23.6)

Total equity Eur m 79.8 39.7

Earnings / (loss) per share Eur 0.16 (0.23)

Key Financial statistics

Gross profit margin % 9.5 2.7

Net profit margin % 3.4 (5.1)

Return on equity % 20.7 (59.4)

Return on net assets % 10.9 (17.2)

Interest cover Times 11.4 (11.5)

Interest and lease cover Times 1.65 (0.03)

Gearing ratio 0.7:1 1.7:1

Group Operating statistics

Passengers carried '000 1,499 1,370

Seats offered '000 2,014 1,948

Revenue passenger kilometres (RPK) Million 6,612 6,186

Available seat kilometres (ASK) Million 8,400 8,399

Revenue tonne kilometres (RTK) Million 760 758

Available tonne kilometres (ATK) Million 1,258 1,256

Passenger load factor % 78.7 73.7

Revenue per ASK (RASK) Eur Cent 6.22 6.02

Cost per ASK (CASK) Eur Cent 5.71 6.15 Chairman’s Message 04 Air Mauritius Annual Report 2015/16

Chairman’s Message

The Company embarked on a programme to boost sales and enhance productivity in all areas of the business. I am particularly pleased to note that Air Mauritius has delivered results and is engaged on the path the Board and Management had set. Profitability was restored and many more passengers are choosing to travel with Air Mauritius. The number of passengers carried grew by 9.4% to attain record levels in spite of competition that had intensified significantly. Total equity of the Company nearly doubled to reach EUR 82.5M at the end of the year under review.

The foundation for enhanced connectivity between Africa and Asia, through the hubs in Mauritius and Singapore, was laid with the launch of the “Air Corridor” in March this year. Air Mauritius The Group and the Company have declared also took the first steps to extend its coverage profits of EUR 16.5M and EUR 15.4M respectively of the African continent with the launch of 2 new reversing from the significant losses of EUR 23.6M destinations namely Maputo and Dar-es-Salaam. and EUR 23.7M respectively for the previous year. The results speak for themselves but are only This is a major achievement. the first steps along the road towards sustained growth. The operating environment will remain Clearly, Air Mauritius, like all airlines, has benefitted volatile and competitive pressures will continue to from more favourable fuel prices but the Company’s mount. New entrants now compete in a variety of efforts to overcome an environment that remains segments including low cost as well as full service volatile and increasingly competitive, cannot be differentiated operators. Management is fully understated. More so, as the impact of lower fuel empowered to take action on the principles that prices has been significantly mitigated by fiercer have guided this year’s respectable turnaround competition and also by a very weak Euro which which are good governance, unreserved remains the airline’s leading revenue currency. commitment, service excellence, team work, innovation and growth. The financial year under review has been one of transition with change impacting bottom line as I wish to seize this opportunity to thank all our well as affecting the organisation culture. When the shareholders for their trust, our faithful customers, new Board of Directors was set up in March 2015, the hardworking Air Mauritius employees, our our first task was to reinforce the governance industry partners, our airline partners, my fellow structure and build a culture of productivity Board Members and the Government of Mauritius, and accountability. In order to ensure a smooth our majority shareholder for their unflinching support. transition, the Board worked in close collaboration with Management through various joint sub- committees that were set up to look into all the crucial areas that required urgent attention. The Company was facing some daunting challenges like an unprecedented competitive environment, overheads that had risen quite significantly in Dr Arjoon Suddhoo. FRAcS recent years and key markets not performing optimally. The massive losses that were incurred Chairman in the financial year that ended on March 31, 2015 June 13, 2016 had weakened the Company leaving it with a total equity of EUR 42.9 M. Air Mauritius Annual Report 2015/16 05

Chief Executive Officer’s Review 06 Air Mauritius Annual Report 2015/16

Chief Executive Officer’s Review

airlines will make an aggregate return in excess of the cost of capital. After decades of capital destruction, that’s a significant achievement.”

He further pointed out: “Profitability is not evenly spread… and individually, some of you are experiencing good times, while others face a world in crisis.”

How is Air Mauritius doing, as a commercial airline carrying the additional responsibility of a national socio-economic mission? The results presented in this Annual Report, address this question.

During the year under review airlines worldwide have made an average profit of only USD 10.42 per ticket sold, based on an average ticket price of USD 366. Air Mauritius made an average profit of For nearly 50 years, Air Mauritius has been USD 11.34 on an average ticket price of USD 368. providing the most dependable, vital life-line to Mauritius. During that time, the airline industry However, taking into account the mitigating effects has grown and evolved remarkably as the whole of an exceptional EUR 26.6M hedging pay-out, world discovered the benefits to be derived from and the unfavourable EUR/USD parity, the average air transport and availed of it more and more for profit per ticket and the return on cost of capital business, leisure or simply to re-unite with families would have been much higher than the industry and friends. average for the year. In the early years, when capital and operational Key operating performance indicators explain costs were high, airfares were even higher. The the performance. The number of passengers cost-benefit ratio stimulated travel demand as carried grew by 9.4% to reach an all-time high of those who could afford readily paid the high fares. 1,499,411. Passenger load factor grew by 5.1 % The resulting fat margins posted by incumbent to 78.7%. airlines in turn attracted competition. The industry was then caught in a spiral as travellers kept Competitive pressure continued to mount with new demanding lower prices to travel more frequently. entrants seeking to grab market share and existing Fares went down year after year. This process operators flooding the market with extra capacity. has never stopped with new operators innovating Under such pressure, yield fell from EUR 274 to to respond to market demand by providing basic EUR 270 for the year 2015/16. service at lower costs resulting in an inexorable fall in yield for all. Going forward, market forces will keep changing while exchange rates and fuel price will remain In order to survive and continue to prosper, any volatile. We need to review our governance airline must stay alert to market dynamics and be structure and develop greater operational and prepared to review its business model and, indeed, commercial flexibility to enhance our resilience to to constantly re-invent itself. keep pace with and react to the extremely dynamic market. Conventional full-service scheduled long- In reviewing the state of the industry at the IATA haul carriers of which we form part are today Annual General Assembly in June 2016, its Director confronted with low-cost carriers hitherto limited General remarked “It will be only the second year to regional networks. Our Business Model will in our history—and the second in a row—in which therefore have to be revisited. Air Mauritius Annual Report 2015/16 07

We shall consolidate our historical European The arrival of our first A350 in September 2017, routes while extending our growth on the Chinese will be an important landmark in the upgrade of and Indian routes which grew by 13% and 12%, our products and services. These new aircraft will respectively. The “Air Corridor”, inaugurated in be equipped with full flat seats, a state-of-the-art March 2016 provides additional travel options entertainment system and internet connectivity, all between Asia and Africa using the hubs in Mauritius of world class standards. In the same stride, the and Singapore. rest of our existing fleet will also be retro-fitted to the same level of cabin comfort. Regional operations have also been quite robust. Antananarivo route grew by 8.4% and we are In an effort to keep diversifying our business seeking air access greenlight for a daily flight by base and revenue streams, we have launched a the end of 2016 and twice daily service eventually. subsidiary to offer a full range of helicopter services Traffic on the route has grown to a level where we to the leisure industry and to business. need to operate independently in Antananarivo rather than through a GSA however competently Air Mauritius Holidays is being strengthened and Rogers Aviation International Ltd represented Air is now offering packaged airline tickets and hotel Mauritius over the past years. accommodation.

Reunion traffic grew by 7.7% and Rodrigues by Air Mauritius has therefore started the new financial 26%. With a third ATR72, joining our fleet in July, year well-poised for further sustainable growth. additional frequencies and capacity will be offered on these routes. I take this opportunity to acknowledge the significant contribution of all staff of the Air Mauritius Our African network has been extended to include Group who have continued to dedicate themselves Maputo and Dar-es-Salaam. With these new fully to the achievement of the objectives set out by additions, the Air Mauritius network now consists the Board of Directors of 23 online destinations. CAPA (Center for Asia Pacific Aviation) ranked Air Mauritius among the Top 5 African airlines for weekly nonstop seat capacity to/from Asia Pacific, second to only Ethiopian Airlines and ahead of Kenya Airways and South African Airways. It adds: “With the launch of Guangzhou, Air Mauritius will surpass Ethiopian Airlines with the largest Asian network for an Megh Pillay, C.S.K. African airline.” Chief Executive Officer June 13, 2016 With major partner airlines, we operate to hubs in Paris, Johannesburg, Nairobi, Mumbai, Kuala Lumpur, Singapore, Shanghai, Hong Kong and Perth from where we offer more than a hundred additional destinations. We shall maintain our efforts to expand our footprint by building new partnerships and serving new destinations. Amsterdam is being considered as a second hub in Europe. With KLM as a potential partner, we are planning to access potential markets in Germany, Eastern and Northern Europe. 08 Air Mauritius Annual Report 2015/16 Air Mauritius Annual Report 2015/16 09

Glossary 10 Air Mauritius Annual Report 2015/16

Glossary

Turnover Passenger load factor Represents total revenue earned and loss derived, RPK expressed as a percentage of ASK. net of taxes, allowances and returns, from aircraft, helicopter, hotel, property rental, technical and Available tonne-km (ATK) traffic handling operations. The product of capacity offered (in tonnes) and the distance flown (in kms). Travelled Revenue Consists of gross revenue derived from the carriage Revenue tonne-km (RTK) of passengers, freight, mail and excess luggage. Multiplying revenue load carried (in tonnes) by the distance flown (in kms). Profit after Tax Profit attributable to the equity holders. Overall load factor RTK expressed as a percentage of ATK. Gross profit margin Gross profit expressed as a percentage of turnover. Cargo tonne-km (CTK) Multiplying cargo tonnage carried by the distance Net profit margin flown. Profit after tax expressed as a percentage of turnover. Revenue per ASK (RASK) Earnings per share Total operating revenue divided by ASK. Profit after tax and non-controlling interest divided by number of shares issued. Cost per ASK (CASK) Total operating costs divided by ASK. Net worth per share Total equity divided by number of shares issued. Unit costs Airline operating costs (excluding sales Return on Equity commissions and pool settlements) divided by Profit after tax divided by shareholders’ interest. system-wide available tonne kilometres.

Interest Cover Cash Profit before interest expense divided by interest Cash at bank, cash in hand and short-term deposits. payable. EBITDA Interest and lease Cover Earnings before Interest, Taxes, Depreciation and Profit before interest and lease expense divided by Amortisation. interest and lease payable. Gearing Ratio Dividend Cover Total debt to equity. Debt includes interest-bearing Profit after tax divided by proposed/paid dividend loans and borrowings. for the year. Block Hours Return on Net Assets The time from which the aircraft departs from the Profit after tax divided by total assets less current gate to the time it arrives at the gate of its destination. liabilities. Winter season Available seat-km (ASK) Period between end of October to end of March. The product of seats offered and the distance flown (in kms). Summer season Period between end of March to end of October. Revenue passenger-km (RPK) The number of passengers carried multiplied by Semdex the distance flown (in kms). 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. Air Mauritius Annual Report 2015/16 11

Annual Report and Business Review 12 Air Mauritius Annual Report 2015/16

Annual Report and Business Review

The Directors have pleasure in presenting the Overview of the Business Annual Report, Business Review and Financial Statements of Air Mauritius Limited (the ‘Company’) Principal activities and its subsidiaries (the ‘Group’) for the year ended March 31, 2016. The Financial Statements are set Air Mauritius Limited out on pages 100 to 175. 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 Results for the year the provision of ancillary services for aviation. The The Group reported a profit of EUR 16.5M for the domestic network comprises solely of operations year ended March 31, 2016 compared to a loss to Rodrigues using turbo prop ATR72 aircraft. of EUR 23.6M in the previous year. The Company posted a profit of EUR 15.4M for the year compared The Company is the leading scheduled to a loss of EUR 23.7M for the previous year. international passenger airline in the Indian Ocean region. The Group’s Head Office is in Port Louis, The results for the year under review have been while its principal place of operations is SSR positively impacted by lower oil prices and an International airport, Mauritius. From this base, it increase in passengers but tempered by the serves 21 destinations touching four continents i.e depreciation of the Euro, hedge payouts and Africa, Asia, Australia and Europe. The airline has a decrease in yield. The Brent oil price which a comparatively high proportion of point to point averaged USD 90/BL during 2014/15, dropped to business with interline accounting for about 33.4% an average of USD 50/BL for 2015/16. However, of its passenger sales revenues. The Company has the EUR/USD parity declined from an average of interline outward billings with other carriers which 1.27 for the financial year 2014/15 to an average of amount to around 5.6 % of the airline passenger 1.10 for the financial year 2015/16. flown revenues.

As far as operations of the Company are The Group also operates a worldwide air cargo concerned, the number of passengers carried went business, solely in conjunction with its scheduled up by 9.4% to reach a record level of 1,499,411. passenger services, using the belly hold capacity The number of seats offered increased by 3.4% for cargo transshipment. and the Passenger Load Factor increased from 73.7% to 78.7%. Operating revenue increased by Economic value is generated by the Group by 5.4% from EUR 463.1M to EUR 488.3M whereas meeting the demand for business and leisure the operating expenses decreased by 1.8% to travel, with leisure travel being the main passenger reach EUR 443.9M. Consequently, the gross profit segment. The Company provides vital links for increased from EUR 10.9M to EUR 44.4M. trade and investment, and feeds the tourism sector and the rest of the economy through its substantial On July 06, 2015, a third destination to mainland leisure travel opportunities for individuals and China, Chengdu, was added to the network with families. In the financial year ended March 31, a once weekly A340 flight. Furthermore, with the 2016, the Group earned EUR 490.8M in revenue view to develop Singapore as the hub in Far East as compared to EUR 465.7M for the previous year. Asia to support the “Air Corridor” project initiated 83% of this revenue was generated from passenger by Government, the Company introduced direct traffic, 9% from cargo and 8% from other activities. operations to Singapore on the basis of 3 weekly During the period under review, the number of frequencies on the routing Mauritius-Singapore- passengers uplifted was 1,499,411 and 29,901 Kuala Lumpur and vice versa, as from March 11, tonnes of cargo were uplifted across the network. 2016. At the end of March 2016, the Group had 12 fixed wing aircraft and 2 helicopters in operation. Air Mauritius Annual Report 2015/16 13

Annual Report and Business Review

Mauritius Estate Development Corporation Objectives Limited (“MEDCOR”). The Group aims to build a sustainable business The subsidiary Mauritius Estate Development with margins covering its cost of capital on a long Corporation Limited (MEDCOR) is engaged in term basis. It is working in partnership with all its leasing out office and commercial space. Air key stakeholders to foster growth and harness Mauritius Limited holds 93.7% of the issued share business opportunities and also to effectively capital of the company. manage the risks associated with the business.

MEDCOR recorded a profit after tax of MUR Shareholders’ return 28.9M (EUR 0.7M) as compared to MUR 31.2M (EUR 0.8M) for last year. Last year’s result included For its shareholders, the Group’s key responsibility a fair value gain on investment property of MUR is to generate a sustainable return on the capital 16M as compared to a fair value gain of MUR employed in its business and to ensure it can invest 0.5M for 2015/16. The office space stood at 99% for future growth. It seeks to return to shareholders occupancy level during the year. a balance between capital growth and an income stream by way of dividend. The Group seeks to operate complementary businesses in its Pointe Coton Resort Hotel Co. Ltd investments with the core being airline operations. Pointe Coton Resort Hotel Co. Ltd is in the business of providing hotel accommodations Other stakeholders together with all related services in Rodrigues. Air Mauritius Limited holds 54.2% of its issued share The Group also takes account of its responsibilities capital. to other stakeholders including its employees, its customers and the communities affected by its The company recorded a profit of MUR 11M (EUR operations, as well as having regard to the impact 0.3M) compared to a profit of MUR 0.7M (EUR its business has on the environment. Group policies 17,000) for 2014/15. The occupancy rate of the are benchmarked with best practice internationally hotel went up from 67% to 72% during the year. in managing these stakeholder relationships.

Airmate Ltd Airmate Ltd is a wholly owned subsidiary of Air Mauritius Limited and provides Call Centre and provision of Human Resources to its holding company. Airmate Ltd recorded a turnover of MUR 168.2M (EUR 4.3M) and a loss of MUR 2.8M (EUR 70,020) as compared to a turnover of MUR 177.9M (EUR 4.5M) and a profit of MUR 1M (EUR 25,000) for last year.

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 an 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. 14 Air Mauritius Annual Report 2015/16

Annual Report and Business Review

The Board of Directors

The names and details of the current directors are set out below. Most directors served through the financial year with the exception of Mr Francois Woo Shing Hai, G.O.S.K. who resigned on July 30, 2015, Mr Andries Nathaniel Viljoen who resigned on August 29, 2015, Mr Rohit Nandan who resigned on August 31, 2015, Mr Etienne Rachou who resigned on December 18, 2015, Mr Muhammad Yoosuf Salemohamed who was appointed on July 30, 2015, Mr Ashwani Lohani who was appointed on October 30, 2015, Mr Patrick Roux who was appointed on January 22, 2016 and Mr Megh Pillay, C.S.K. who was appointed on March 15, 2016.

Dr SUDDHOO Arjoon - Chairman

Dr Arjoon Suddhoo was appointed to the Board and elected Chairman on March 09, 2015. After winning the national Laureateship in 1978, Dr Suddhoo started his higher education in England. He 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 for Rolls-Royce Aerospace in UK. During his eight years in the Company, he worked in close collaboration with Cambridge and Oxford Universities and MIT. In 1993, Dr Suddhoo returned to Mauritius to be employed 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 Limited for the period 2001 to 2005. 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.

PILLAY Megh, C.S.K. - Chief Executive Officer

Mr Megh Pillay, C.S.K., is a seasoned business leader with a distinguished career as CEO of major State Owned Public Enterprises such as the Agricultural Marketing Board (1990-1993), Mauritius Telecom (1993-2003) and the State Trading Corporation (2010-2015). He has also previously served as Managing Director (now CEO) of Air Mauritius (2003-2005).

He holds a Master’s degree from the Louisiana State University at Baton Rouge, USA. He was appointed to the Board on March 15, 2016. Air Mauritius Annual Report 2015/16 15

Annual Report and Business Review

The Board of Directors (Cont’d)

ESPITALIER-NOËL Philippe

Mr Philippe Espitalier-Noël was appointed to the Board on October 09, 2000. 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.

RIVALLAND Louis

Mr Louis Rivalland is currently the Group Chief Executive of Swan General Ltd and Swan Life Ltd. He was previously part of the management team of Commercial Union in South Africa and conducted several assignments for Commercial Union in Europe. 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 has played an active role in the development of risk management, investments, insurance and pensions in Mauritius having chaired or been part of various technical committees in these fields.

He holds a BSc (Hons) in Actuarial Science and Statistics, a Post Graduate Diploma in Strategy and Innovation from SAID Business School and is a Fellow of the Institute of Actuaries, UK. He was appointed to the Board on July 26, 2012.

MAUNTHROOA Ramprakash

Mr Ramprakash Maunthrooa is a Senior Adviser at the Prime Minister’s Office. He is also the representative of the Prime Minister’s Office on the Board of Investment. Mr Maunthrooa has served as Managing Director of the Board of Investment. He has also been the Director General of the Mauritius Ports Authority and thereafter served as Chairman of the organisation from 2000 to 2003.

He has also worked as a freelance Consultant as a Port Specialist and subsequently as an Investment and Management Consultant both in Mauritius and in the region. He was appointed to the Board on February 05, 2015. 16 Air Mauritius Annual Report 2015/16

Annual Report and Business Review

The Board of Directors (Cont’d)

FONG WENG-POORUN Kan Oye

Mrs Kan Oye Fong Weng–Poorun is presently Senior Chief Executive of the Ministry of Tourism and External Communications. She holds a BA (Hons) in Administration.

She has a long career in the public service in different Ministries such as Ministry of Works (1979-1992), Ministry of Health (1992-1994), Ministry of Energy, Water Resources and Postal Services (1994-1997), Ministry of Public Infrastructure and Public Safety (1997-2001), Ministry of Agriculture, Fisheries and Natural Resources (2001-2003) and Ministry of Housing & Lands (2003-2005), the Prime Minister’s Office (Home Affairs) (2005-2014) where she was appointed Senior Chief Executive in March 2012. In January 2015 she joined the Ministry of Tourism and External Communications.

She was conferred the “Chevalier dans l’Ordre National de la Légion d’Honneur” in July 2011 by the President of the Republic of France and the Citoyenneté d’Honneur of Rodrigues in 2014. She is also a recipient of the Exemplary Women Leadership Award at the Africa India Partnership Summit 2014. She was appointed to the Board on February 05, 2015.

MANRAJ Dev, G.O.S.K.

Mr Dev Manraj, G.O.S.K. holds a Post-graduate Diploma in International Management from the International Institute for Management Development (IMD) from Switzerland and is a Fellow of the Association of Chartered Certified Accountants (FCCA).

Mr Manraj has an extensive portfolio of experience, developed from the start of his career, predominantly within the public and semi-governmental spheres in Mauritius. In 2000, Mr Manraj also served as Advisor to the Prime Minister and as Senior Advisor in 2012.

Mr Manraj has also served as Chairman of the State Bank of Mauritius (SBM), the State Insurance Company of Mauritius Ltd (SICOM), the Mauritius Offshore Business Activities Authority (MOBAA), Airports of Mauritius Co. Ltd and Business Parks of Mauritius Ltd (BPML).

He has been actively involved in most of the major projects in Mauritius, including the Ebène Cybercity. He contributed in the setting up of the Financial Services Commission, the Mauritius Leasing Company Ltd, the National Transport Corporation and The State Investment Corporation Ltd amongst others. In addition, Mr Manraj was previously appointed Director of the Board of Investment (BOI), the Mauritius Sugar Authority and the Mauritius Broadcasting Corporation at different intervals in his career. He was appointed to the Board on March 09, 2015. Air Mauritius Annual Report 2015/16 17

Annual Report and Business Review

The Board of Directors (Cont’d)

SEEBALUCK Sateeaved, G.O.S.K.

Mr Sateeaved Seebaluck, G.O.S.K. is presently the Secretary to the Cabinet and Head of the Civil Service. He holds a BA (Hons) Economics and a Diploma in Public Administration and Management.

He joined the Civil Service in January 1976 as Economist at the Ministry of Economic Planning and was appointed Permanent Secretary in 2000. He served various Ministries and has been Chairman and Director of many Boards and Statutory Committees during his career.

While serving at the Ministry of Environment, Mr Seebaluck pioneered Sustainable Development and organised the International Conference on Small Islands Developing States in 2005. He is recipient of several International Awards on the environment.

In 2010, he was promoted Senior Chief Executive and was posted to the Ministry of Civil Service and Administrative Reforms. He was appointed to the Board on March 09, 2015.

VEERASAMY Banoomatee

Mrs Banoomatee Veerasamy is Acting Managing Director of The State Investment Corporation Ltd (SIC), the investment arm of Government. She has over 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 at 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 Masters’ degree in law from the University of London. She was appointed to the Board on March 09, 2015. 18 Air Mauritius Annual Report 2015/16

Annual Report and Business Review

The Board of Directors (Cont’d)

HEIN Marc, G.O.S.K.

Mr Marc Hein, G.O.S.K. founder and Head of Practice of Juristconsult Chambers is a graduate of Gray’s Inn School of Law in London. Mr Hein started practicing law in 1980 at the Chambers of Sir Raymond Hein, Q.C. Mr Hein was elected to the Mauritius Parliament in 1983 and was a member of Parliament until 1987. Mr Hein was also Chairman of the Mauritius Bar Council in 1992. He established Juristconsult in 1992 which has been thriving since, as a leading business law firm. Mr Hein is currently the Editor of the Mauritius Business Law Review and represents local and international clients on numerous cross border transactions.

Mr Hein was appointed as the first Enforcer of Global Finance Mauritius (GFM). He was also the Chairman of the National Economic and Social Council of Mauritius. From early 2012 to June 2014, Mr Hein was Chairman of the Board of the Financial Services Commission. He was appointed to the Board on April 10, 2015.

MACKAY Daniel

Mr Daniel Mackay has worked for 33 years at Air France SA where he has had various functions, including being a member of the Audit Committee and Strategic Committee. Mr Mackay has solid experience in Corporate Governance, Board of Directors and its Committees, good knowledge in human resources and in social skills related to the activities of global air transport. He was appointed to the Board on April 10, 2015.

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 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), the Director of ALTEO Milling Company and the Managing Director of Office Clean and DHR Training. He was appointed to the Board on April 10, 2015 Air Mauritius Annual Report 2015/16 19

Annual Report and Business Review

The Board of Directors (Cont’d)

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, 2015

LOHANI Ashwani

Mr Ashwani Lohani is presently the Chairman & Managing Director of Air India. He earlier worked as the Managing Director & 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 & Managing Director of India Tourism Development Corporation and other important assignments in railways.

He is a life member of the Institute of Rolling Stock Engineers and the Museums Association of India and the Founder cum Working President of the Indian Steam Railway Society. He has written over a hundred articles and columns on a variety of subjects in magazines and newspapers of national repute. He was appointed to the Board on October 30, 2015 20 Air Mauritius Annual Report 2015/16

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 1990, working in the Quality Management Department for all North American stations. In 1991, he was appointed to the position of Assistant to the Air France Regional Cargo Director for Scandinavia and Finland. 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, 2016. He was appointed to the Board on January 22, 2016

Resignation of the Directors

The following Directors have resigned during the financial year:

VILJOEN Andries Nathaniel (resigned on August 29, 2015)

He was appointed as Chief Executive Officer as from August 30, 2012 and occupied the post till he left the Company on August 29, 2015.

Mr Andries Nathaniel Viljoen was appointed to the Board on July 21, 2011. He had joined the Company in April 2009 as the Chief Financial Officer and Chief Information Officer and was appointed as Chief Executive Officer on August 30, 2012 and occupied the post till he left the Company on August 29, 2015. Apart from his degrees in the commercial and financial fields, he is also a Chartered Accountant (SA). Mr Viljoen is a seasoned airline executive with more than 33 years airline leadership experience. His experience includes the 15 years he spent with Comair/British Airways as Finance and Commercial Director and the 8 years he spent at South African Airways initially as Chief Financial Officer and then as President and Chief Executive Officer.

NANDAN Rohit (resigned on August 31, 2015)

Mr Rohit Nandan took charge of Air India Ltd as Chairman & Managing Director on August 12, 2011. He was appointed to the Board on August 12, 2011. He was earlier Joint Secretary, Ministry of Civil Aviation, Delhi and belongs to Service Cadre of “IAS/Uttar Pradesh/1982 batch. Prior to Civil Aviation Ministry, he was holding the post of Principal Secretary, Rural Development Department, Government of Uttar Pradesh. Air Mauritius Annual Report 2015/16 21

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Resignation of the Directors (Cont’d)

WOO SHING HAI Francois, G.O.S.K. (resigned on July 30, 2015)

Mr François Woo Shing Hai, G.O.S.K. was appointed to the Board on August 14, 2009 and is the Group Managing Director of Compagnie Mauricienne de Textile Ltée, industry leader in fashionwear manufacture. He received the prestigious award “Entrepreneur of the Year 2002”. Mr Woo Shing Hai was appointed by the Chairman of the World Bank and the Managing Director of the International Monetary Fund as adviser to the President of the Republic of Senegal. In year 2006, he was conferred the academic title of Honorary Fellowship in Management by the University of Mauritius.

RACHOU Etienne (resigned on December 18, 2015)

Mr Etienne Rachou was appointed to the Board on November 07, 2013. After graduating from the HEC Business School, he began his career in 1979 with the Air France Group. In 1987, he was appointed Vice President Sales, Air France for the Paris region. He became Air France Regional Manager for United Kingdom and Ireland in April 1996 before becoming Air France Senior Vice President, Europe & North Africa, on June 30, 1998. Mr Rachou was promoted Air France Senior Vice President, Africa & Middle East, on July 01, 2007 and he was made Senior Vice President Africa & Middle East, Air France-KLM on September 01, 2008. He was appointed Deputy Executive Vice President International & The Netherlands, Air France-KLM on January 01, 2010, and became a member of the Air France Executive Committee. As from July 2013, Mr Rachou became Head of the Alliances Air France and Project Manager Alliances, Air France/KLM Group. 22 Air Mauritius Annual Report 2015/16

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Corporate Governance

Corporate Governance involves balancing the A statement of the directors’ responsibilities in interests of the stakeholders in a Company - these respect of the financial statements is set out on include its shareholders, management, customers, page 96 and a statement on going concern is suppliers, financiers, government and the given on page 113. community at large. The Board is accountable to the Company’s shareholders for good governance Board Information and is committed to ensure that the interests of all All directors receive regular information about stakeholders are given due consideration. the Company’s affairs to enable them discharge In line with the Report on Corporate Governance their duties at Board meetings. Independent for Mauritius issued by the National Committee professional advice is available to directors in on Corporate Governance under the Financial appropriate circumstances, the cost of which is Reporting Act 2004 (the ‘Code’), the Board of fully borne by the Company. Directors has put in place various committees to assist in the execution of its responsibilities and to Board and Director Appraisal ensure compliance with the provisions set out in The Board of the Company was reconstituted the Code. during financial year 2015/16 and it complied with the Company’s policy to review and evaluate Board of Directors the performance of the Board. The results of the The Board of Directors is led by the non-executive exercise were shared with the Board. However, Chairman, Dr Arjoon Suddhoo, while the executive no individual assessment of Board directors management of the Company is led by the newly was undertaken. The Corporate Governance appointed Chief Executive Officer, Mr Megh Pillay, Committee will devise a process in order that the individual evaluation exercise be undertaken in C.S.K. The roles of the Chairman and the Chief Executive Officer are separate and recognised in financial year 2016/17. terms of the Report on Corporate Governance for Mauritius. Roles and Functions of Chairman and Chief Executive Officer Role of the Board The Chairman’s primary function is to preside over The role of the Board is threefold namely, to meetings of directors and to ensure the smooth establish policies, to make significant and strategic running of the Board and to preside the Company’s decisions and to oversee the organisation’s meetings of Shareholders. The function and role of activities. The Board sets the Company’s strategic the Chief Executive Officer is separate from that targets, ensures that the necessary financial and of the Chairman. His main functions are, inter- human resources are in place for the Company alia, to develop and recommend to the Board a to meet its objectives and reviews management long term vision and strategy for the Group, to performance. The Board also sets the Company’s devise business plans and budgets that support values and standards and ensures that its the Company’s long-term strategy, to strive to obligations to the stakeholders are understood consistently achieve the Company’s financial and met. and operating objectives and to ensure that the day-to-day business affairs of the Company are appropriately managed and monitored. Board Meetings The Board of the Company met fourteen times during the year under review. The Board has defined specific terms of reference for its committees. Air Mauritius Annual Report 2015/16 23

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Corporate Governance (Cont’d)

Role of Non-Executive and Independent Directors’ Remuneration Non-Executive Directors Board directors are paid monthly fees for their There were 15 directors serving on the Board of services to the Company. Directors, who are also Air Mauritius as at March 31, 2016 with the Chief directors within the Group, receive fees from these Executive Officer as the only Executive Director. subsidiaries. Details of the Directors’ fees and Non-executive and independent directors play a other remuneration are contained on page 50 of vital role in providing independent judgement in the Annual Report. all circumstances. The non-executive directors are drawn from a diversity of business and other Significant Contracts backgrounds, so as to bring a broad range of No contracts of significance or loans existed views and experiences to Board deliberations. between the Company and its Directors during Although the Board is presently composed of one the year under review, with the exception of the executive director, it is of the view that the spirit service contract of the Executive Director which of the Code is being respected in view of the is summarised on page 50 .The Company has a attendance and participation of Senior Executives well-established procedure for the disclosure of at all Board meetings and deliberations on matters interests including a Register of Interests for both such as strategy and investment. Board and Management. The Board acknowledges that the current practice is for the controlling shareholder to propose Role and Function of Company Secretary members of the Board for election by shareholders The Company Secretary plays a key role in at the Annual Meeting of the Company. Four of advising the Board in the application of Corporate these are independent directors as defined by the Governance in the Company. He also ensures that Code. In line with the Code, all directors stand for the Company complies with its constitution and all re-election on a yearly basis. Nominations to the relevant statutory requirements, codes of conduct various committees are also made on a yearly and rules established by the Board. basis. The Company Secretary ensures that papers for Senior Executives of the Company are invited Board and Committee Meetings are distributed regularly to attend Board meetings and sub- prior to the relevant meeting. All Board members committee meetings. External consultants are have access to the Company Secretary for any also invited to attend Board and sub-committee further information they may require in the discharge meetings as and when their expertise is required. of their responsibilities. The Company Secretary is the focal point of contact for institutional and other Dealings in Company Shares shareholders. The appointment and removal of the No director dealt in Company shares during the Company Secretary is a matter for the Board as a year. Directors are notified of close periods on a whole. quarterly basis. Details of Directors’ shareholding in the Company are given on page 51 of this Annual Report. 24 Air Mauritius Annual Report 2015/16

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Corporate Governance (Cont’d)

Board Members and Board and Committee 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 CGC AC RMSC FC SC EXCO

Chairman Dr Arjoon Suddhoo N 13/14 n/a n/a 9/9 7/7 8/8 11/11

Chief Executive Officer Mr Andries Nathaniel Viljoen (up to August 29, 2015) E 7/7 0/0 n/a 3/3 n/a 1/1 n/a

Mr Megh Pillay, C.S.K. (as from March 15, 2016) E n/a 2/2 n/a n/a n/a n/a n/a

Directors Mr Ramprakash Maunthrooa N 12/14 n/a n/a 8/9 8/8 8/8 10/11

Mr Dev Manraj, G.O.S.K. N 8/14 n/a 0/3 0/9 0/1 n/a 4/11

Mr Sateeaved Seebaluck, G.O.S.K. N 13/14 2/3 n/a n/a n/a 5/8 n/a

Mr Philippe Espitalier–Noël N 9/14 n/a 4/5 n/a 6/8 5/8 7/11

Mr Marc Hein, G.O.S.K. I 10/14 2/3 n/a n/a n/a 5/8 n/a

Mrs Kan Oye Fong Weng-Poorun N 11/14 n/a 3/5 n/a 1/1 n/a 9/11

Mr Louis Rivalland N 12/14 n/a 5/5 7/9 n/a n/a n/a

Mrs Banoomatee Veerasamy N 13/14 n/a 5/5 n/a 6/7 n/a n/a

Mr Daniel Mackay I 9/14 2/3 4/5 n/a n/a n/a n/a

Mr Bissoon Mungroo, G.O.S.K. I 12/14 2/3 n/a 9/9 n/a n/a n/a

Mr Muhammad Yoosuf Salemohamed (as from July 30, 2015) I 9/9 3/3 n/a n/a 6/7 n/a n/a

Mr Ashwani Lohani (as from October 30, 2015) N 0/5 n/a n/a n/a n/a n/a n/a

Mr Patrick Roux (as from January 22, 2016) N 0/2 n/a n/a n/a n/a n/a n/a

Mr Francois Woo Shing Hai, G.O.S.K. (up to July 30, 2015) N 1/5 0/0 n/a n/a n/a n/a n/a

Mr Rohit Nandan (up to August 31, 2015) N 1/7 n/a n/a n/a n/a n/a n/a

Mr Etienne Rachou (up to December 18, 2015) N 4/11 n/a n/a n/a n/a n/a n/a

Mr Pankaj Srivastava (Alternate to Mr A Lohani and Mr R Nandan) N 0/14 n/a n/a n/a n/a n/a n/a

Mr Radhakrishna Chellapermal (Alternate to Mr D Manraj) N 6/14 n/a 3/3 8/8 1/1 n/a 7/11

E = Executive Director Company Secretary: Fooad Nooraully I = Independent Director N = Non Executive Director Auditors: Ernst & Young and KPMG n/a: Not a member

CGC Corporate Governance Committee FC Finance Committee AC Audit Committee SC Staff Committee RMSC Risk Management Steering Committee EXCO Executive Committee

Attendance: Number of meetings attended / total eligible to attend Air Mauritius Annual Report 2015/16 25

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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 MEDCOR Ltd Pointe Coton Resort Hotel Co Ltd Airmate Ltd Mauritius Helicopter Limited Air Mauritius Holidays Limited

Dr Arjoon Suddhoo Chairman Chairman Chairman Chairman

Mr Megh Pillay, C.S.K. ü ü Chairman Chairman Chairman (as from March 15, 2016)

Mr Andries Nathaniel Viljoen ü ü ü ü ü ü ü (up to August 29, 2015)

Mr Ramprakash Maunthrooa ü ü

Mr Dev Manraj, G.O.S.K. ü ü

Mr Sateeaved Seebaluck, G.O.S.K. ü ü

Mr Philippe Espitalier-Noël ü ü

Mr Marc Hein, G.O.S.K. ü

Mrs Kan Oye Fong Weng-Poorun ü ü

Mr Louis Rivalland ü ü

Mr Daniel Mackay ü

Mrs Banoomatee Veerasamy ü ü ü ü

Mr Bissoon Mungroo, G.O.S.K. ü

Mr Muhammad Yoosuf Salemohamed ü (as from July 30, 2015)

Mr Ashwani Lohani (as from October 30, 2015) ü ü

Mr Patrick Roux (as from January 22, 2016) ü ü

Mr Rohit Nandan (up to August 31, 2015) ü ü

Mr Etienne Rachou ü ü (up to December 18, 2015)

Mr Francois Woo Shing Hai, G.O.S.K. (up to July ü ü 30, 2015)

Mr Pankaj Srivastava (Alternate to Mr A Lohani ü ü and Mr R Nandan)

Mr Radhakrishna Chellapermal (Alternate to ü ü Mr D Manraj) 26 Air Mauritius Annual Report 2015/16

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Corporate Governance (Cont’d)

Board Committees All members of the Audit Committee are non- The Board has six specific sub Committees, which executive directors and included one independent meet regularly under the terms of reference set by Director of the Board. However, the non-executive the Board. Copies of these are also available on Chairman of the Audit Committee was not an www.airmauritius.com. Specific responsibilities are independent director as prescribed by the Code assigned to sub-committees of the Board, namely, but had the professional knowledge, expertise and the Audit Committee, the Risk Management experience in accounting to head this committee. Steering Committee, the Corporate Governance The Board considers that each member brings Committee, the Executive Committee, the Staff broad experience and professional knowledge of Committee and the Finance Committee which financial reporting to the Committee’s deliberations. act within the parameters of their clearly defined The Committee’s main responsibilities include: terms of reference. As and when necessary ● other committees have been set up by the Board To oversee the financial reporting process to on an ad-hoc basis to deal with specific issues ensure the balance, transparency and integrity of relevance to the Company. Each of the of published financial information; Committees has authority to take external advice ● To review the effectiveness of the Company’s as required. internal financial control;

1) AC Audit Committee ● To evaluate the independence and to review the effectiveness of the internal audit function; 2) RMSC Risk Management Steering Committee ● To ensure that no unjustified restrictions are 3) SC Staff Committee formerly known as made on the internal audit function; the Senior Officers Remuneration and Selection Committee (SORSC) ● To review the effectiveness of the independent audit process including recommending the 4) CGC Corporate Governance Committee appointment and assessing the performance of 5) FC Finance Committee the external auditor; ● 6) EXCO Executive Committee To review the Company’s process for monitoring compliance with laws and regulations affecting financial reporting, its Code of Business Practice 1. Audit Committee (AC) and Ethics and its Fraud Prevention Policy; Members: Louis Rivalland (Chairman), Philippe ● Espitalier-Noël, Dev Manraj G.O.S.K. (from April To review the appropriateness of the Group’s 10, 2015 to August 27, 2015), Daniel Mackay, accounting policies and consider changes to Banoomatee Veerasamy, Kan Oye Fong Weng- them; and Poorun ● To review the significant accounting judgments and monitor the integrity of the annual and interim Secretary: Fooad Nooraully financial statements. Ultimate responsibility for the approval of the annual and interim financial In attendance: Megh Pillay, C.S.K. (CEO as from statements rests with the Board. March 15, 2016), Andries Nathaniel Viljoen (CEO up to August 29, 2015), Indradev Buton (Officer- In appropriate circumstances the Committee may in-Charge from August 29, 2015 to March 15, make recommendations to the Board to put to 2016) Vijay Seetul, Dindoyal Sookun, Nazir Shah shareholders for approval at the annual meeting, Kodaruth, Ernst & Young and KPMG. for the appointment, reappointment and removal of the Company’s external auditors. Air Mauritius Annual Report 2015/16 27

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Corporate Governance (Cont’d)

The Committee reviews the work undertaken by d) Audit Fees: The Committee also recommended the external auditors and assesses annually its to the Board the fees to be paid to external independence and objectivity taking into account auditors each year. Details of the fees paid to relevant professional and regulatory requirements the external auditors during the financial year and the relationship with the auditors as a whole. 2015/16 can be found on page 51. The Committee monitors the auditors’ compliance with relevant regulatory, ethical and professional 2. Risk Management Steering Committee standards. It also monitors the provision of any (RMSC) non-audit services as well as processes for the Members: Dr Arjoon Suddhoo (Chairman), Megh rotation of partners, in the audit process. Pillay, C.S.K. (CEO as from March 15, 2016), Andries Items reviewed by the Audit Committee during the Nathaniel Viljoen (CEO up to August 29, 2015), year include: Louis Rivalland, Dev Manraj, G.O.S.K., Ramprakash Maunthrooa, Bissoon Mungroo, G.O.S.K. a) Financial reporting: The Committee reviewed the draft annual and interim reports before Secretary: Fooad Nooraully. recommending their publication to the Board. In Attendance: Vijay Seetul, Dindoyal Sookun, The Committee discussed with Management Jean Laval Ah Chip and Indradev Buton (Officer-in- and external auditors the significant accounting Charge from August 29, 2015 to March 15, 2016) policies, estimates and judgements applied in preparing these reports. The Committee’s terms of reference include: b) Internal controls: The Committee has an ● Ensuring there is a system of risk assessment ongoing process for reviewing the effectiveness across the Company on an on-going basis; of the system of internal controls. During the year it considered reports from the Vice ● Reviewing the effectiveness of the Company’s President-Internal Audit summarising the risk management system including risk work undertaken. The Committee looked at assessment reports; recommendations for improvements as well as actions taken by management as a result. ● Assisting the Board to understand the total risks The Committee also sought the views of the facing the Group and the Company; external auditors in making its assessment of ● Approving risk mitigation actions for specific the effectiveness of controls. items of risk and identifying areas for system improvements and monitoring; c) Internal audit: It is the responsibility of the Internal Audit Department to provide assurance to the ● Reviewing actions taken for specific critical board regarding the implementation, operation transactions in accordance with the risk map and effectiveness of internal control and risk. for both financial and non-financial risks ona To ensure the independence of the Internal continuing basis; Audit, the Vice President–Internal Audit reports directly to the Committee and the appointment ● Setting and approving changes to financial and dismissal of the Head of Internal Audit approval limits for hedge and treasury is under the purview of the Committee. transactions; and ● Setting and approving risk parameters for the The Committee evaluated the performance of Company’s budget each year. Internal Audit from the quality of reports and recommendations from the Vice President- Internal Audit. 28 Air Mauritius Annual Report 2015/16

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Corporate Governance (Cont’d)

2. Risk Management Steering Committee The Staff Committee is a Sub-Committee of the (RMSC) (Cont’d) Board of Air Mauritius, and established by the The Risk Management Steering Committee met Board which delegates the following powers to nine times during the year to monitor enterprise the Staff Committee to take appropriate decisions wide risk, approve hedge transactions for both and/or to make recommendations to the Board on currency and fuel and to set parameters for the matters relating to inter alia:- Company’s hedging strategy for each period. (i) Human Resource plans and strategies; In addition the RMSC also:- (ii) Selection, recruitment, appointments, promotion, restructuring and other related exercises; ● Reviewed and approved risks limits and parameters, hedge mandate and any derogation (iii) Remuneration and Performance Management from the risk manual as appropriate, whilst System; aligning to the business strategy and risk appetite; (vi) Terms and Conditions of Service; ● Reviewed and approved hedge performance (v) Training and Human Resource Development; for both jet fuel and currency and ensuring that and these transactions remain within pre-approved (vi) Industrial relations, policies and practices. risk framework; ● Ratified the key enterprise wide risk register as 4. Corporate Governance Committee (CGC) approved by the risk owners and the leadership Members: Muhammad Yoosuf Salemohamed team; (Chairman) (as from August 27, 2015), Megh Pillay, C.S.K. (CEO as from March 15, 2016), ● Carried out an analysis of counterparty Andries Nathaniel Viljoen (CEO up to August 29, credit risks, reviewing and approving new 2015), Marc Hein, G.O.S.K., Daniel Mackay, Bissoon counterparties that would otherwise deviate Mungroo, G.O.S.K., Sateeaved Seebaluck, G.O.S.K., from prescribed internally set criteria; and Francois Woo Shing Hai, G.O.S.K. (from April 10, ● Reviewed and approved the budgeted financial 2015 to July 30, 2015). parameters to be used as the basis for the financial year budget. Secretary: Fooad Nooraully

In Attendance: Indradev Buton (Officer-in-Charge 3. Staff Committee (SC) formerly known as the from August 29, 2015 to March 15, 2016), Senior Officers Remuneration and Selection Committee (SORSC) The role of the Corporate Governance Committee Members: Dr Arjoon Suddhoo (Chairman), Megh is to ensure that Board structures as well as Pillay, C.S.K., (CEO as from March 15, 2016), reporting requirements on corporate governance, Andries Nathaniel Viljoen (CEO up to August 29, whether in the Annual Report or on an ongoing 2015), Philippe Espitalier-Noël, Marc Hein, G.O.S.K., basis, are in accordance with the principles of Ramprakash Maunthrooa, Sateeaved Seebaluck, good governance and the Code. G.O.S.K. This Committee was chaired by a non-executive Secretary: Fooad Nooraully and independent director. As from April 2015, membership to the Committee was reviewed. Four In Attendance: Indradev Buton (Officer-in-Charge Independent/Non-Executive directors have been from August 29, 2015 to March 15, 2016), appointed to that Committee. The Committee is now Balakrishna Seetaramadoo (as from January 25, composed of a majority of Independent Directors. 2016) Air Mauritius Annual Report 2015/16 29

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Corporate Governance (Cont’d)

5. Finance Committee (FC) The Committee advises the Board in relation to Members: Dr Arjoon Suddhoo (Chairman), Ramprakash Maunthrooa, Philippe Espitalier-Noël, (a) Financial policies, strategies and courses of Banoomatee Veerasamy, Muhammad Yoosuf action, Salemohamed, Dev Manraj, G.O.S.K. (up to August (b) Capital structure and funding; 27, 2015), Kan Oye Fong Weng Poorun (up to August 27, 2015). (c) Capital management planning and initiatives including capital allocation; Secretary: Dindoyal Sookun (d) Acquisitions and divestments of assets, including proposals which may have a material In Attendance: Megh Pillay, C.S.K. (CEO as from March 15, 2016), Andries Nathaniel Viljoen (CEO impact on the capital position of the Company up to August 29, 2015), Indradev Buton (Officer-in- financial risk management practices; and Charge from August 29, 2015 to March 15, 2016), (e) Transactions or circumstances which could Vijay Seetul. materially affect the financial condition and profile of the Company. The Finance Committee monitors all expenses and revenues of the Company by setting well established procedures of accountability and thresholds/ 6. Executive Committee (EXCO) limits of approval, in line with good governance Members: Dr Arjoon Suddhoo (Chairman), and financial best practice and standards. The Ramprakash Maunthrooa, Philippe Espitalier-Noël, Committee’s purpose is to support and advise Dev Manraj, G.O.S.K., Kan Oye Fong Weng-Poorun. the Board in overseeing financial affairs, including the review, approval, or recommendation to the Secretary: Fooad Nooraully Board (in each case consistent with the Board’s delegation of authority) of agreements, financings, In Attendance: Megh Pillay, C.S.K. (CEO as from capital spending, short, medium and long term March 15, 2016), Andries Nathaniel Viljoen (CEO purchase agreements, leasing agreements, asset up to August 29, 2015), Indradev Buton, Vijay management, revenue obtained from its ongoing Seetul, Ashok Keerodhur, Donald Payen, Garth and new concerns and other transactions relating Gray, Balakrishna Seetaramadoo (as from January to the Company. 25, 2016).

The Executive Committee was set up to oversee Executive Management Team during the transitional period pending the recruitment of a new CEO following the departure of Mr Viljoen. It aimed at supporting Executive Management to ensure a smooth handing over period. 30 Air Mauritius Annual Report 2015/16

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Corporate Governance (Cont’d)

Directorship In Other Listed Companies

Name of Directors Directorship in other listed companies

Mr Philippe Espitalier-Noël Ascencia Limited Rogers & Company Limited ENL Limited Swan General Ltd ENL Property Limited

Mr Louis Rivalland ENL Land Limited Ireland Blyth Limited New Mauritius Hotels Limited Swan General Ltd Swan Life Ltd

Leadership Team Other than Mr Megh Pillay, C.S.K whose profile is given on page 14, the leadership team of Air Mauritius comprises of the following senior executives.

Indradev Buton Fooad Nooraully

Mr Buton was the Executive Vice President- Mr Nooraully is the Executive Vice President-Legal Information Systems, Procurement and Facilities and Company Secretary. He was also the Executive until end of June 2015. Following the interim Vice President-Corporate Communications. organisational structure effective July 01, 2015, Following the interim organisational structure Mr Buton is the EVP-Strategic Planning and effective July 01, 2015, he had overseen the Information Systems and oversees Commercial Human Resources & Organisational Development Department. He has concurrently been the Officer up to January 2016. He joined the Company in in Charge from August 29, 2015 to March 15, April 2001. 2016. Mr Buton joined Air Mauritius in 1986. Ashok Keerodhur Donald Payen Mr Keerodhur is the Executive Vice President- Mr Payen is the Executive Vice President-Customer Technical Services. He is in charge of the Technical Experience, Ground & In-flight Services. Following Services Department which provides maintenance the interim organisational structure effective July and engineering services for the airline fleet and 01, 2015, Mr Payen is overseeing Cargo, Customer technical handling services to third parties. He Services and Communications Departments. He joined the Company in April 1989. joined Air Mauritius in 1979. Captain Garth Gray Vijay Seetul Captain Gray is the Executive Vice President-Flight Mr Seetul is the Executive Vice President-Finance. Operations. He is an experienced professional He was formerly the Executive Vice President- pilot with a successful career in aviation of over Internal Audit. Following the interim organisational 30 years, both in military and civil spheres. He structure effective July 01, 2015, Mr Seetul was formerly seconded by the UK CAA as Flight is overseeing the Procurement and Facilities Operations to the Civil Aviation. He joined the Department. He joined the Company in April 1989. Company in December 2013. Air Mauritius Annual Report 2015/16 31

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Corporate Governance (Cont’d)

Leadership Team (Cont’d) Prem Sewpaul Balakrishna Seetaramadoo Mr Sewpaul is the Vice President-Communications Mr Seetaramadoo is the Executive Vice President- and Corporate Affairs. He has been part of the Human Resources & Organisational Development. Cabin Operations management team and has He initially joined the Company in 1984 and left in worked in the Program Office and the CEO’s 2002. He has nearly 32 years experience in various Office. He joined the Company in April 1985. areas of the airline business and is also a member of IATA Faculty. He joined the Company in January Francois Marion 2016. Captain Marion is the Head of Corporate Safety and Compliance. He is currently a senior captain Dharmacharya Ramjutun (on leave) on A330 and A340 aircraft and is responsible for Mr Ramjutun is the Executive Vice President- the regulatory quality assurance programs now Strategic Planning, Network, Fleet, Alliances referred to as compliance. He joined the Company and Cargo. He was the former Executive Vice in 1989. President-Airport and Ground Operations. He joined the Company in May 1990. Jalloud Sheikh M Fakeermahamod Mr Fakeermahamod is the Head of Revenue Dindoyal Sookun Management and Pricing. Following an interim Mr Sookun is the Financial Controller responsible organisational structure effective July 01, 2015, for financial reporting and control across the he also oversees Sales for Mauritius Market, and Group. He also oversees the Financial Accounting, the Frequent Flyer unit. He joined the Company in Management Accounting and Revenue Accounting 1998. functions. He joined the Company in August 1984. Donald Li Ying Chitranjan Ramdaursingh Mr Li Ying is the Vice President – Information Mr Ramdaursingh is the Vice President-Sales. Systems. He is in charge of the Information Previously, he held various positions in Finance Systems Department which provides Information and Internal Audit Departments before moving to and Communication Technology related systems Commercial Department. He joined the Company and services across the Company. He joined the in December 1982. Company in 1988.

Nazir Shah Kodaruth

Mr Kodaruth is the Vice President-Internal Audit. He was formerly the Senior Manager-Procurement and the Senior Manager-Management Accounting. He joined the Company in September 1988. 32 Air Mauritius Annual Report 2015/16

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Corporate Governance (Cont’d)

Insurance cover & indemnities it is impossible to anticipate or provide for every The Company has arranged appropriate insurance situation that may arise, the Code is a brief cover in respect of legal action against its directors statement of the standards of business conduct and officers. The Company has granted rolling which should guide everyday decisions. indemnities to the directors and the Secretary, uncapped in amount but subject to applicable law, This Code sets out the standards and guiding in relation to certain losses and liabilities which principles of conduct of Air Mauritius personnel they may incur in the course of acting as officers in the discharge of their duties and deals with of companies within the Group. These indemnities principles of integrity, diligence and responsibility. also set out the terms on which the Company It helps staff comply with their duties, adhere to the may, in its discretion, advance defence costs. A best standards and avoid breaches of discipline as specimen indemnity is available for view on the a result of ignorance, misunderstanding or wrong Company’s website, by clicking on the heading interpretation of their obligations. Corporate Governance. Shareholders’ Agreement Code of Ethics and Business Conduct The Company is not a party to any shareholders’ The Code of Ethics and Business Conduct agreement and to the best of its knowledge, introduced in 2004 forms the foundation for there is no such agreement between its direct the conduct expected of every employee in the shareholders. Company’s business dealings. This document has been endorsed by the Board and applies to Holding Structure all employees of Air Mauritius worldwide whether The holding structure of the Company is set out on already in employment or newly recruited. Whilst page 178 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, 2016.

Shareholder Direct Indirect Effective

% % %

Air Mauritius Holding Ltd 51.00 - 51.00

The Government of Mauritius 8.37 36.05 44.42

The State Investment Corporation Ltd 4.54 9.19 13.73

Rogers & Company Limited 4.28 9.24 13.52

Compagnie National Air France 2.78 5.72 8.50

Air India 2.56 4.50 7.06 Air Mauritius Annual Report 2015/16 33

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Corporate Governance (Cont’d)

Communication with Shareholders Receipts and Returns to Shareholders The Company maintains regular contact with its larger institutional shareholders through its Dividend Policy meetings with the Chairman, the Chief Executive The Company has a policy of paying 30% of Officer and the Executive Vice President-Finance. profits each year as dividend, subject to the In addition, annual stockbroker and investor events solvency test. In determining the level of dividend, are held to inform the public on the performance consideration is given to the Company’s future of the Company. The Board also receives regular funding requirements. The directors have not feedback on investors’ views. Copies of any news recommended any dividend for the year ended releases and presentations to investors are made March 31, 2016 in view of the major investment in available to the public through the Company’s Aircraft that the Company intends to undertake in website, www.airmauritius.com. the forthcoming financial years.

The Annual Meeting gives a reasonable Shares and Shareholders opportunity to the Board to discuss all matters relating to the Company and its performance with The authorised share capital of the Company is shareholders. At these meetings, issues related MUR 2,000,000,000 (EUR 81,566,000) divided to corporate governance, Company operations into 200,000,000 ordinary shares of MUR 10 each. and performance are raised by the shareholders The number of ordinary shares issued and fully paid and responded to by the Directors. In addition, in Air Mauritius Limited as at March 31, 2016 was the Chief Executive Officer’s address at the 102,305,000 shares (EUR 41,724,000), the same Annual Meeting responds to any issues raised by as in the previous financial year. In accordance with shareholders in writing, in advance of the meeting. the Company’s constitution, all ordinary shares Shareholders also express their views freely by have equal rights to dividends and capital and each voting for resolutions at the Annual Meeting. share carries one voting right.

Donations Capital Structure Shareholder Rights As in previous years, the Group and Company Air Mauritius Holding Ltd whose registered office did not make any donations to political parties. is at Air Mauritius Centre, President John Kennedy The Company continued to provide support in the Street, Port Louis is the holding Company of Air form of rebated tickets and promotions to social Mauritius Limited. The ultimate controlling entity is organisations. No donation in cash was made by the Government of Mauritius. At March 31, 2016, Air Mauritius Limited during the financial year under the shareholding of Air Mauritius Limited was as review. follows:

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 Financial Statement for the year 2015/16 as disclosed in note 4.3 of the Financial Statements. 34 Air Mauritius Annual Report 2015/16

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Corporate Governance (Cont’d)

Receipts and Returns to Shareholders (Cont’d)

Shareholding of Air Mauritius Limited as at March 31, 2016

Number of shares (of % voting rights in Ordinary Shareholders MUR 10.00 each) Air Mauritius

Air Mauritius Holding Ltd 52,175,550 51.00%

The Government of Mauritius 8,564,658 8.37%

The State Investment Corporation Ltd 4,646,265 4.54%

Rogers & Company Limited 4,379,344 4.28%

Compagnie Nationale Air France 2,841,986 2.78%

Air India 2,617,098 2.56%

National Pensions Fund 2,078,508 2.03%

The Mauritius Commercial Bank Ltd (A/C The Mauritius Development Investment Trust Co Ltd) 1,319,929 1.29%

Other Shareholders 23,681,662 23.15%

Total 102,305,000 100.00%

The shareholder analysis at March 31, 2016 was as follows:

Range of Shares No. of Shareholders No. of voting rights % of share capital % of all shareholders

1 - 1,000 10,483 3,687,528 3.6 86.1

1,001 - 5,000 1,140 2,608,031 2.6 9.4

5,001 - 10,000 245 1,812,120 1.8 2.0

10,001 - 25,000 165 2,708,550 2.6 1.3

25,001 - 50,000 64 2,275,922 2.2 0.5

50,001 - 100,000 40 2,769,426 2.7 0.3

100,001 - 1,000,000 34 7,820,085 7.6 0.3

Over 1,000,000 8 78,623,338 76.9 0.1

Total 12,179 102,305,000 100.0 100.0 Air Mauritius Annual Report 2015/16 35

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Corporate Governance (Cont’d)

Receipts and Returns to Shareholders (Cont’d)

Major clauses in the Memorandum and Every instrument of transfer of shares shall be Articles of Association of Air Mauritius Limited accompanied by a declaration signed on behalf In order to protect the operating rights of the of the transferee in a form determined by the Company under the air services agreements, the Board stating whether or not the transferee is on number of ordinary shares held by non-Mauritian registration a Mauritian national and whether any nationals is monitored by the Directors. Presently, person other than a Mauritian national will hold there are no large interests of single or associated or have interest in the shares referred to in the non-Mauritian nationals in the shareholding of the instrument of transfer. Company. Directors Issue of Shares The number of Directors shall not be less than nine Subject to the provisions of the Companies Act (9) members or more than fifteen (15) members. 2001 (the “Act”) and, without prejudice to any Not less than two thirds of the Directors of the special rights previously conferred on the holders of Company shall be Mauritian citizens. any existing shares or class of shares, any share in the Company may be issued either at par or at a Qualification of Directors premium or (subject to Section 54 of the Act) at a No Director shall be required to hold shares in the discount or by way of bonus and may, in accordance Company to qualify him for appointment. with any applicable enactment or rule of law, issue shares of no par value, and any shares issued by Appointment of Directors the Company may be issued with such preferred, deferred, other special rights or restrictions, whether The Directors of the Company shall be appointed in regard to dividend, voting, return of capital, or by the Company in Annual Meetings. otherwise, on such terms and conditions and at such times and in such manner as the Company Related Party Transactions may by ordinary resolution determine. Related Party Transactions are disclosed in note 32 of the Financial Statements. Transfer of Shares Any member may transfer all or any of his shares Shareholders’ Information by instrument in writing provided that in the case Information relating to share price, reporting dates of any shares of the Company which are traded on and meetings of shareholders are shown on pages the Mauritius Stock Exchange the transfer may be 184 and 185. in such form as is permitted by the Mauritius Stock Exchange. 36 Air Mauritius Annual Report 2015/16

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Sustainability Report

Air Mauritius has fulfilled the mission of bridging August 2009, to encourage Mauritians to visit the Mauritius to the world for nearly half a century island has contributed immensely to the growth of now. Consistently committed to the safety of tourism in Rodrigues. This program complements its passengers and to service excellence, the the active participation of Air Mauritius in the Company has thrived and preserved its position as promotion of the Rodrigues destination. market leader in Mauritius. Residents of Rodrigues also benefit from special air The airline is one of the largest companies of the fare packages and Air Mauritius provides assistance island in terms of turnover and is a leading employer, for medical emergencies and transportation of providing for around 2,700 Mauritian jobs. As a medical items to and from Mauritius. responsible Company, Air Mauritius maintains a strong relationship with its stakeholders as well as In June 2016, Air Mauritius will take delivery of a with the community at large. new ATR72 which will reinforce operations on Rodrigues. Looking beyond Corporate Social Responsibility, Air Mauritius’ commitment to sustainable Amédée Maingard Foundation development aims at creating shared value for the Through the Amédée Maingard Foundation, community as it pursues its business objectives. Air Mauritius supports high potential Mauritian students, usually first ranking students, in Tourism Partnering the tourism industry and Hospitality Management courses at the As the national airline of Mauritius, Air Mauritius University of Mauritius, the University of Technology shares common strategic objectives with the and the Ecole Hotêlière Sir Gaëtan Duval. country and its economic partners. It supports several economic sectors, mainly the tourism The foundation pays for their course fees and industry. grants them a monthly stipend during the entire duration of their Degree or Diploma programmes. Europe remains the main market for the industry, but in recent years, the airline embarked on Health a strategy to rebalance growth to other high Air Mauritius empathises with fellow Mauritian potential destinations in Asia and Africa. It flies to citizens when travelling overseas for medical 6 destinations in Africa and 4 destinations in India. assistance and offers discounted fares for medical The airline has recently started to develop the treatments not available locally. This facility has also Chinese market and currently operates to Hong been extended to two accompanying relatives. Kong, Beijing, Shanghai, Chengdu and soon to Guangzhou. Leisure and sports Air Mauritius also spares no effort in promoting the The Company helps national sporting talents Mauritius destination with special offers on several develop their skills. It has a discounted ticket routes. It also supports destination promotion and programme that helps athletes to travel abroad for facilitates trade partners when they travel overseas training and for international competitions. to attend trade fairs. Air Mauritius supports the building of national Territorial continuity with Rodrigues image through the showcasing of Mauritius arts and culture in recognised forums worldwide. Local Air Mauritius has participated in the development artists travelling abroad to give performances of Rodrigues for over 40 years now by connecting benefit from special discounts within a well-defined the island to mainland Mauritius and the rest of policy framework. the world. The special programme introduced in Air Mauritius Annual Report 2015/16 37

Annual Report and Business Review

Sustainability Report (Cont’d)

Education and training It is anticipated that the report will be adopted Air Mauritius strongly believes in the building of after the assembly in 2016. However, the revision the human resource capital of the country. The of the EU ETS Directive can only be implemented Company assists students who travel abroad for with the consent of the Commission, the European further studies by allowing them a defined amount Parliament and the European Council. Failing of excess luggage free of charge as well as special that, the EU ETS for aviation would cover flights discounted student fares. Accompanying parents departing from airports in the European Economic also benefit from special fares to attend graduation Area (EEA) and arriving to other airports in EEA or ceremonies. to third countries and, if not exempted through delegated legislation, incoming flights to airports in the EEA from third countries. Inclusion of both Carbon Emission flights to and from third countries would largely In 2012, the European Union (EU) launched an increase the exposure of the majority of airlines, emissions trading scheme (EU ETS) that intended including Air Mauritius. to apply a carbon emission charge to airlines flying into and out of the Eurozone. Following international Under the French Competent Authority DGAC, opposition, the EU reduced the coverage of the Air Mauritius has voluntarily complied with the scheme to flights within the EU, and to allow time for EU ETS since 2012 and continues to do so. Air the development of a global market-based approach Mauritius takes its environmental responsibilities by the International Civil Aviation Organisation (ICAO). seriously and intends to continue to improve its In October 2013, the ICAO General Assembly agreed environmental efficiency and to minimise emissions. to develop a global market based measure by 2016. As a result of this progress at ICAO, the EU Health and safety status introduced a regulation to continue with EU ETS but restricted to intra-Europe flights until 2016. The financial year 2015/16 had been a challenging year for health and safety management at Air Reductions of carbon emissions by the Air Mauritius with the pursuit to ensure compliance Transport Industry remain an important part of with local Occupational Safety & Health (OSH) and the EU’s overall 2030 greenhouse gas cut targets. other applicable legislations while adhering to other The General Assembly of ICAO is being held in standard OSH requirements. September/October 2016 and there is a pressing need to develop an offsetting system to achieve The key OSH actions for the financial year 2015/16 carbon neutral growth from 2020 onwards. This were: is evidenced by the public consultation about market-based measures to reduce climate change (i) Raising OSH awareness among employees impact from air transport emissions. The Company has provided OSH awareness training to all Cabin Crew and Aircraft & Workshop The European Commission plans to release a report maintenance staff at Technical Services Hangars on actions to implement the global market-based including Ground Support Services hangars measure for Air Transport including a proposal revolving around safety themes such as fire for regulation amending the EU ETS Directive safety, noise at work, working at height, working to ensure the appropriate coverage of aviation in confined space, manual handling and inflight activities. It should detail to which extent the EU cabin safety. On the other hand, courses were Emissions Trading Scheme (EU ETS) should cover run on ramp safety, human factors and Safety the currently exempted flights to and from airports Management System for Ground Operations outside Europe as from 2017. The exact content of employees. the proposal will depend on developments at the ICAO assembly. 38 Air Mauritius Annual Report 2015/16

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Sustainability Report (Cont’d)

(ii) Undertaking a review of the OSH Risk (v) Improving and testing emergency Assessments preparedness plans OSH risk assessments had been carried out and Ensuring that employees or visitors would be safe updated in line with requirements under the OSH in the event of any adverse incident or emergency Act 2005 and it is on-going based on review of was one of the Company’s mandate. In line with legislations or organisation, technological and this commitment, fire drills had been organised work-method changes. at the Airport (including at the Hangars), Head Office and Ebène while employees working at the (iii) Improving OSH Communication Passengers Handling and Lounge were involved in airport emergency exercises. As part of the On-time meetings of the Corporate Safety & Health responsibility to safely evacuate sick and injured Committee had been held regrouping management employees from airside, the Company has trained and employees for promoting the OSH cause at its first aiders on handling sick or injured employees Air Mauritius. On the other hand, there had been using stretchers and blankets. Training materials set up and proper functioning of departmental and posters for sensitisation on ZIKA disease Safety & Health Committees in almost all clusters had already been prepared for dissemination to for enabling OSH matters to be addressed at the employees and posting in the Company Share business units’ level and allowing an enhanced Point. The Communicable Diseases Procedures participation of employees, supervisors and line have been updated with emergence of new managers in OSH matters. OSH working groups communicable disease. had been established in Inflight Services, Technical Services and Cabin Operations to handle specific OSH matters. Onsite walk the talk or tool box (vi) Promoting Health at workplace meetings had been conducted during routine visits Several health promotion interventions had been of the health and safety practitioners. organised namely:

Health and Safety Office has provided professional ● Talk on breast cancer services to the Procurement Office, Transport ● Department and Facilities management Unit Talk on HIV AIDS to ensure compliance with health and safety ● Nutritional talks requirements for procurement of services and goods as well as for meeting OSH obligations from ● Non-Communicable Diseases Screening contractors. On the other hand, mandatory medical examinations are on-going for employees who are (iv) Continuing OSH policies review and required to undergo health surveillance. establishing new OSH policies There had been a review of existing OSH policies (vii) Environmental Protection while other health and safety policies and procedures had been established namely, the In its endeavour to be an eco-friendly responsible Students OSH Placement Policy, Contractors’ organisation, Air Mauritius had continued its Policy, Drugs & Alcohol Management Policy, environmental protection programme by adopting Injury Leave Policy, OSH Risk Assessment Policy, safe disposal of unserviceable tyres, batteries, Personal Protective Equipment & Clothing Policy, chemicals and used oils. Confined Space Policy and the Fire Evacuation Procedures. Air Mauritius Annual Report 2015/16 39

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Sustainability Report (Cont’d)

(viii) Accident and Incident Reporting partners based at the Airport namely, Airports Air Mauritius had two accidents involving its of Mauritius Co. Ltd (AML), Airport Terminal employees leading to minor injury which were Operations Limited (ATOL) and Department of notifiable and reportable to the OSH enforcing Civil Aviation (DCA) to improve the environmental agency during the financial year 2015/16. performance of the Company whilst involving the Moreover, two additional notifiable and reportable various departments cross-functionally and also accidents were registered in the sites of the its direct business partners at the airport to benefit Company involving Airmate staff. the reduced regulatory compliance risk, improved financial benefits from resource saving and demonstration of good environmental governance. Corporate Social Responsibility Air Mauritius has set up a Corporate Social (iii) Bringing an Ebony Forest Back to Ebène Responsibility (CSR) Unit which has for prime function to incorporate social and environmental As one of the stakeholders of the Business Parks of considerations in its decision-making and be Mauritius Limited (BPML) where part of employees accountable for the impact of its decisions and are based particularly at Ebène Cyber City, Air activities in society and the environment. This Mauritius contributed to the initiative of having an implies both transparent and ethical behaviour that endemic mini-park at Ebène, thus benefiting the contribute to sustainability of the Company, being employees and visitors to use and enjoy, particularly in compliance with applicable law and is consistent during lunch time and breaks. Air Mauritius through with international norms of behaviour. its volunteer group of employees participated in the first phase of the project in the clean-up campaign As part of the awareness programme, the CSR together with other stakeholders by removing 320 unit met the internal stakeholders, members kgs of solid wastes and 100 kgs of recyclables. of the unions, enabling them to have a better understanding of the concept of Corporate (iv) Save a life - Give Blood Sustainability and Social Responsibility. The Air Mauritius employees as responsible corporate following key objectives were met: citizens contributed more than 180 pints of blood to the Ministry of Health and Quality of Life to (i) CSR Strategy maintain the stock level of blood bank. A CSR strategy was developed with the assistance of Prof. Michael Hopkins from UK and the (v) Fight against gender-based violence Company’s aim is to be in line with best practices Air Mauritius Managers having a mixed workforce in the airline industry with regards to Corporate under their purview met with the Corporate Sustainability and Social Responsibility. The Sustainability and Social Responsibility (CSSR) unit Company is embarking on the ISO 26000 Social and the representative of the Ministry of Gender Responsibility. Equality, Child Development and Family Welfare and elaborated on the issue of productivity at work (ii) IATA Environmental Assessment linked with gender based violence. The Corporate Social Responsibility unit of Air Mauritius hosted a multi-stakeholder (vi) Assisting Needy Children workshop on Aviation Environment based on Air Mauritius and its employees joined together to the IATA Environmental Assessment (IEnvA) donate educational materials to 200 needy children program. Various departments of Air Mauritius of the Tombeau Bay, Cite La Cure and at the were represented at the workshop as well as Curepipe Shelter to support and encourage them representatives of the Company’s business in their schooling. 40 Air Mauritius Annual Report 2015/16

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Sustainability Report (Cont’d)

(vii) Environment problems including flight delays, staff shortages can The One Take-off One Tree program gained often escalate and impact on revenues or the brand. momentum through increased involvement of Rodriguans who planted 4,727 endemic trees The Company ensures that it makes full use of on the island. Furthermore, Air Mauritius through its Enterprise Risk Management (ERM) as an its partner Mauritius Wildlife Foundation (MWF) integrated process for planning, organising, leading conducted an awareness program to the young and controlling activities of the organisation in order generation of Rodrigues between 12-20 years to minimise the effects of all types of risk on its on the importance of conservation works on rare capital and earnings. Through its ERM program, plants and species, habitat restoration, effect of the Company is able to take a holistic view of its climate change, impact of human activities on risk profile and not compartmentalise or “silo” risks, the environment and measures to reduce related to recognise the correlation between risk types and hazard. In addition, 4,277 trees were planted in the put in place controls to mitigate future loss events. mainland as well on the Round Island and Ile aux Aigrettes. Air Mauritius volunteer group participated The Company recognises that its ERM program with the staff of MWF in creating a nesting site at Ile does not only identify “threats” but also discern aux Aigrettes for the birds. They also participated in “opportunities” and proactively addresses risks the weeding and planting of plants at Mondain and and opportunities. in removing domestic wastes at the Ile Aux Phares as part of the sustainable projects for responsible Risk Management Structure tourism. Effective ERM is based on policies and processes that are established by the Company’s Board (viii) Social Development Goals (SDGs) of Directors with overall management of risks In collaboration with the NGO Association Airline delegated to a subcommittee of the board - the Ambassadors and the Paille en Queue Social Risk Management Steering Committee (RMSC). Club of Air Mauritius, a mini symposium was held The RMSC is responsible for reviewing policies, and the 14 Social Development Goals of the United defining risk tolerance and approving procedures Nations were enumerated and linked with the and objectives. RMSC meets on a regular basis Corporate Sustainability and Social Responsibility. to set risk management policies and procedures, On that same occasion, the project of protecting review, assess and ratify risk management activities. the children from sexual exploitation was launched The Company has a Risk Management Manual giving the outgoing passengers the possibility to which provides guidelines for the establishment contribute to the good cause by donating their and implementation of the ERM process. unused coins to the NGO, Association Airline Ambassadors. The accountable managers of the department are responsible for risk management under a clear Enterprise Risk Management and predefined delegated authority. The Treasury & Risk Management Section works with Risk The risks that the Company faces on a daily basis Owners to assist, advise and implement proactive are numerous; ranging from a rare event, fatalities risk management disciplines for mitigating risks involving aircraft making headlines which are identified, to more sustainable levels. potentially devastating to an airline’s reputation, to events like a financial mismanagement or a bad maintenance record can impact on the brand name and ultimately the bottom line. Smaller matters, but significant in aggregate, such as daily operational Air Mauritius Annual Report 2015/16 41

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Enterprise Risk Management (Cont’d)

ERM Process - Organisation chart

Ultimate responsibility for effective management of risks - set strategies Air Mauritius for the identification, analysis and Board management of the enterprise-wide risks of Directors

Risk Management Delegation

Responsible for reviewing policies, Risk defining risk tolerance and approving Management procedures and objectives Steering Committee

Report and advise on critical risks

Works with each department individually to assist, advise and implement Treasury proactive risk management disciplines & Risk for reducing risks identified - Review the Management risk matrix annually - Define the Risk Section Management Manual

Collaborate and support

Responsible for risk management Departments and continuity at departmental level – and Update Risk Register annually – Conduct Accountable action plans in order to reduce risks to Managers more sustainable level 42 Air Mauritius Annual Report 2015/16

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Enterprise Risk Management (Cont’d)

Risk Management Methodology The process for risk mapping update relies on the The goal of Enterprise Risk Management is to followings: identify and address all potential risks and their root ● causes. The ERM program at Air Mauritius allows A yearly review, performed through on-site it to manage risks by identifying the business cross-functional workshops involving Risk functions, processes and activities that created Owners/Teams them and then developing and implementing ● A continuous update, in case of modifications strategies to minimise the potential exposure. on risks already identified, new risks or new mitigation plans identified/performed all through ERM workshops (departmental and cross- the year on the basis of information provided by functional) are conducted annually with the concerned Risk Owners/Teams assistance of a consultant to ensure that the full spectrum of risk - strategic, operational, financial ● A Risk Register is generated that includes and regulatory is identified, evaluated, managed all risks information; “corporate” levels risks and monitored. The risk matrix for both financial are identified using pre-defined parameters. and non-financial risks is then reviewed. A bottom The results of the risk mapping update and up approach is adopted for the review exercise, “corporate” level risks are reported to the Risk whereby all risks that may cause a failure to achieve Management Steering committee (RMSC). corporate objectives are identified and evaluated at ● The RMSC formulates the strategy for additional departmental and cross functional level. The Risk works for instance, currently, the formulation of Mapping is hence updated. « Focused Risk Mitigations Plans » on selected “corporate” level risks and implementation of action plans as approved by RMSC/Board.

Actions Performed on an Annual Basis

1 Risk identification 2 Risk Assessment 3 Risk Mitigation

• Review list of risks identified • Assess new risks • Define further risk treatment during last update measures • Review action plans which were • Identification of new risk issues implemented since last update • Conduct actions to set up new controls • Update risk assessment taking into account environmental • Report on actions performed evolutions and new controls in place

Collaborative work between Treasury & Risk Management Section, User Departments, Risk Owners Air Mauritius Annual Report 2015/16 43

Annual Report and Business Review

Enterprise Risk Management (Cont’d)

Risk mapping is based on:- ● Identify other actions plans, additional to the current ones, that would further mitigate the ● Cross-functional workshops (rather than risks; workshops at departmental level). This allows ● to improve coherence in risk assessment at Build up business case where relevant (more enterprise level as well as a better alignment in focused and detailed action plans with time risk mitigation plans definition and achievement. frame and budget); and ● ● Scenario-based assessment, with the effect of The results of the exercise have been presented introducing more objectivity and traceability in to the RMSC and eventually the Board. assessments. The scenario-based assessment approach supports that multiple loss scenarios (c) The introduction of a web application dedicated are possible for a defined risk and a more efficient to the collection of information on risk and its way in risk mapping was to choose a “reference” analysis that will enable to track and share risk scenario in order to represent the risk. The information across the organisation likelihood and impact of the risk are determined through the reference scenario. The chosen Major Risk Areas scenario has to be “serious” since the concern By nature, the aviation industry is a highly is mainly for major risks control and mitigation, specialised and regulated one, requiring but needs to stay “plausible” because the risk adherence to specific rules and regulations in the mapping has to stick to reality. The scenario- conduct of airline business and other civil aviation based approach helps risk mapping assessments activities. The scope of such regulation covers to be traceable and understandable. airport infrastructure issues, slots and capacity management, route flying rights, consumer rights ● The concept of risk tolerance has been and denied boarding, flight cancellation and delays, introduced in order to be able to challenge environmental requirements, security etc. The current risk level with regards to Air Mauritius Company’s ability to comply with and influence any financial resources and capacity. This is helping changes in these regulations is key to maintaining to better define risk mitigation priorities. its operational and financial performance.

Actions Performed In 2015/16 The major risks categories identified during the Risk (a) Workshops to update Risk Registers were Management exercise are categorised below:- undertaken in September 2015; the Risk Management Steering Committee (RMSC), 1. Market Competition Risks (Competition from reviewed the results of the risk mapping and the other airlines, Increased competition from actions defined to improve risk mitigation across destinations) the organisation. Competition is becoming fiercer in Mauritius with airlines bidding for broader air access with (b) The initiative launched by the RMSC for the increased frequencies and novel offers from other definition and implementation of further mitigating destinations. The aviation markets continue to action plans on a selection of risks. Risk Owners be liberalised with competitors maintaining lower and Action Owners worked out their respective cost structures coupled with other competitive mitigation plans based on the following:- advantages. The downward pressure on yield ● List down all the action plans currently in place/ persists as the Company tries to stimulate or in the process of being implemented; demand. The Company has taken robust and proactive measures in order to make its turnaround ● Assess that these action plans adequately sustainable in the longer term. mitigate the risks; 44 Air Mauritius Annual Report 2015/16

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Enterprise Risk Management (Cont’d)

Management has responded to these risks by 3. Fleet and Network Risks (Delayed fleet implementing a number of initiatives: renewal, loss of a code share partner airline) The Company operates a number of aircraft based (a) Aggressive actions to counteract competitors’ on a certain number of economic assumptions. move; When economic cycles change, it is very difficult for (b) Regular frequency reviews and modulations; the Company to readjust the fleet size accordingly. The Company addresses this issue by: (c) Market intelligence and feedback; (a) Having a mix of new and old aircraft in its fleet so (d) Network and fleet review in the longer term; that unencumbered aircraft can be leased out or (e) Partnerships with other airlines; disposed of at short notice; (f) Review of regional strategy and fleet; (b) Financing its aircraft on both financing and operating leases to increase flexibility; (g) Creation of Air Mauritius Holidays Limited (online tour operator); (c) The introduction of new generation, more fuel efficient aircraft in the fleet; and (h) Maintain good and long term relationship with customers (marketing campaign); (d) Fleet flexibility, swap in aircraft types, decision deadline to confirm delivery, option rights (i) Superior service across all value chain; and and purchase rights are some of the levers considered. (j) Incentive mechanism for agents and customers, for e.g the “Travel Extravaganza” campaign. 4. Leadership Risks (Organisation not aligned The Company also remains alert to all on corporate strategy, Inadequate external developments in that area and constantly reviews communication) its risk management strategies. The Company has a Crisis Communication Process within its Crisis Management Centre, a 2. Business Model Risks (Economic Crisis, No Media monitoring set up, PR Agencies across the Long Term Sustainability) network, a restricted external communications policy and a Social media communication in place Failing economies, mostly in Europe have as mitigating actions. contributed to a sluggish airline environment. The global economic crisis has gathered momentum The Company also communicates regularly with its and is now affecting all countries with impact on Team members to present the corporate strategy consumer behaviour. The Company recognised by way of written communication, collaborative the importance of revamping its business model. It management workshops and structured remained focused and implemented measures that departmental meetings. were crucial to ensure recovery and thereafter long term sustainability of the airline. Designed to bring recovery in the short term and give resilience to the 5. Fraud Risks (Embezzlement, Banking Fraud business model to face the increasingly challenging Cards) environment, the 7-step Recovery and Game Air Mauritius mitigated this risk by having a proper Changer plan’s proactive measures focused on and efficient system of internal controls corporate- improving the Company’s margin and profitability wise which is subject to regular internal and and preparing the Company for the post economic external audits. The internal audit department crisis. reports risk issues identified directly to the audit committee together with the actions taken to remedy the weaknesses. Air Mauritius Annual Report 2015/16 45

Annual Report and Business Review

Enterprise Risk Management (Cont’d)

The Company has a detailed Fraud Prevention ● Having off-site back-up systems, replication of Policy which outlines procedures for prevention, servers between 3 sites (airport, Ebène Office detection and investigation of suspected frauds and Head Office) and alternate disaster recovery and irregularities. Staff and other stakeholders sites; acknowledge the need to act with integrity and ● report all suspicious transactions to relevant Ensuring maintenance and regular checks; authorities in accordance with the Code of Business ● On-time renewal and upgrade of main servers Practice and Ethics, Company procedures and and storage equipment to replace ageing the requirements of the law. The Code, which is hardware so as to minimise system downtime/ applicable to all Directors and staff, is one of the unavailability that can result from hardware key pillars in the implementation of high standards failure; in corporate governance throughout the Group. ● Regular upgrade and reinforcement of current 6. Major Events (Aircraft Crash, Pandemic Alert) backup systems with new enhanced features e.g. duplication for faster backups, synthetic (a) An aircraft crash may cause major disruptions backups; to the operations. The Company ensures that its Emergency Procedures Manual is ● Implementation of latest and more robust regularly reviewed and updated with the replication systems and data from main data support of consultants, to meet and align with centre in Ebène to disaster recovery site; best practice standards. At regular intervals, ● Having simulations of redundant and fail- classroom training on emergency procedures over systems, rehearsal of reinstallations and are undertaken and crisis simulations are restorations from backup tapes, testing of regularly carried out to familiarise staff with disaster recovery site; and those procedures and ensure that everyone is clear about his role in emergency situations. ● Computer security standards, including ongoing backup structures, have been developed in (b) Pandemics and Epidemics: The Company can house and by third parties to ensure that IT and be severely hit by epidemics and pandemics other systems are reliable and well protected as well as other health risks; risks which are against threats of hackers and viruses. beyond its control. The Company can only, to a certain extent, control the impact of these risks (b) Industrial relations on its business performance by the monitoring of health alerts and flights modulations. The Company’s unionised workforce comprises of six unions. Providing and maintaining an unfailing, trustworthy, healthy, safe and secure working 7. Disruptions in Operations environment is of paramount importance to the (a) IT as Facilitator organisation. Collective bargaining takes place on The modern working environment relies heavily a regular basis and a breakdown in the bargaining on technology and e-commerce to deliver process could disrupt operations and adversely key functions. The impact of unavailability affect business performance. Management and breakdown of IT services hosting critical recognises this and encourages effective applications for e.g. E-mail services, ERP, communication with the Unions to maintain this Maintenix, AF inventory is immediate and potentially state of affairs. devastating to the business. The Company mitigates these risks in the following ways: 46 Air Mauritius Annual Report 2015/16

Annual Report and Business Review

Enterprise Risk Management (Cont’d)

(c) Business Continuity importance that it places on communication with A range of events can severely disrupt organisations its internal and external stakeholders by bringing and bring it to a standstill. The Company has under one roof all the communications functions considered all foreseeable eventualities and has including management of the corporate identity, identified the actions it needs to take to respond to brand, corporate affairs, events management, a crisis for different categories of risk. corporate social responsibility and employee and investor communications. It focuses on The Business Continuity Programme includes further improving governance issues and ensures backup procedures, standby facilities as well as consistency in its relationship with local and emergency procedures. It forms an integral part of international institutions, shareholders and other the management of enterprise wide risks covering investors, the media and the general public. Its ground operations, aircraft operations, information communications systems and public relations technology security and safety. machinery are well prepared so that both staff and general public are well informed about the Company’s activities and performances. 8. Safety and Security The safety and security of the Company’s 10. Legal and Regulatory Risks customers and employees are fundamental values for the Company. Failure to prevent a major The Company’s business and reputation may be security or safety incident would harm both the harmed if it fails to comply with the applicable new Company’s operations and financial performance. or changed laws and regulation or governance The Company’s business depends on the absolute standards or changes in interpretation of laws and assurance of safe and secure operations, both regulations. It also has to manage the risk of loss that in the air and on the ground and has in place a may be caused by a defective transaction, a claim flight safety and security policy that ensures that resulting in liability for the Company or a failure to priority is given to this objective for the safety of its adequately protect assets owned by the Company. passengers. The Company actively monitors these risks through It acknowledges the duty of care it owes to its its Legal Section which ensures that all contracts shareholders and stakeholders and is committed are properly vetted and that legal risks pertaining to establishing and sustaining a culture of safety to these agreements are adequately understood, and security within the organisation. properly identified and integrated into strategic decisions. 9. Reputation Insurance The Company faces reputational risk and consequently the loss of public confidence when it The Company subscribes to essential insurance is confronted to a negative perception. It recognises covers of types customary in the airline industry, reputation as an ongoing risk that can adversely designed to protect against loss exposures that or beneficially impact the organisation’s reputation could result in bankruptcy and at amounts deemed and the very survival of its business depends on reasonable and adequate to protect its assets, to meet continued credibility and trust. It therefore works its liabilities, to comply with civil aviation regulations constantly to improve its image with all stakeholders, and to comply with credit and lease agreements. maintaining their trust and confidence. The policies principally provide “All Risks, War and Terrorism” coverage for loss or damage to aircraft, The Company also acknowledges that reputational engines and spare parts, passengers and third party risks may occur as a direct result of people failing liability, property damage, cargo and baggage liability to communicate properly. It demonstrates the and employee liability. Air Mauritius Annual Report 2015/16 47

Annual Report and Business Review

Enterprise Risk Management (Cont’d)

Claims not covered by or exceed insurance limits (a) Foreign Exchange The Group believes that its insurance covers would The currency pair to which the Company is most substantially mitigate the effect of claims likely exposed is the EUR/USD. Indeed, the revenue to be brought against the Group in foreseeable stream of the Company is principally in Euro or circumstances. However, even though the Group Euro correlated currencies. On the other hand, takes care to update its limits based on worldwide the Company pays a significant proportion of its trends, insurance limits can sometimes be expenses in US dollars, a currency in which it earns broken and uncovered claims may emerge with a smaller proportion of its revenue. As mentioned consequent risk of additional cost or loss. above, to mitigate the exposure to EUR/USD volatility, the Company has cash flow hedges in 11. Financial Risks place. As an airline with worldwide operations, Air The Company continues to report its Financial Mauritius is exposed to financial risks relating to Statements in Euro, and consequently, the fluctuations in exchange rate, jet fuel price and depreciation of the Euro vis a vis the US dollar interest rate movement, as well as credit and represents a risk which the Company needs to liquidity risks. The objective of the financial risk manage. An adverse movement in EUR/USD management at Air Mauritius is to minimise the will result in higher USD denominated liabilities negative impact of these market fluctuations on the translated. Company’s earnings, cash flows and equity. During the financial year 2015/16, the EUR/USD The Board of Directors sets the Risk Management traded within a wide range – from a low of 1.0521 policies and objectives of the Company, and to a high of 1.1714. A poor economic background lays down the parameters within which the and diverging monetary policies kept the European various aspects of Treasury risk management are single currency under heavy pressure. Mounting operated. The Board through its Risk Management speculation of a US rate rise pushed the USD Steering Committee (RMSC) has approved a Risk to trade higher. The Euro extended losses amid Management Manual, which outlines the Company Greece’s debt talks and growing speculation of policies and procedures for managing corporate a Grexit. The Euro was undermined as Greece and asset financing and financial risks. missed the EUR 1.5 billion IMF repayment due on June 30, 2015. Despite Greek voters In carrying out its hedging activities and overwhelmingly rejecting the terms of a rescue implementing its risk management strategy, Air package at a snap referendum, Greece was forced Mauritius is guided by the provisions of its Risk to capitulate to an even more onerous package, Management Manual. The manual requires that the only way for the country to remain in the Euro the Company be hedged against variations in jet bloc. fuel prices and exchange rates. For jet fuel and foreign currency, the risk management framework The Euro gained after the US Central Bank prescribes for a minimum and maximum hedge September decision to keep interest rates on hold ratio of 30% and 70% respectively, over a disappointed investors. The common currency maximum tenor of 2 years, on a rolling basis. This was further supported as signs of slowing global is also subject to derogations, by the RMSC, based growth raised bets the Federal Reserve would not on particular circumstances like market conditions raise US interest rates until 2016. and financial status of the Company.

The RMSC is apprised of all the hedge transactions entered into by management. 48 Air Mauritius Annual Report 2015/16

Annual Report and Business Review

Enterprise Risk Management (Cont’d)

By November 2015, the Euro slipped below (b) Jet Fuel Price Risk the USD 1.06 level, on pace for its worst month Jet fuel is a major variable cost component for performance since March 2015, pressured by news Air Mauritius, accounting for over 30% of total that the European Central Bank (ECB) is willing to costs. With the considerable price volatility, fuel add more stimulus to the Euro zone economy to accounted for up to 45% of total costs in recent raise inflation. However, the Euro recouped some years. The risk associated to fluctuations in the of its losses after the ECB cut its interest rate on price of jet fuel is managed by various hedging deposits at its December 2015 meeting by just 10 techniques as well as the use of fuel surcharge, basis points, disappointing some Euro short-sellers whereby some of the cost is passed on to the who were expecting a sharper move. However, customer. Air Mauritius uses predominantly Brent the ECB’s main refinancing rate, which is the rate crude as proxy for monitoring and hedging against at which banks borrow from the ECB’s weekly increases in the price of jet fuel. During financial auction facility, and marginal lending rate, which is year 2015/16, Brent prices traded in the range of the emergency borrowing rate, were left untouched USD 27 – USD 68 per barrel. at 0.05 percent and 0.30 percent respectively. The ECB failed to deliver on high expectations for more Supply, inventories numbers and geo-political easing, setting up the Euro to spike higher against tensions have dominated oil market during the most major currencies. December 2015 marked a financial year. Brent price was trading at a high of new chapter for the United States and the global USD 68 per barrel during the financial year’s first economy, as the Federal Reserve announced a quarter mainly due to the geo-political tensions quarter-point increase in the target range for the in the Middle East. Saudi Arabia was stepping up federal funds rate, for the first time in nearly a its production levels in order to keep the pressure decade on high cost producers and therefore increasing its market share. The June OPEC meeting During the last quarter of the financial year, the outcome was to maintain output target, signaling EUR/USD traded from a low of 1.0711 to a high of it continued to stand by its decision to let market 1.1412. The ECB unleashed a raft of measures at forces determine prices. its March 2016 meeting, many of which the market had not expected, to stimulate Euro zone growth Supply and inventory numbers continued to and inflation. The ECB sliced its key refinancing dominate the scene during the second quarter rate to 0% while ECB President, Mario Draghi as well. Crude futures continued their downwards anticipated no more interest rate cut to revive trend - Russian production remained strong and the sluggish Euro zone economy. The common OPEC production made another high in July 2015 currency recovered on reduced expectations contributed mostly by Iraq and Saudi Arabia. for further rate cuts. The fall in Asian stocks and Concerns continued that Iranian barrels would add an oil slump below USD 30 per barrel eroded to the existing global surplus following the removal investor confidence in global economic growth and of sanctions. The continued increase in oil rigs boosted demand for save haven Euro. Dim global despite the fall in price in July 2015 was a further outlook put emerging market assets on the back sign that US oil producers would continue to lower foot, souring investor risk appetite. their breakeven cost and would continue to pump when possible despite the global oversupply. Furthermore, a number of central banks are looking to ease policy further. In an environment of weak growth and low inflation, bond yields will be lower for longer, certainly in Germany. Political concerns, such as the Brexit vote and Spain’s political rumblings, could still keep spreads of Euro zone periphery government bonds wide, if not spur further spread widening. Air Mauritius Annual Report 2015/16 49

Annual Report and Business Review

Enterprise Risk Management (Cont’d)

The bearish sentiment in the crude market persisted financial institution, including local Mauritian banks in the third quarter amid signs that the global glut is well defined. The Company has in place wherever would continue as the OPEC continued to pump possible ISDA (International Swap Derivatives more than its collective quota. Iran continued to Association) agreements with financial institutions show intentions to ramp up output significantly with whom it carries out hedging activities. These following easing of sanction. Oil stocks were at afore-mentioned measures ensure that credit risks record levels. The surplus had spread across the are minimised. US, Europe and Asia. (d) Interest rate risk Oil prices plunged below the USD 28 per barrel level at the prospect of Iranian oil flooding global Air Mauritius earnings are also affected by changes markets in January 2016. Worries about top in interest rates due to the impact of such changes energy consumer China and rising oil supply on interest income and expenses from short term continued to weigh on markets. The International deposits and other interest bearing financial assets Energy Agency increased its forecast for the global and liabilities. Air Mauritius mitigates this risk by oil surplus in the first half of 2016, with supply having a loan portfolio which carries both fixed and expected to exceed demand by 1.75 million barrel floating rates. Short term facilities also bear floating per day. interest rates.

Oil prices jumped amid renewed talk that OPEC (e) Liquidity risk might finally agree to cut output to reduce a world Liquidity risk is the risk that the Company will be glut and signs that the global surplus would ease unable to meet its obligations as they come due as US output declined. Increase in oil prices was because of an inability to liquidate assets or obtain limited as rising crude stockpiles kept supplies at adequate funding. The Company mitigates this their highest level. As oversupply is seen as easing, risk by careful cash flow planning and regular World Bank raised its forecasted oil price. Brent reviews of the facilities it has in place with its closed at above USD 40 per barrel on March 31, banking partners. 2016.

(c) Counterparty credit risk The Risk Management Manual requires that the Company deals with only financial institutions approved by the Risk Management Steering Committee. Overall exposure to each approved 50 Air Mauritius Annual Report 2015/16

Annual Report and Business Review

Remuneration Report

Remuneration and benefits

2016 2015 €’000 €’000 Remuneration and benefits of Mr M.Pillay,C.S.K. 12 - Remuneration and benefits of Mr A.N. Viljoen 213 451 Fees paid during the year to Non-Executive Directors* 80 65 305 516 Fees paid to the Executive Directors by subsidiaries 4 7 Fees paid to the Non-Executive Directors by subsidiaries 6 28 315 551

* Monthly fees paid to each Non-Executive Director amounts to MUR 15,000 (EUR 380) except for the Chairman who was paid a monthly fee of MUR 75,000 (EUR 1,900).

The fees exclude any amount of reimbursed expenses incurred wholly, exclusively and necessarily for the business.

The Company provides the Executive and all (ii) the loss of the Company resulting from any Non-Executive Directors with the privilege of a claim made against the insured for any wrongful reasonable amount of air tickets for themselves and act in the insured’s capacity as a director, officer their immediate family. The value of this privilege is or employee (in a managerial or supervisory not considered to be a part of their remuneration. capacity) of the Company but only when and to the extent that the Company has indemnified Particulars of service contract the insured for the loss. of Executive Director The limit of liability is: The term of the service contract of the Executive Director is for a period of 3 years ending March ● First cover: USD 10M in the aggregate (including 14, 2019 renewable at the Company’s option for defense costs); further periods of 3 years. The notice period for termination of the contract is 6 months. ● Excess Layer cover: USD 10M in the aggregate including costs and expenses. 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. Air Mauritius Annual Report 2015/16 51

Annual Report and Business Review

Remuneration Report (Cont’d)

Directors’ share interests

Ordinary shares held on March 31, 2016

Direct Indirect

Mr Megh Pillay, C.S.K. 620 620

Mr Bissoon Mungroo, G.O.S.K. 16,100 -

Mr Louis Rivalland 100 -

Auditors’ remuneration The remuneration payable to the auditors was as follows:

The Company Subsidiaries 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Audit services 127 113 15 13 Other services 13 39 3 3

Remuneration for other services is derived from the provision of tax advice and special reports on compliance with financial and regulatory matters.

Approved by the Board of Directors on June 13, 2016 and signed on its behalf by:

Dr Arjoon Suddhoo. FRAcS Mr Louis Rivalland Chairman of the Board Director & Chairman of the Audit Committee

Management Discussion and Analysis 54 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Global Airline Context

The International Monetary Fund (IMF) World ● Lufthansa introduced new services from Frankfurt Economic Outlook of April 2016 reports growth in with twice weekly A340 flights effective December global economic activity at 3.1% in 2015 compared 08, 2015 for the Winter 2015/16. to 3.4% in 2014. The growth in emerging and ● developing Asian economies namely China, Turkish Airlines introduced new services from India and ASEAN countries (Indonesia, Malaysia, Istanbul effective December 15, 2015 with three Philippines, Thailand, and Vietnam) has declined weekly A330 flights and a fourth weekly flight from 6.8% in 2014 to 6.6% in 2015. Similarly, the added between February and March 2016. growth in Sub-Saharan Africa has decreased from ● Condor has added a 5th B767 weekly frequency 5.1% in 2014 to 3.4% in 2015. On the other hand, between Germany and Mauritius in Winter the Euro area improved slightly from a growth of 2015/16. 0.9% in 2014 to 1.6% in 2015. ● Over and above its once weekly B787 flight from In its report on economic performance of the London Gatwick, Thomson Airways operated a airline industry in December 2015, International series of supplementary flights from Stockholm, Air Transport Association (IATA) announced record Copenhagen and Helsinki. net profit of USD 33 billion in 2015 with profit ● TUI Airlines Netherlands operated around margin of 4.6%, compared to USD 17.3 billion 16 charter round trips between Warsaw and and 2.3% respectively in 2014. The distribution of Mauritius from November 2015 to March 2016. the industry profit remained uneven with carriers in Latin America and Africa incurring losses. IATA ● China Southern Airlines increased its operations attributes the upward movement in profits to from one to twice weekly A330 flights from stronger demand and lower jet fuel prices. The Shenzhen effective January 12, 2015, but average Brent crude oil price was USD 55 per subsequently withdrew its operations in barrel in 2015 compared to USD 99 per barrel in November 2015. 2014. In 2015, whilst global passenger and cargo traffic grew by 6.7% and 1.9% respectively, there ● Air Seychelles added a 5th weekly flight from has been significant reduction in passenger and Seychelles as from February 2016. These cargo yields by 12% and 18% respectively. flights offer seamless connections to Mumbai and Paris via Seychelles. IATA projects an improvement in global industry ● Emirates operated 18 supplementary B777 profitability in 2016 with profit forecast of USD 36.3 flights from Dubai over and above its twice daily billion and profit margin of 5.1%. A380 frequencies. ● Air Austral launched 2 direct weekly ATR72 Air Mauritius Competitive Landscape flights between St Pierre Reunion and Rodrigues Air Mauritius has witnessed an intensification of during the Reunion peak periods. competition across its network with the following developments taking place during the financial year Competition will further intensify during 2016 with 2015/16: the resumption of operations by Edelweiss Airlines from Zurich and new services by Eurowings ● Austrian Airlines resumed operations from Vienna from Cologne and Evelop Airlines from Madrid. with a once weekly B767 flight as from October Other potential new operators include Hong 29, 2015 and with a second weekly flight from Kong Airlines, Air Asia, LOT Polish Airlines and December 20, 2015 to February 28, 2016. Ethiopian Airlines. Moreover, existing operators such as Turkish Airlines, Emirates and Condor will consolidate their services to Mauritius with additional frequencies and capacity. Air Mauritius Annual Report 2015/16 55

Management Discussion and Analysis

Network Developments Route Network

The salient features in term of network a) Online Destinations developments for financial year 2015/16 were the With the addition of Chengdu in July 2015, Air following: Mauritius operated to 21 online points as follows: ● With a view to developing Singapore as the hub in Far East Asia to support the “Air Corridor” Regions Destinations project announced by the Government of Europe Paris, London Mauritius, Air Mauritius has introduced direct operations to Singapore on the basis of 3 Asia Hong Kong, Singapore, Shanghai, weekly frequencies on the routing Mauritius/ Beijing, Kuala Lumpur, Mumbai, Delhi, Chennai, Bangalore, Chengdu Singapore/Kuala Lumpur and vice versa as from March 11, 2016. The timings of the flights have Australia Perth been worked out to optimise connectivity in Singapore and Mauritius hubs. Africa Johannesburg, Cape Town, Durban, Nairobi ● New online operation has been introduced to Indian Ocean Antananarivo, Saint-Denis, Saint-Pierre, Chengdu as a third point of call in mainland Rodrigues China effective July 06, 2015 on the basis of a once weekly A340 flight. b) Network Connectivity ● Given growing market potential of the Indian The Origin & Destination model has been market, a 4th weekly base flight has been added consolidated during the financial year 2015/16 to Mumbai effective start of November 2015. by leveraging on the hub structure at its base in Mauritius and the regional outstation hubs backed ● A third A319 base weekly flight to Nairobi has by airline partnerships, namely Paris for Europe, been operated effective July 2015 to support Kuala Lumpur and Singapore as from March 2016 Nairobi as a hub for northern and western Africa. for Far East, Perth for Australia, Johannesburg for ● In view of increasing demand for air travel to Sub Saharan Africa and Nairobi for Central and Rodrigues, especially with the launch of the Northern Africa. special fare from Rodrigues as from February 2015, a 3rd base flight has been added thrice weekly throughout the financial year 2015/16. This additional frequency has been converted to a 3rd daily service as from March 27, 2016. 56 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Route Network (Cont’d)

c) Codeshare Destinations Beyond Kuala Lumpur Beyond Paris (CDG) Under the cooperation with Malaysia Airlines, Air Mauritius had its code beyond Kuala Lumpur on Air Mauritius had its code as Marketing Carrier on the following 10 points as Marketing Carrier: AF operated flights beyond Paris Charles de Gaulle (CDG) to 35 destinations across eleven countries as follows: Malaysia Langkawi, Kuantan, Penang, Kota Bharu, Johar Bahru

France Brest, Bordeaux, Clermont-Ferrand, China Shanghai, Beijing Lyon, Montpellier, Marseille, Nice, Nantes, Singapore Singapore Pau-Pyrénées, Rennes, Toulouse Hong Kong Hong Kong Spain Barcelona, Bilbao, Madrid Thailand Bangkok UK Aberdeen, Birmingham, Edinburgh, London-Heathrow, Manchester, Newcastle Beyond Perth Germany Dusseldorf, Frankfurt, Munich The partnership with Virgin Australia allowed Air Mauritius to have its code on Virgin Australia Austria Vienna operated flights beyond Perth to 4 points, namely Italy Rome, Bologna Melbourne, Sydney, Adelaide and Brisbane.

Switzerland Zurich, Geneva, Basel Beyond Dubai Netherlands Amsterdam As Marketing Carrier on Emirates (EK) operated Denmark Copenhagen, Billund flights, Air Mauritius carried its code beyond Dubai to 6 points namely Cairo, Karachi, Colombo, Sweden Stockholm, Gothenburg Riyadh, Jeddah and Dammam. Norway Oslo Sydney Brisbane Melbourne Pacific Ocean Adelaide Hong Kong * Air Mauritius Annual Report 2015/16 57 SINGAPORE Beijing AUSTRALIA Kuantan KUALA LUMPUR ASIA Shanghai Kota Bharu Hong Kong Bangkok Guangzhou CHINA Johar Bahru

Management Discussion and AnalysisPenang PERTH Langkawi Beijing Chengdu Colombo Chennai Sydney Brisbane Delhi Melbourne Pacific Ocean Adelaide Karachi Hong Kong * INDIA SINGAPORE Beijing AUSTRALIA Kuantan RODRIGUES Bangalore Mumbai KUALA LUMPUR MAURITIUS ASIA Shanghai Kota Bharu Hong Kong Bangkok REUNION (St. Denis & St. Pierre) Guangzhou CHINA Oce a n Dubai Johar Bahru Penang PERTH Ind ia n Langkawi INTERNATIONAL ROUTE MAP Beijing Antananarivo Chengdu Dammam Jeddah Riyadh Nairobi Cairo KENYA MADAGASCAR Colombo Chennai Durban Dar es Salaam Delhi Maputo Vienna Karachi Stockholm Johannesburg Rome INDIA Europe Copenhagen Munich Cape Town Gothenburg Bologna RODRIGUES Bangalore Zurich Oslo Mumbai MAURITIUS Frankfurt AFRICA SOUTH AFRICA Nice Billund REUNION Geneva (St. Denis & St. Pierre) Dusseldorf Oce a n Dubai Amsterdam Marseille Lyon Basel Montpellier Barcelona Ind ia n INTERNATIONAL ROUTE MAP (Heathrow) LONDON Aberdeen Toulouse PARIS Pau-Pyrenees Antananarivo Bordeaux Nantes Clermont Ferrand Rennes Madrid Bilbao Dammam Jeddah Newcastle Riyadh Edinburgh Brest Birmingham Nairobi Manchester Cairo KENYA MADAGASCAR Operations on Guangzhou will start as from 12 July 2016. Operations on Guangzhou will start as from Air Mauritius Operated Flights Air Mauritius Marketing Codeshare Flights Air Mauritius Marketing Codeshare Air Mauritius joint operations with Partner Airline Durban Dar es Salaam * Maputo Vienna Stockholm Johannesburg Rome Europe Copenhagen Munich Cape Town Gothenburg Bologna Zurich Oslo Frankfurt AFRICA SOUTH AFRICA Nice Billund Geneva Dusseldorf rom 12 July 2016. rom Amsterdam Marseille Lyon re Flights re Basel Montpellier Barcelona (Heathrow) LONDON Aberdeen Toulouse PARIS Pau-Pyrenees Bordeaux Nantes Clermont Ferrand Rennes Madrid Bilbao Newcastle Edinburgh Brest Birmingham Manchester Operations on Guangzhou will start as f Air Mauritius Operated Flights Air Mauritius Marketing Codesha Air Mauritius joint operations with Partner Airline * 58 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Aircraft Fleet

a) Fleet Composition During the financial year 2015/16, Air Mauritius fleet consisted of 12 aircraft as below:

Owned/Finance Operating Type of Aircraft Fleet Total Seat Capacity Lease Lease

Airbus A340-300 Wide Body 3 1 4 298

Airbus A340-300E Wide Body - 2 2 300

Airbus A330-200 Wide Body 1 1 2 275

Airbus A319-100 Narrow Body 2 - 2 124/132

ATR72 - 500 Turbo Prop 1 1 2 72

Total 7 5 12

Bell Ranger Helicopter 2 - 2 4

At the end of March 2016, the average age of the overall aircraft fleet stood at 13 years, with the average age of both the wide body and narrow body fleets standing at 13.7 years and that of the turbo prop fleet at 9.5 years.

b) ATR Wet Lease d) Fleet Utilisation The inter-island operations during the financial year Total block hours operated by Air Mauritius, 2015/16 was supported by the short term wet excluding utilisation of the wet leased ATR72 lease of one ATR72 aircraft between November aircraft, stood at 43,108 for the financial year 2015 and mid-January 2016 to replace one 2015/16. The 2015/16 fleet break down of aircraft ATR72 aircraft undergoing overhaul checks during utilisation in block hours is as below: November 2015. Moreover, the leased aircraft allowed additional capacity requirements to Average Daily Total Block Rodrigues and Pierrefonds during December 2015 Aircraft Fleet Utilisation (Block Hours and January 2016 peaks. It also provided flexibility Hours) to manage the inter-island operations during the A340 - 300 24,352 12.1 peaks. A330 - 200 9,070 12.5

c) Fleet Deployment A319 - 100 4,776 7.9

The A340 fleet has been primarily deployed to ATR72 - 500 4,910 6.9 long haul routes to Europe and China taking into account payload-range capability, while the Note: The above average daily utilisation figures are based on medium haul operations to India, South East Asia aircraft available days, that is, aircraft maintenance days and Perth have been served mainly by the A330 for maintenance overhaul checks are excluded. fleet. A mix of wide and narrow body aircraft have been deployed to Africa, Madagascar, and The wet leased ATR72 aircraft operated around Reunion considering both passenger and cargo 650 block hours between November 2015 and requirements. The ATR72 fleet has been deployed mid-January 2016 or an average daily utilisation of to Rodrigues and Reunion (Gillot and Pierrefonds). 8.8 block hours. Air Mauritius Annual Report 2015/16 59

Management Discussion and Analysis

Capacity Aero-Political and Industry Developments a) Seat Capacity The following are the main aero-political and Air Mauritius seat input was 2 million seats during industry developments during the financial year the financial year 2015/16. 2015/16:

In line with the objective to rebalance growth to a) Air Transport within the emerging markets, deployment of additional seat Indian Ocean Region and Africa capacity has been geared towards India and the Indian Ocean region. Overall seat capacity (i) Air Access Policy in Mauritius increased by 65,802 in 2015/16, representing a With a view to transforming Mauritius into a regional growth of 3.4%. aviation and tourism hub, the government aims to revisit the air access policy. The liberalization of air transport in Mauritius has led to a continuously b) Cargo Capacity evolving competitive landscape with the entry of Air Mauritius deployed a cargo capacity of 64,364 new airlines as well as growing competition from tonnes during the financial year 2015/16 or an existing carriers. The last financial year witnessed increase of 1.6% over 2014/15. new operators entering the Mauritian market including Austrian Airlines, Lufthansa and Turkish Bilateral Air Services Agreements Airlines along with adhoc operators.

During the financial year 2015/16, the portfolio (ii) Indian Ocean Airlines Alliance Vanille of traffic rights was further expanded with The national airlines of the Indian Ocean the conclusion of new Bilateral Air Services Commission, comprising of Air Austral, Air Agreements between Mauritius and eight countries Madagascar, Air Seychelles, Inter Iles Air and namely Finland, Portugal, Vietnam, New Zealand, Air Mauritius signed a multilateral cooperation Rwanda, Congo, Nigeria and Brazil. Moreover, agreement in September 2015, called ‘Indian existing traffic rights available with Germany, China, Ocean Airlines Alliance Vanille’ aimed at Zimbabwe and South Africa have been enhanced, strengthening cooperation between the airlines of mainly in terms of designation of airlines, additional the region. frequency entitlements and other rights. By capitalising on synergies among the airlines, Thus, as at March 31, 2016, the number of the Alliance Vanille aims to improve air connectivity countries with which Mauritius has Bilateral Air in the Indian Ocean region with a view to offering Services Agreements stood at 51, representing passengers a wider choice of flights and an potential market opportunities for future network enhanced product. Thus, the Alliance will development. For the financial year 2016/17, new contribute to promote travel and tourism, business traffic rights will be sought in line with Air Mauritius’ and trade as well as regional cooperation among network expansion plans. the IOC countries.

(iii) Air Transport Liberalisation in Africa At the regional level, the momentum is for the full implementation of the Yamoussoukro Decision for air transport liberalisation in Africa with a view to lay the foundation for the establishment of a Single Air Transport Market in the continent as spelt out in the African Union Agenda 2063. 60 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Aero-Political and Industry Developments (Cont’d)

As at date, 13 African States namely, Benin, countries. The package proposes important Cape Verde, Republic of Congo, Ivory Coast, measures in order to maintain high EU standards Egypt, Ethiopia, Ghana, Kenya, Nigeria, Rwanda, for safety, security, the environment, social issues Sierra Leone, South Africa and Zimbabwe have and passenger rights. Measures will also be committed to liberalise the intra-African market considered to address issues relating to unfair by 2017. More African Union member States are commercial practices from third countries and third expected to commit at a later stage. country operators.

b) Environment - ICAO’s global Market Based Airline Alliances and Partnerships Measure for Aviation Emissions The International Civil Aviation Organization (ICAO) Airline partnerships development remains a committed to develop a global Market Based strategic tool to increase geographical market reach Measure (MBM) to address international aviation and network. In this context, during financial year emissions by 2016. The Council is expected to 2015/16, Air Mauritius reinforced its cooperation recommend on a global MBM scheme at the 39th with existing partners while identifying new avenues ICAO Assembly in September/October 2016. The for cooperation with potential partners. 191 ICAO Member States in the Assembly will deliberate and make a decision on the global MBM During the financial year 2015/16, cooperation to be implemented from 2020 onwards. Depending arrangements with Air India, South African Airways on the outcome of the ICAO Assembly, the and Emirates were enhanced whilst the other applicability of the EU Emissions Trading Scheme existing codeshare agreements fine-tuned. A new (ETS) to international flights will be re-assessed. partnership was forged with Hong Kong Airlines as marketing carrier on all Air Mauritius Hong Kong/Mauritius flights. Furthermore, Air Mauritius c) Air Passenger Rights became a member of the newly formed Alliance The proposed revision of the EU Air Passenger Vanille in 2015. Rights Regulation ((EC No. 261/2004) is likely to be further delayed in 2016. This is mainly due In addition to the above developments in airline to unresolved issues regarding the thresholds partnerships, the launching of the Mauritius/ for compensation in case of delays and missed Singapore “Air Corridor” connecting Africa and connecting flights as well as the British-Spanish Asia has been a salient feature. territorial dispute over Gibraltar. a) Air Mauritius/Air France d) EU Aviation Package The current Joint Venture Agreement (JVA) with In December 2015, the European Commission Air France covers the Paris route as well as adopted a new aviation strategy/package for destinations beyond Paris and destinations beyond Europe, outlining its vision for the European Mauritius. aviation sector. The strategy aims to strengthen the competitiveness of the European aviation During the financial year 2015/16, Air Mauritius sector, reinforce its global leadership position placed its code on flights operated by Air France and ensure the sustainability of the entire EU air and its franchisees beyond Paris to 35 European transport value network. destinations including French provinces. More beyond Paris codeshare destinations will be added It aims to improve market access for Europe as and when additional third country code share through the negotiation of EU-level comprehensive rights become available. air transport agreements with key countries and create investment opportunities with third Air Mauritius Annual Report 2015/16 61

Management Discussion and Analysis

Airline Alliances and Partnerships (Cont’d)

Beyond Mauritius, Air France codeshares to four Furthermore, Air Mauritius and Emirates have destinations, namely Durban, Perth, Reunion also agreed to explore other areas of cooperation Gillot and Reunion Pierrefonds. Air France and Air to strengthen the partnership, including the Mauritius further beefed up the code share rates on implementation of a tie up between the frequent Air Mauritius network. flyer programs of both airlines which has been concluded at the start of financial year 2016/17. b) Air Mauritius/Malaysia Airlines Air Mauritius and Malaysia Airlines have a free flow d) Air Mauritius/Air India codeshare agreement on the trunk route between Air Mauritius and Air India have a codeshare Mauritius and Kuala Lumpur which also extends arrangement on all the flights between Mauritius to cover domestic codeshare and third country and India. During the year 2015/16, Air Mauritius codeshare. remained the sole operator and flew to the following four destinations in India – Mumbai/Delhi/ During the financial year 2015/16, Air Mauritius Chennai/Bangalore. operated three weekly frequencies to Kuala Lumpur in codeshare with Malaysia Airlines as As from April 17, 2015, the codeshare arrangement the marketing carrier. The Air Mauritius/Malaysia between Air India and Air Mauritius was enhanced Airlines Codeshare Agreement also covers sectors from a soft block to a free flow. beyond Kuala Lumpur to 5 domestic points and 5 international points. Malaysia Airlines, on the other Air India and Air Mauritius have agreed, in hand, codeshares on Air Mauritius operated flights principle, to extend the free flow codeshare between Mauritius and Johannesburg. agreement to include domestic sectors in India as well as some sectors beyond Mauritius. These additional codeshare sectors are expected to be c) Air Mauritius/Emirates implemented during financial year 2016/17 subject The commercial agreement between Air Mauritius to necessary regulatory approvals. and Emirates covers the Mauritius/Dubai route and also provides access to points beyond Dubai and Mauritius. e) Air Mauritius/Kenya Airways Air Mauritius and Kenya Airways are into a free flow In terms of codesharing, the scope currently codeshare arrangement since August 2012 and the consists of the trunk route Mauritius/Dubai and 6 agreement was renewed in financial year 2015/16. beyond Dubai destinations. Other countries will be The codeshare covers all flights operated between added as and when the requisite traffic rights are Mauritius and Nairobi, where Air Mauritius is the available. operating carrier and Kenya Airways the marketing carrier. On the Mauritius/Dubai route, Air Mauritius has a soft block allocation of 63 seats (2 First Class seats, 8 The provision of the codeshare arrangement also Business Class seats and 53 Economy Class seats) extends to cover beyond codeshare. Kenya on the Emirates operated Airbus A380 aircraft. The Airways places its code on Air Mauritius operated beyond codeshare is on a free flow basis. flights to Perth. Additional beyond Mauritius and new beyond Nairobi codeshare destinations will be As a reciprocal extension of beyond codeshare added as and when third country codeshare rights arrangements, Air Mauritius and Emirates are and other approvals from authorities are obtained. considering to implement beyond Mauritius codeshare sectors as well. 62 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Airline Alliances and Partnerships (Cont’d)

f) Air Mauritius/South African Airways i) Air Mauritius/Air Austral Air Mauritius and South African Airways have Air Mauritius and Air Austral currently have a free a codeshare arrangement on the Mauritius/ flow codeshare agreement whereby Air Austral is Johannesburg route, where each carrier the marketing carrier on Air Mauritius flights to/ codeshares on each other’s aircraft. from Perth. The agreement was renewed during financial year 2015/16. Effective July 01, 2015, Air Mauritius and South African Airways converted the soft block j) Air Mauritius/Hong Kong Airlines arrangement into a free flow arrangement as part of a phased approach to an enhanced cooperation. Air Mauritius and Hong Kong Airlines concluded a codeshare agreement effective September 01, Discussions between Air Mauritius and South 2015. The codeshare arrangement covers the African Airways are ongoing on ways to reinforce Hong Kong/ Mauritius route and is on a free flow and expand the current cooperation arrangement. basis, whereby Hong Kong airlines as a marketing carrier places its code on the Air Mauritius operated flights. g) Air Mauritius/Virgin Australia Air Mauritius has a domestic free flow codeshare k) Alliance Vanille agreement with Virgin Australia which enables Air Mauritius to expand its market reach in Australia Air Mauritius is a member of the Alliance Vanille beyond its hub in Perth. since June 2015.

Under this codeshare agreement, Air Mauritius Alliance Vanille is an agreement amongst Indian codeshares as marketing carrier on Virgin Australia Ocean based airlines with the objective to reinforce operated domestic flights beyond Perth, to/from partnerships and develop synergies in different Adelaide, Brisbane, Sydney and Melbourne, which areas. The members include Air Mauritius, Air connect on Air Mauritius operated Mauritius/Perth/ Seychelles, Air Madagascar, Air Austral and Inter Mauritius flights. IIes Air.

h) Air Mauritius/Air Madagascar Air Mauritius and Air Madagascar entered into a free flow codeshare agreement effective January 2013, on the Mauritius/Antananarivo route, whereby Air Madagascar places its code on Air Mauritius operated flights. The agreement was renewed during financial year 2015/16.

Air Mauritius and Air Madagascar are exploring avenues to expand the perimeter of the cooperation. Air Mauritius Annual Report 2015/16 63

Management Discussion and Analysis

Patterns of Operations

The main highlights of the financial year 2015/16 In the light of the financial year 2014/15 weekly patterns of operations are as follows: performance, base operations on Shanghai and Beijing have been rightsized to twice and once a) France weekly frequencies respectively effective April 2015. Supplementary flights have been operated Air Mauritius operated to Paris Charles de Gaulle to these destinations during the peak periods route in joint venture with Air France. The base of July-August 2015, Chinese Golden Week in weekly services consisted of 10 flights in Summer September-October 2015 and Chinese New Year 2015, with 7 A340 flights operated by Air Mauritius in February 2016. and 3 B777 flights operated by Air France. Up to 4 weekly supplementary flights were operated with Two weekly A330 frequencies were operated to the A340 aircraft during Summer 2015 peaks in Hong Kong throughout 2015/16. April, July, August and October 2015. The Winter 2015/16 base weekly operations comprised of 14 frequencies, with Air Mauritius and Air France e) India operating 7 weekly flights each. In addition, 11 Three base weekly flights were scheduled to supplementary flights were operated by Air France Mumbai with a fourth flight added as from November during the mid-December 2015 to mid-January 2015. In addition, 2 weekly supplementary flights 2016 peaks. Frequency modulations have been were operated between April 15, to June 19, carried out during the lean months of May 2015, 2015 and one weekly supplementary flight from June 2015, February 2016 and March 2016. December 04, 2015 to January 15, 2016.

The twice weekly flights to Delhi and once b) United Kingdom weekly combined Bangalore/Chennai flight were The base operations to the United Kingdom maintained throughout 2015/16. However, to cater consisted of 3 weekly A340 frequencies to London for extra capacity, the Bangalore/Chennai flight Heathrow. A fourth weekly frequency was operated was operated with the A340 aircraft. from July to August 2015 and from December 2015 to the first week of January 2016. f) Australia Two weekly A330 flights were operated to Perth c) Malaysia and Singapore with an additional weekly frequency in April, July, Two weekly flights were operated to Kuala Lumpur August, first fortnight of October 2015 and from and a once weekly Mauritius/Kuala Lumpur/ December 2015 to the first week of February 2016. Singapore vice versa flights were operated with the A330 aircraft. Effective March 11, 2016, these 3 weekly services have been rerouted to operate g) South Africa Mauritius/Singapore/Kuala Lumpur and vice versa The base weekly operations on Johannesburg providing direct services on Singapore to support (JNB) consisted of 8 flights (4 A340 and 4 A319 the “Air Corridor” project. flights) with 6 weekly flights operated in day structure and 2 weekly flights operated with evening departure from Mauritius and morning d) China departure from JNB, with aircraft layover in JNB. Effective July 06, 2015, Air Mauritius introduced Effective mid-August 2015, the JNB operations operations to Chengdu with a once weekly direct were reviewed to a daily flight in day structure with A340 flight throughout 2015/16 except from harmonised timings. November 30, to December 28, 2015, when the services were cancelled as a result of poor demand. 64 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Patterns of Operations (Cont’d) 2016/17 Development Plans

Modulations have been carried out during the Major developments plans for financial year off-peak period in May-June, mid-October to 2016/17 include the following: November 2015, and mid-January to mid-March 2016. Additional capacity has been provided a) Fleet Growth through upgrades and supplementary flights A third ATR72 will join the turboprop fleet by end during December 2015-January 2016 peaks. of June 2016 to beef up inter-island services as Three weekly flights were operated with the A319 from July 2016. This additional aircraft will support aircraft to Cape Town and two weekly A319 flights the on-going development of the inter-island to Durban, except for modulation during A319 operations, more importantly Rodrigues and Saint overhaul checks from mid-May to June 2015 and Pierre. Rodrigues can only be served with the February-March 2016. turbo prop ATR aircraft.

h) Kenya b) Network Expansion ● The base operation to Nairobi was increased from Online services to two new points in mainland 2 to 3 weekly frequencies as from July 2015, Africa, namely Maputo (MPM) and Dar-Es- except during A319 overhaul checks from mid- Salaam (DAR) have been introduced as from May to June 2015 and February-March 2016. May 2016 on the basis of once weekly flight to each destination. DAR is combined with NBO and MPM is combined with DUR both with the i) Madagascar A319 aircraft. Four weekly frequencies were operated to ● Antananarivo (TNR) during 2015/16 with the A340 New online operation will be introduced to aircraft. Guangzhou as a fourth point of call in mainland China as from July 12, 2016 with a once weekly A340 flight. This new operation will enable j) Reunion Air Mauritius to tap into traffic from the south The base operations to Reunion consisted of 3 of China, Mauritius as well as from the Indian daily flights to Gillot with a mix aircraft fleet and 3 Ocean region. weekly ATR flights to Pierrefonds. 5 of the 21 base weekly Gillot flights were operated with the A340 c) Network Consolidation aircraft. During the peaks, additional capacity has been provided on Reunion route on the basis of Operations to existing destinations will continue to aircraft upgrades and supplementary flights. be consolidated with additional frequencies and capacity. This includes:

k) Rodrigues ● A third weekly flight to Shanghai from July 07, Over and above twice daily flights, a third flight 2016. was added on three days of the week during ● financial year 2015/16. Supplementary flights were A fourth weekly base flight to Mumbai throughout operated during the peak periods to meet demand. the financial year 2016/17. The wet leased ATR72 aircraft enabled up to eight ● A second weekly combined Bangalore/Chennai daily services during the end of year hyper peaks. frequency as from October 27, 2016. ● 5th and 6th weekly A319 flights to Antananarivo as from April and July 2016 respectively. Air Mauritius Annual Report 2015/16 65

Management Discussion and Analysis

2016/17 Development Plans (Cont’d)

● Operations to Reunion Pierrefonds to be carriers have been very aggressive in terms of increased from 3 to 5 weekly ATR72 flights as pricing. from November 2016 with improved afternoon timings. ● Destination competition is also becoming stiffer with a wide choice of affordable leisure ● A 3rd base daily flight to Rodrigues throughout destinations in the region namely, South Africa, the financial year 2016/17 and with up to 9 daily Seychelles, Maldives, Bali, and Sri Lanka, while flights during the hyper peak periods. Mauritius is perceived as expensive. Overall seat capacity for Air Mauritius is planned to increase by about 6.9% in 2016/17 as compared Overview of Markets & Routes to 2015/16. Cargo capacity is expected to Mauritius increase by 5.2% in 2016/17. The Mauritian market is the most important market in the Air Mauritius network both in terms Passenger Sales and Distribution of revenue and passenger numbers. As such, this year, Air Mauritius was all set to conquer its home During the financial year 2015/16, Air Mauritius market and reaffirm its leadership position as the operated to 21 destinations across 4 continents. National Carrier. This year, a lot of focus has been Air Mauritius injected more than 2 million seats placed on this market, which eventually culminated across the network, carried nearly 1.5 million to its current exceptional satisfactory performance passengers and achieved a passenger load factor in terms of growth and market share. of 78.7% which is a significant improvement over the passenger load factor achieved in financial year The most visible initiative which was implemented 2014/15. Overall the passenger sales performance to lift the profile and visibility of Air Mauritius in against last year shows net signs of improvement. the Mauritian market, was the implementation of the Travel Extravaganza offer which focused on As compared to last year, positive variances were additional value-added to customers as opposed registered in terms of number of passengers to only the price offer. Three waves of this offer were carried, load factor and revenue passenger km implemented in the financial year 2015/16, and (RPK) million. were widely acclaimed by customers and travel agents alike. All marketing activity in the Mauritian It is worth highlighting that most markets performed market including publicity and promotions were better than last year. made through this campaign, which projected a consistent brand image of Air Mauritius. During the course of the year, Air Mauritius introduced one new destination in the network. Apart from the Travel Extravaganza Offer, Air On July 06, 2015, a third point of call in mainland Mauritius leveraged on all the elements of the China, Chengdu was introduced. Moreover, marketing mix to achieve its sales objectives. additional frequencies were also operated on Structured pricing actions throughout the year Mumbai, Nairobi and Rodrigues. Furthermore, in both as a price leadership activity, and to preempt line with the “Air Corridor” project, effective March competitors actions complemented the offer. More 11, 2016, Singapore is now served with three than 20 instances of specials were launched this weekly direct services. On the other hand, the year in Mauritius. Besides a campaign of closeness operating environment grew more challenging. to travel agents was encouraged in order to earn more support from this channel, which remains ● Cut throat competition from foreign airline the most important one for Air Mauritius in the operators which accounts for half of the total Mauritian market. capacity into Mauritius. Moreover, Sixth freedom 66 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Passenger Sales and Distribution (Cont’d)

Europe While the Indian market shows positive signs of European markets continue to suffer from the growth, competitive aggressiveness from the relentless pressure of competition. Operations by competing six-freedom carriers grew. European carriers coupled with the operations of the sixth freedom carriers accounted for more than Malaysia & Singapore 70% of total capacity injected by foreign carriers. In line with the “Air Corridor” campaign, Air Mauritius shifted its South-East Asian hub from Malaysia Air Mauritius continued to operate direct flights to to Singapore. Hence, since March 11, 2016, two destinations in Europe namely, Paris (CDG) Air Mauritius now operates three direct flights to and London (LHR). Air Mauritius consolidated Singapore on a Mauritius/Singapore/Kuala Lumpur its operations on Paris (CDG) as its main hub in and vice versa routing. The “Air Corridor” project Europe through its partnership with Air France leverages on the “hub concept” geared towards which ensured that at least one daily frequency on developing Mauritius into a gateway between Asia the route was maintained. The beyond Paris (CDG) and Africa with Singapore as the chosen entry codeshare with Air France enabled Air Mauritius to point in Asia. channel passengers to 35 points in Europe under the MK code. Hong Kong During the financial year 2015/16, traffic from The Hong Kong market showed a steady Europe continued to grow on almost all main performance. Passenger Revenue generated from markets. However, a dilution in average yield Hong Kong as an area of sales continues to grow. due to competition led to revenue shortfall. This Overall, the Hong Kong route performance was situation was further exacerbated with new quite laudable with a high load factor. entrants operating seasonal flights only during the peak season. China China is now the third biggest market in terms Australasia of revenue generation for Air Mauritius and is Australia positioned to grow to the second place during the forthcoming year. In line with the Government The Australian market shows signs of improvement strategy to promote tourism from China, Air as traffic and revenue increased as compared to Mauritius launched its operations to a third point last year. However, seat capacity injected was in Mainland China, Chengdu, on July 06, 2015. All closely monitored as two weekly frequencies were performance indicators show an improvement as operated on Perth route with a third frequency compared to the previous year. during the peak of April, July, August, December 2015 and January 2016. Middle East

India Emirates operated double daily A380 frequencies during the year with additional frequencies during Air Mauritius serves four points in India – Mumbai, the peak period. The Dubai route is operated Delhi, Bangalore and Chennai. Three weekly by Emirates (EK) and Air Mauritius has a code frequencies were operated on Mumbai with a fourth share arrangement on the trunk route as well as one during the peak period. Delhi maintained its on some beyond points. As marketing carrier, Air two weekly frequencies. The weekly combined Mauritius has significantly improved its passenger flight on Mauritius/Bangalore/Chennai/Mauritius performance on the Dubai route. route was upgraded to operate with A340 aircraft. Air Mauritius Annual Report 2015/16 67

Management Discussion and Analysis

Passenger Sales and Distribution (Cont’d)

Africa With the increasingly competitive environment and new entrants from different parts of the world, it has South Africa been a particularly challenging task to reconcile the The South African markets continued to perform conflicting objectives of volume, yields and market amidst difficult competition coupled with tough share. Yield degradation has been a major challenge economic conditions prevailing. The sluggish this year, and hence the challenging RM task performance of macro-economic indicators in remained the channeling of lower fares passengers South Africa is being reflected into a slow growth to poor flights, as the Company constantly watched in that market. and preempted competitors’ actions. The Company has been particularly proactive in its main market Kenya where there was an oversupply of seats. Various structured pricing actions inbuilt in the marketing Nairobi remains Air Mauritius gateway in Eastern strategy for the Mauritian market have been and Western Africa through the partnership with designed to meet the market challenges. Kenya Airways. The Kenyan market is showing some signs of recovery. This year, Air Mauritius also harnessed the Asia Corridor by positioning Singapore as its new hub Inter-Island in Asia. Following negotiations with leading Asian carriers, new competitive fares were introduced to Reunion and from various Asian points, also covering the Reunion remains the second biggest market in region and Africa. terms of passengers carried. Capacity is modulated on the route because of seasonal demand. Sales During the year, about 80 interline agreements out of Réunion have grown compared to last year. were negotiated with the objective to improve Air Mauritius market exposure in offline markets at Madagascar more competitive prices. Madagascar route continues to register laudable performances. The market is showing signs of Ancillary Revenues growth and more frequencies are planned to tap the emerging opportunities. In line with the trend observed in previous years, ancillary revenues continued to increase, registering Rodrigues significant growth compared to last financial year.

The Rodrigues route continued to show improvement The unbundling of premium services, such as in passengers carried and revenue compared to upgrades and lounge access, have proved to be last year. While flight loads were closely monitored quite popular with passengers. There has also and a third daily frequency was added. Sales from been demand for exit seats and the facility to buy Rodrigues also displayed positive growth. them in advance at the time of ticket purchase has greatly facilitated sales. More direct marketing has Revenue Management and Pricing been conducted, especially at the airport whilst the passengers are queuing up or checking in. During the financial year 2015/16, Air Mauritius However, baggage revenues were almost flat, as strengthened its process to use its revamped a result of the increase in free baggage allowance revenue management and pricing in order to which has been given in some markets in order to optimise passenger revenue. With the Revenue maintain competitiveness. Management (RM) culture now widely embedded in sales strategy, this has become one of the most In the next financial year, new services, such as important marketing tools to achieve passenger travel insurance, will be introduced, so as to grow revenue target. the revenue streams. 68 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Kestrelflyer

During the financial year 2015/16, Kestrelflyer, the international markets. The next landmark will be the frequent flyer programme of Air Mauritius, has lived launch of the Air Mauritius-SBM Visa Sky-Smiles up to its objective of putting the customer at the product, a cobranded product allowing customers centre of its activities. to earn miles on Air Mauritius while using their co-branded credit card. This is considered to be Currently, about 70,000 members are registered and the first of its kind product under Mauritian Skies, the customer base is on a rising trend. With accrual which besides benefitting the customers, will also scheme of miles and redemptions, more than 3,500 allow the Company to create marketing synergies free tickets were awarded this year as well as more among the three brands. than 4,000 upgrades together with more than 2,000 excess luggage. To push the programme further as a powerful marketing tool to enhance sales, various E-Commerce bonuses and redemptions at promotional rates, The digital age permeates everyday life and accompanied the Air Mauritius Travel Extravaganza customer expectations in the travel industry is programme constantly evolving, forcing service providers to implement better and simpler solutions to enhance To render the miles even more exchangeable, the online customer experience. and hence encourage customers to accumulate miles, contributing to increase the overall revenue, There have been several important initiatives in the Air Mauritius has harnessed its various Airline and recent years that have contributed to the growth non-Airline partnership, namely the partnership of the Web Sales channel. More focus was given with Flying Blue, Indigo Hotels, Cotton Bay Hotel to E-Commerce with the setting-up of the Digital and EYE Optician. This portfolio has been recently organisation in the Commercial Department. The beefed up with the partnership with Emirates website provided a better user experience primarily Skywards, allowing Kestrelflyer and Skywards with enriched contents, improved booking engine, members to accumulate and redeem miles on new payment gateway, ancillary services and a either Air Mauritius or Emirates Airlines network. new mobile website. In order to attract traffic to the website, a series of e-marketing projects were During the financial year 2015/16, the Company implemented including Search Engine Marketing, has also focused a lot on customer service, at E-mail marketing, Search Engine Optimisation, all major touch points in the organisation. A right Social Media Marketing and Display Advertising. balance was struck between the various needs Furthermore, a major Social Media project was of customers, from convenience, offered by self- launched, which provided all essential related service through the web, closeness and face-to- services. All these activities are on-going under face interaction through a dedicated front desk, and the Digital organisation. customers who prefer to use the 24/7 call centre service. The objective was indeed to increase the During the financial year 2015/16, Air Mauritius customer satisfaction level and maximise their life- consolidated its digital strategy, growing the online time customer value. sales channel by 19%. Markets such as Reunion, France, United Kingdom, South Africa, Australia During the financial year 2016/17, the frequent and India which have good internet penetration flyer programme will focus both on products and generated increasing sales on the web channel. promotion. Additional partnerships, including those Web traffic and sales have increased from all traffic with non-traditional partners are in the pipeline sources including Direct, Organic (SEO), Search with the objective of increasing exchangeability advertising (SEM), Referral sites, Email Marketing of miles to create value for customers. This will and Social Media. be backed by aggressive marketing campaigns to create awareness of offerings both in the local and Air Mauritius Annual Report 2015/16 69

Management Discussion and Analysis

E-Commerce (Cont’d)

Search Engine Optimisation (SEO) Time to Think Option SEO is an on-going activity to promote traffic on A new facility was introduced for web customers the Company’s website. The Company’s ranking to have the possibility to hold their booking with new keywords has improved on search for a period of up to 72 hours at a nominal fee. engines and SEO has resulted into higher sales Those who opt for this service can then confirm revenue derived from organic traffic. their purchase online, through the Call Centre or at ticket offices in Mauritius. This service was Search Engine Marketing (SEM) launched initially in Mauritius and will be deployed to all markets. SEM has been carried out over and above SEO. SEM campaigns were pursued in the five main markets, namely France, Reunion, UK, Australia Social Media and South Africa. The campaigns are closely The social media platforms present huge monitored and optimised to ensure high Return opportunities to create brand awareness and on Investement, targeting high potential web actively engage with customers and drive visitors with calls to action such as special offers revenues. Air Mauritius continued to pursue its with the ultimate objective of converting them to social media strategy during the financial year purchasers. The Company also carried out SEM 2015/16. Campaigns were run in the South African campaigns for the China market. and Mauritian market on Facebook to build the community and recruit fans. The Company is now E-mail campaigns actively present on Facebook, Twitter, Instagram, Google+, YouTube as well as on Chinese Social The customer database is regularly updated with Media platforms Weibo and WeChat. In China, the the latest news on products and services and they Company is running an on-going campaign named are also informed of special offers and promotions. “Ticket to Happiness”, to boost engagement of This creates more awareness thus generating followers on Weibo and Wechat. higher sales through the web as well as the offline channels. On Facebook, the Company is actually one of the leading airline brand in Africa with over 711,000 Mobile Channel fans. Social media channels are being used to Mobile technology is changing the penetration of boost brand awareness as well as to promote internet worldwide through growth in the usage of tactical offers. The Company also engages with smartphone. The Company has experienced high the community and offers social customer service growth of web traffic and sales from mobile devices by responding to customer queries. and this is the future trend with more and more users accessing its website through smartphones. Air Mauritius owns the “Made in Mauritius” blog, A mobile application has been developed in-house which contains rich and varied contents to promote and will soon be released to customers. Mauritius as a destination in a different perspective. It is a unique collaboration with travel trade partners, hotels, attractions and some local and international Cart Recovery Programme bloggers. The blog has been recognised for best Air Mauritius has implemented a “Cart Recovery in class content marketing and a reference for Programme” as from June 2015. The Company travellers. The “Made in Mauritius” blog won the is using targeted Email Remarketing and On- Travolution Award 2015, a major travel award Site Remarketing campaigns to reconnect with for “Best Use of Content Marketing”. It was also customers leaving Air Mauritius website or who nominated as finalist in the International Content have left Air Mauritius website at a certain stage of Marketing Awards. the online purchase journey. 70 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Cargo

Performance New Developments The Cargo business is a vital contributor to the To consolidate further the revenue stream and overall financial performance of Air Mauritius. It extend the network, new agreements were accounts for nearly 9% of the total airline revenue. established with other Airlines and Trucking It continues to optimise belly hold capacity companies providing the Company opportunities deployed on all the passenger flights and the to use its capacity to reach additional offline points revenue generated by this activity is significant and and increase the market penetration. contributes positively to the Company’s bottom line. During the financial year 2015/16, cargo In terms of technology, the following projects carried by Air Mauritius amounts to 29,901 tonnes were initiated during the year to meet the ever with a corresponding revenue of EUR 41.7M. changing industry requirements and also adapt to customers’ needs: Demand for air cargo stagnated for the past couple of years due to the underperforming world economy ● New user-friendly system to process complaints and a weak growth in trade, particularly trade in and claims from its customers; the commodities that are traditionally carried as ● Enhancement of the existing cargo dashboard air cargo. Shifting of manufacturing base to other to allow better monitoring of the business; countries together with changes in the containership industry has led to a reduction in the overall demand ● Enhancement in the Cargo Imports System for for air cargo. Shippers now have the possibility to additional freight status updates; move their freight away from air cargo to maritime when schedules and time commitments permit. ● Cargo BI (Business Intelligence) platform updated with new models for better analysis of As there was hardly any growth in the air cargo corporate performance; business, this led to a global imbalance of demand ● The e-AWB (Air Waybill) penetration in the and supply with too much capacity chasing too little network; and available air cargo in the market. All major markets were affected when the resultant fall in volumes and ● Implementation of Postal Air Waybill. the intense competition putting pressure on prices brought down yields and revenue. Cargo revenue Way Forward was also hit by the depreciation of the Euro and other currencies during this financial year. For the financial year 2016/17, there exist concerns about the escalating costs and weakening load factors and yields. Pressure from Ongoing Commitment to Quality competition from existing and new entrants will Despite the slowdown in global economy, Air also become another big challenge with regard Mauritius remains dedicated in delivering high to demand and supply imbalance. In view of the quality service to its customers. Quality audits uncertain business environment, the Company will carried out during the year validated its certification continue to be flexible in deploying its resources, as ISO 9001:2008 compliant and confirm that alert and proactive on all sales opportunities the Quality Management Systems in place are and vigilant in maintaining cost discipline. In this of international standards. The focus on quality volatile environment, the Company will continue and Customer service make the Company a to seek growth opportunities in emerging markets Skytrax 4-Star airline and to maintain this status, and actively pursue with more initiatives to grow it will continue to invest in upgrading the skills revenue, improve market share and efficiency. of its employees to better serve its customers. Management is committed to provide regular training and support to all its team members. Air Mauritius Annual Report 2015/16 71

Management Discussion and Analysis

Cargo (Cont’d)

Future growth will depend largely in consolidating Passenger and Global Distribution Systems Mauritius as the hub and taking advantage of the To support the strategy of Mauritius to become “Air Corridor” to position Mauritius as the transit a hub linking Africa to the East, Air Mauritius platform for cargo moving from East to West has implemented a new series of code sharing and vice versa. Being the National Carrier, the agreements and interline ticketing facilities with Company will ensure an efficient network of cargo airline partners such as Jet Star Asia, Vietnam services in order to promote trade, support local Airlines, Hong Kong Airline, LAM Mozambique and industries and also continue to contribute towards Rwanda Airlines. The Global Distribution System the economic development of the country. (GDS) implementation of these agreements has been carried out to allow travel agencies to book Helicopter Business seats and issue tickets on the codeshare airline sectors in a seamless manner. Moreover, the sale of During the financial year 2015/16, the helicopter ancillary services to generate additional revenue has business recorded a 26% hike in revenue been further improved with the use of rich content in compared to 2014/15 and the number of helicopter some GDS to allow the travel agents and customers passengers also increased by 33% over the same have a detailed view and description of the product period. at booking time from travel agency screens.

This is largely attributable to the various promotional During the last financial year, the Amadeus Altea campaigns carried out during the financial year and Departure Control System (DCS) has been which targeted the general public and groups and deployed at additional airports, namely Mumbai and particularly promoting the services. Moreover, the Kuala Lumpur, to enhance passenger check-in and upturn in tourist arrivals has also contributed to the boarding activities. In addition, interline Through- growth in helicopter sales. Check-In agreements have been implemented to enhance the customer experience for baggage The helicopter business is important in the value handling at transit points and allow passengers to chain of Air Mauritius. In this respect, it has been collect their luggage at the end of their journey. decided to transfer the helicopter operations to the subsidiary Mauritius Helicopter Limited E-Services (MHL). The objective is to consolidate the market In order to improve ancillary revenues, a new ‘Time presence, widen the customer base and extend To Think’ functionality has been implemented the distribution channels. on the Air Mauritius booking engine for the Mauritius market. This feature allows a customer Information and Communication to pay a nominal fee to secure a booking for a Technology (ICT) predetermined amount of time before proceeding with ticket issuance. This service assists not only During the year 2015/16, Air Mauritius pursued in bringing additional revenue but also enhances its strategy to leverage on Information and the customer experience when transacting on the Communication Technologies in order to bring Company’s website. In addition, the implementation cost-effective, integrated and customer-focused of a servicing flow has been completed to further ICT solutions. The ultimate objective is to enhance enhance the Company’s ancillary online services. business operations, improve customer service Through this new functionality, customers who and improve employee productivity. In this respect, already hold an online ticket can return back on the the Company has implemented new systems Company’s website at any time before departure and upgraded existing applications to meet new to purchase ancillary services such as additional business needs and bring further efficiencies baggage, lounge access or exit seats. across its value chain. 72 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Information and Communication Technology (ICT) (Cont’d)

New capabilities have also been incorporated in Customer Relationship Management the Company’s online booking engine to capture The Customer Relationship Management (CRM) the passenger booking experience through every system is regularly enhanced to cater for new booking step. This allows Air Mauritius to follow up business offerings and services to its frequent and send emails to those purchase intents with a flyers. These enhancements allow Kestrelflyer view to converting them into sales. members who have travelled during the Air Mauritius Travel Extravaganza period to easily Major enhancements have also been made on the redeem their gift vouchers and corporate members Tour Operating engine of the Air Mauritius Holidays to redeem miles received through the achievement website in order to diversify the sales channel and of their targeted performance. Furthermore, the increase market reach. Furthermore, customers system has been enhanced to cater for the tie up can now book and buy their holiday packages with between Air Mauritius Kestrelflyer and Emirates Air Mauritius Holidays over the phone and with Skywards loyalty programmes. travel agents in selected markets.

Enterprise Resource Management Sales and Marketing Systems The Company’s Enterprise Resource Planning A web based system has been designed and (ERP) systems comprising Oracle Financial and developed to support the Air Mauritius Travel HR applications have been enhanced to cater for Extravaganza programme. This application new regulatory, business and user requirements as makes use of advanced concepts of responsive well as assisting in further streamlining back office web design to meet the requirements of multiple processes. The Human Resource Information System types of desktop, laptop, tablet and smartphone (HRIS) which is used to manage employee and devices that run various internet browsers on payroll information has undergone customisations different operating systems. The platform offers a to accommodate new government regulations with user-friendly interface to passengers, travel agents respect to changes in fiscal year period, end of year and Air Mauritius sales personnel with features bonus computation and statement of emolument such as benefit claims, inventory management, generation. Additional system enhancements have e-newsletters as well as logistics management with also been implemented to improve the HR process internal and external service providers. A French of tracking employee transfers and assist Cabin version of the system has also been rolled out for Operations department in refining its cabin crew the French-speaking markets in Reunion Island appraisal process. The HRIS system has also been and Madagascar. extended for the Air Mauritius Holidays subsidiary to allow standardised processing of leaves and other The management of stopover packages provided employee regulations. Furthermore, the Performance by airlines is currently carried out using an internally Management System has been reviewed and developed system which integrates with the enhanced to support the Company’s objective setting Amadeus reservation system. This application and workforce performance management activities. allows requests to be captured at various touch points such as the Company’s contact centre, The Concessional Travel System which has ticketing counters and outstations. Moreover, it automated the entire process of staff rebate facilitates their processing through automated travel requests has been implemented in several work flows and generation of electronic vouchers, outstations such as Australia, Malaysia and confirmation sheets, hotel and transportation Madagascar and has also been customised to requests to various service providers. This system cater for Airmate staff. Moreover, this application has also been enhanced to include packages paid has also been re-engineered to allow staff to access by the passenger and assists the Commercial the system outside the office and from various department in its endeavour to encourage people mobile devices such as tablets and smartphones. to visit Mauritius on their way to other destinations. Air Mauritius Annual Report 2015/16 73

Management Discussion and Analysis

Information and Communication Technology (ICT) (Cont’d)

Furthermore, the Crew Allowance System which Business Intelligence computes post-flight allowances for both technical Air Mauritius has continued to leverage on its and cabin crew based on their flying hours and on Business Intelligence (BI) systems that extract, various business rules such as the grade of the consolidate and simplify information to enable crew and their travel details has been enhanced faster and easier decision making. In this respect, now to include pre-flight allowances such as hotel, new reporting and dashboarding capabilities meal and transport allowance costs. have been developed and rolled out. These encompass inter-alia new BI systems such as a Operation Systems passenger codeshare model to better assess the Air Mauritius has upgraded its Flight Safety performance of various codeshare partnerships, an Management system ‘VisiumAQD’ to the latest executive dashboard to monitor key performance platform. This upgrade allows better integration measures of the Company and an HR dashboard of the Company’s safety management processes to consolidate information on employee head in key areas such as Cabin, Flight, Aircraft count. Maintenance and Ground operations. In addition to providing an integrated platform for safety, Enterprise Collaboration quality and risk management across the Company, The Company makes intensive use of collaborative it further contributes to industry best practices systems to foster enterprise knowledge for compliance with stringent air transport sharing and facilitate intra and inter department airworthiness and regulatory requirements. communication. During the last financial year, several applications have been developed and A system to directly transmit load sheet information deployed on the Microsoft SharePoint collaboration via SITA and Airbus ACARS messaging systems to platform to provide new or enhanced intranets, pilots inside aircraft cockpit has been implemented. portals as well as workflow applications. A cash This new automated process which would avoid forecast module has been integrated into the cash Load Controllers to proceed physically to the management system to allow Finance department aircraft to sign off load sheet documentation has monitor the liquidity of the Company in a more been implemented using Reunion Island station as proactive way. A portal has also been developed the kick off platform. This centralised load sheet to allow better management and sharing of system is being extended to other outstations. initiatives within the Customer Experience unit. As part of its E-Procurement strategy, a Procurement Furthermore, to reduce SITA Type B messaging Supplier Portal has been implemented and this costs and address some of the technical limitations extranet enables external suppliers to register their of this messaging platform such as its restricted credentials and services with Air Mauritius more storage retention period and limited query efficiently. Furthermore, a ‘Read & Sign’ system capabilities, an ‘Operational Messaging Database has been developed to allow cabin crew personnel System’ has been developed to cater for more to read and acknowledge important memos at than twenty message types. This new application their convenience and from any location. This allows the retrieval of messages by flight and/ collaborative workspace environment assists the or date, the locking of important flight related Company to streamline and centralise business messages for restricted viewing, the granting of documents and processes, reduce information access based on station and a routing facility of silos and enhance staff productivity and SITA Type B messages via the Company’s email. engagement in their place of work. 74 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Information and Communication Flight Operations and Safety Technology (ICT) (Cont’d) Air Mauritius holds an Aircraft Operator’s Certificate (AOC) issued by the Department of Civil Aviation ICT Infrastructure (DCA) of the Republic of Mauritius in order to qualify A reliable, secured and scalable ICT infrastructure is for Commercial Air Transport Operators. To achieve a prerequisite to support all the current systems and this AOC the Company must demonstrate that IT services that are being used across the Company it can comply with International Civil Aviation worldwide. To cater for the growing number of Organization (ICAO) standards which are set in the applications being deployed across the organisation Civil Aviation Regulations of Mauritius. and the increasingly complex enterprise computing resources required to support its operations, the Since Safety of Customers remains the prime Company’s ICT Infrastructure has been reinforced objective, Air Mauritius strives for continuous to provide higher performance, availability and improvement, setting standards well above resiliency of all critical systems. minimum compliance levels. The Department of Civil Aviation carries out oversight of all aspects The reinforcement of the Company’s IT security of the Company’s operation to verify continued environment against new cyber threats, compliance has been achieved, and safety computer viruses and evolving malware is an standards remain high. Air Mauritius also achieved on-going process. During the year 2015/16, the an IATA Operational Safety Audit (IOSA) Certificate implementation of the latest generation firewalls which is recertified every two years. has been carried out in all major outstation offices. Furthermore, electronic data related to web facing Flight Operations department is headed by the applications are encrypted and sent in a more Executive Vice President-Flight Operations as the secured manner between two destinations. AOC Nominated Person for Flight Operations and a management team comprising of Management As the IT industry is evolving towards cloud Pilots and Operations Managers. services to lower cost of IT operations and higher flexibility to implement and manage systems, some The Flight Operations Support team, managed by of the Company’s IT Infrastructure services are another AOC nominated person, is responsible being gradually migrated to cloud based platforms. to provide the logistical backup for operations to In this respect, a phased migration of end user all destinations and alternate airports where Air productivity services such as email applications Mauritius operates. It ensures that the relevant and Office desktop client tools to Microsoft cloud permits and approvals have been obtained from based Office 365 platform is being carried out for the different countries that the Company overflies, outstation offices. and documentation, manuals and procedures are accurate. As an extension of the “Air Corridor” With the centralisation of IT systems and internet project, the Company introduced two new browsing applications in the Company’s main data destinations in the network, Maputo and Dar Es centre at Ebène, the introduction of IP cameras Salaam. for CCTV monitoring and the higher use of IT applications companywide, the volume of data Crew Training is organised and carried out under between Air Mauritius office sites is continuously the aegis of the Chief Training Captain, AOC increasing. In this respect, the Wide Area Network Nominated Person for Training, and his team. Air (WAN) fibre optic connectivity linking all offices of Mauritius holds approvals from the DCA to conduct the Company has been upgraded. Furthermore, initial type rating courses, recurrent simulator as the use of cloud based services and externally training and ground courses, also specialist hosted applications increases resulting in higher training courses such as Low Visibility Operations internet bandwidth requirements, the Company’s (LVO) and extended twin engine operations networking and internet capabilities have been (ETOPs). Training is conducted throughout the consolidated and upgraded where appropriate. year to ensure both flight crew and cabin crew Air Mauritius Annual Report 2015/16 75

Management Discussion and Analysis

Flight Operations and Safety (Cont’d) meet the mandatory requirements but also to flight planning, negotiating optimum routings and improve standards, share industry best practice cruising levels, improved, precise load information and provide continuous feedback on performance. all contribute to accurately calculating the amount Human factors and safety management systems of fuel to be carried, thus minimising excess. training are also included in the syllabus and fatigue managements will be introduced next year. During the year, the department has been extensively involved in the preparation for the arrival of Airbus Cabin Operations has pursued its effort to provide A350 which has been ordered to replace the A340 a high quality service with the unique Mauritian long haul fleet. The project team will continue the Hospitality. Premium service delivery training has preparations through the ‘entry into service’ phase been designed and devolved and a program to right up to the arrival in September 2017. review the enhance service in the economy class has been prepared and will be implemented in the Flight Operations cannot function without the course of the year. Public Address training has cooperation of other departments. As safety is the been introduced to reflect the voice brand of Air first priority, cooperation with the Safety Department Mauritius. The department participated actively in is essential. Promoting an open reporting culture is the Cost effective Service Improvement initiative at the heart of a Safety Management System and whereby focus on customer satisfaction and therefore there is close liaison between the two areas. wastage control are concurrently managed. The As customer experience is also paramount, service digital era requires the introduction of new work improvements are coordinated, managed and rolled method and communication tools. An increased out in a ‘joined-up’ way across the Company. use of IT platforms for crew Management and communication is planned for the year and will culminate with the use of tablets by Cabin Crew. A Technical Services refreshed Customer Relations corporate platform Technical Services (TS) has the prime mission will provide new opportunities for increasing of providing safe on time aircraft for every flight personal attention in service. operated by Air Mauritius. It also has the challenge to always provide a cabin that is to the Skytrax The Operation Control Centre (OCC) is the ‘nerve 4 star standard. TS has been transforming centre’ for Aircraft Operations where all flights its organisation to a Continuing Airworthiness are monitored and situations managed. They Management Organisation whereby all aspects of oversee the network and provide the control maintenance and safety are relentlessly controlled. when unforeseen circumstances disrupt planned This initiative has the aim to consistently enhance operations. The primary aim is to minimise safety standards to keep it well above minimum disruption, ensuring that customers reach their compliance level. destination safely and efficiently in any given circumstance. OCC also manages the day to day TS is the main service provider in terms of Technical functions of flight dispatch, flight planning, crew Handling at SSR International Airport. In addition control and flight monitoring, whereby automatic to the Company’s fleet, qualified TS personnel updates of the aircraft position is received. handle the majority of foreign carriers operating to Mauritius. TS has the added responsibility Controlling costs is an important objective for of providing full engineering and maintenance any business, thus the Company has set up a support to the Maritime Air Squadron of the ‘Fuel Office’ which focuses on fuel conservation Mauritius National Coast Guard. Technical handling initiatives for all areas of the Company in order of foreign operators has been a growing business to manage this major outgoing. The Company for TS. Revenue increased significantly compared continues to utilise a number of planning tools to to the previous financial year. optimise and reduce fuel consumption. Dynamic 76 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Technical Services (Cont’d)

The maintenance facility comprises of two The core capabilities of TS were mainly on the maintenance hangars that can accommodate one Airbus family aircraft and the ATR72. Two years long range wide body, two turbo-propeller aircraft ago, TS embarked on a project to extend its and two helicopters. Regular servicing and repairs capability to handle Boeing aircraft as well. As at are carried out on a 24/7 basis in Mauritius. Major date, TS has qualified personnel on the Boeing 777 overhauls and refurbishment of larger aircraft are and the Boeing 787 aircraft. Moving forward, TS outsourced to reputed specialised maintenance aims at having full line maintenance capability on organisations. the Boeing family aircraft also.

TS oversees the whole maintenance and The main asset of Technical Services is its engineering operation network-wide. This is workforce. Keeping them up-to-date with the achieved through round the clock operation of its latest technology and regulations is paramount Maintenance Control Centre. Highly qualified and to achieve the level of safety and efficiency experienced maintenance personnel uses state of this industry calls for. In that respect, TS has an the art technological means to closely monitor the extensive training programme for its workforce. performance of each aircraft be it on the ground or Several well established trainings encompassing, in flight. This set up ensures that any of the aircraft among others, human factors, safety management in operation are always airworthy and safety of system, refresher training, aircraft systems, passengers always remains of utmost priority. transport of dangerous goods and warehousing of aircraft equipment are organised locally in its With the increasing number of flights to Rodrigues Approved Training Centre by local instructors or and the raising expectation of its customers for by specialised entities from abroad. Some specific high on-time performance, Technical Services has training are also carried out overseas in specialised implemented a permanent line maintenance base training centres. headed by a resident Licensed Aircraft Engineer at Plaine Corail airport. Technical Support at TS is committed to deliver a cabin which is at Gillot airport has also been significantly enhanced least to the Skytrax 4 Star standard or better. To by outsourcing the services to a local supplier. that effect, TS has been continuously working TS personnel are positioned in both Gillot and on new ways of keeping the cabin to the desired Pierrefond airports during peak holiday periods. standard. Training of cabin maintenance personnel is continuing and more comprehensive works are The TS management team comprises of being performed during aircraft heavy maintenance Maintenance, Engineering, Supply Chain and layovers in specialised repair organisations. Quality managers headed by the EVP Technical Services who is also the Air Operator’s Certificate (AOC) Nominated Person for Maintenance and Human Resources And Engineering. TS holds approval as an Approved Organisational Development (HR & OD) Maintenance Organisation from DCA Mauritius and European Aviation Safety Agency (EASA). The rapid pace of business change requires Moreover it holds approvals from other non- adaptability of employees. Addressing business European Aviation Authorities namely, UAE, South challenges require the talents, energies and Africa, and Seychelles. As a further commitment performance of employees. A set of priorities for to international standards, TS has positively action to gain and sustain competitive advantage contributed to maintain its IOSA Certification. have been established to align with the business strategies. Air Mauritius Annual Report 2015/16 77

Management Discussion and Analysis

Human Resources And Organisational Development (HR & OD) (Cont’d)

The HR & OD Department’s focus is to invest business which is under-staffed to prevent burn- in progressive HR policies and cost-effective out and resentment amongst those employees programs with the goal of building a high-performing covering for their workmates on leave. organisation of engaged people, while fostering and creating a work environment where people want to Safety, Health & Environment work, not where they have to work. While optimism Air Mauritius and its subsidiaries highly value the is still on the rise given an economic recovery is safety, health and wellbeing of its employees and taking hold around the world, cost containment all its stakeholders and recognise that excellence remains a strategic priority for the Company. in environmental, health and safety performance is an essential part of its business. The focus is on Performance Management System (PMS) their integration into its corporate processes and The PMS for management and executives has decision-making areas as well as an enhancement been completed, using competency models as in the implementation of the risk assessment. a basis to manage performance which articulate the knowledge, skills, abilities and characteristics By embedding a comprehensive and responsible deemed most important in achieving the culture throughout its business, the Company organisational goals. meets all its safety, health and environmental goals through measurable targets that promote their continual improvement. Mauritianisation The Mauritianisation process for pilots is on-going with the aim to reach 60% within the next 3 years. Employee Relations Likewise, the recruitment of Trainee Technicians and Air Mauritius endeavours to promote healthy Support Engineers have been actioned to ensure that employee relations at its workplace. Commitment- there are no expatriates working in jobs that can be based human resource practices are applied performed by Mauritians. Emphasis is also on hiring to allow organisational social climate of trust, Mauritians who have worked in global organisations cooperation and shared responsibility between Air with significant track records. Mauritius and the respective trade unions.

The Company continues to ascertain that all its Early Retirement employees are comfortable with each other, share The rightsizing of the workforce is of prime concern a good relationship and work in close coordination to ensure growth and sustainability. As such, in the towards the objectives set. financial year 2016/17 an early retirement plan has been proposed to those who want to exit the organisation with the consent of their superiors. Training & Development The early retirement plan aims to provide eligible The rate at which the Company learns is a source employees wishing to retire with a dignified exit of sustainable competitive advantage. Operating opportunity and enhanced benefits, consistent in a highly regulated business environment, with the mission of the Company. the Company has to ensure that its employees are trained at the required level to meet local and international standards and regulations as Leave Without Pay well as continuously building on their technical In the financial year 2016/17, a Leave Without Pay competencies. Accordingly, annual training plan of 2 years will be offered to employees willing to be and budget have been set to ensure compliance granted such leave. All requests are being carefully with regulatory international aviation standards and scrutinised to ensure that there is no critical area of requirements. 78 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Human Resources And Organisational Development (HR & OD) (Cont’d) ● Airport offering improvements

Setting Up of the Air Mauritius It has also initiated actions to improve emotional Training & Development Institute (AMTDI) connections and customer advocacy: In an era of liberalisation and globalisation, Air Mauritius recognises the opportunities emerging from ● Actionable customer insights at various touch the evolving scenario to develop a curriculum related points to the airline business. There is a need to provide skill development and business training to interested ● Customer Recovery process improvements individuals at large to mainstream them in the on- ● Cabin Definition of A350 aircraft to meet the going process of economic growth at the Company needs of future customers and country levels. The setting up of the AMTDI will allow sustainable long-term relationships with the ● Progress on potential Cabin improvement local, regional and international communities in terms options for the existing fleet of learning and development as well as the payoff in ● its business results. This is all part of the Company’s Collaboration of all customer-related functions for strategy which places priority on long-term business a coherent Customer Relationship Management development over short-term temporary gain. and Customer Experience Management strategy The Company is well geared to face the current and Customer Experience, foreseeable challenges of the customer from an Ground and Inflight Services experience perspective by continuing on the above- named dimensions, and maximising benefits of digital developments applicable to the airline industry. 1. Customer Transforming the organisation for the customer of It is also conscious of the need for corporate today and tomorrow… alignment and consistency across products and processes impacting on the offerings across Air Mauritius has a strategic objective to strengthen the customers’ journey with Air Mauritius. The the core business base by providing the highest Company will endeavor to further improve on level of cabin experience and quality of service these fronts within the available resources during across the customer journey at a reasonable price. the financial year 2016/17. The action plan for the To achieve this, the Company will further develop financial year 2016/17 is to further improve the the enhancements introduced since 2012. experience of customers which revolves around:

During the financial year 2015/16, the Company ● Skytrax 4-Star Onboard and Airport standards has maintained its efforts to improve the customer offering, adhere to industry standards e.g. Skytrax ● On-going actionable customer insights 4-Star and comply with airline regulatory standards, ● while keeping a focus on cost-effectiveness. Implementation of Microsoft Dynamics Customer Relationship Management across the customer Its actions in the financial year are a continuation journey of the phase on addressing the functional needs of ● Service Education customers, as summarised below: ● Service Recognition and Rewards ● Service Education: Increasing Customer Loyalty ● course to frontline team members Service Recovery & Guarantees ● ● Service Quality across the customer journey Service Improvement Projects across Touch points ● Onboard offering improvements Air Mauritius Annual Report 2015/16 79

Management Discussion and Analysis

Customer Experience, Ground and Inflight Services(Cont’d)

The Company is determined to create the 3. Inflight Services competitive edge in terms of a differentiated The Company has successfully delivered its customer experience and innovate for its customers promise to obtain Skytrax 4-Star Rating in July who have evolving needs. 2014. In the financial year 2015/16, the Inflight Services Department, in conjunction with the Cabin 2. Ground Services Crew Management team, has implemented a In addition to handling its own flights, Air Mauritius number of products and services. provides ground handling services to other airlines as well. These services which include passenger, The biggest challenge for Inflight Services has been baggage, ramp, cargo and cleaning services, the sustainability of the required Quality Standards aim at offering effective and efficient services with on all onboard product attributes. The Company commitment to optimal satisfaction. had put in place several ‘Service Excellence and Cost Efficiency Initiatives’ during financial year The latest technology aircraft like A380, B787 and 2015/16 in conjunction with cross functional team B777 are handled regularly by Air Mauritius. During members , to improve the product and service the financial year 2015/16, Air Mauritius has handled delivery, while optimising costs, and get the more than 14,500 flights and 2,560,000 passengers customers to be rightly served. at high international standards. The technical development of handling equipment as well as the The supply chain activity at Inflight Services is a key evolution in aviation regulations requires a permanent contributor to sustain the required quality standards need for training. As part of its continuous efforts to on Air Mauritius Network, with zero disruption of improve operational efficiencies, training programs stock items, whilst ensuring operational efficiencies for new employees and refresher courses were on- and gains at base, as well as outstations, to optimise going, including mandatory training and train-the- resources. The Inflight Services risk register has trainer programs. The Company prepares its team been updated in line with the new control systems members with the skills necessary to perform their in place, with the required mitigating action plans, jobs efficiently and with confidence from day one, to secure further service development. helping to increase employee skills, improve safety and meet customer requirements. Several Inflight Services areas have further improved their offering, such as the implementation of The service delivery standards at the Sir a bi-monthly Inflight Entertainment (IFE) cycle, Seewoosagur Ramgoolam International Airport which enables the Company to capture the latest are monitored through regular audits which have blockbusters at an earlier stage of the industry validated the Company’s compliance status of IATA movie release, the launch of Online Inflight Duty Operational Safety Audit (IOSA), IATA Safety Audit Free Shopping out of base, which will be gradually for Ground Operations (ISAGO) and ISO 9001:2008. enhanced to meet customer expectations, a Recertification from these respected institutions complete new menu design since March 2016 out of confirms that the safety and quality management base, and regular updates at outstations alongside system put in place are applied relentlessly. the catering tenders, which are supported by an intensive program of meal quality checks, and food The Amédee Maingard Lounge in Mauritius has safety checks. Inflight Services also support the been awarded the Indian Ocean’s Leading Airport Company’s Lounge products and services. Lounge at the 2016 World Travel Awards for the third consecutive year. The menu offering in the lounge The Inflight Services had also embarked on a number is constantly reviewed and customised for different of specialised cross functional projects, namely: customer profiles whereas the beverages are aligned ● with the onboard offerings to provide a unique The A350 Aircraft Definition Implementation experience for customers be it on ground or in flight. by several Work Groups, covering specialised aspects. 80 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Customer Experience, Ground and Inflight Services(Cont’d) For goal congruence across the organisation, a spectrum of internal communications tools are ● The Project Management of the A350 IFE deployed and maintained to ensure colleagues implementation, consisting of the Graphic in Mauritius and across the network understand User Interface (GUI) design, IFE Contents Company values and strategic objectives. They management process, selection process of give employees access to the latest news about applications from the supplier’s catalogue, the airline while providing them with a medium define the business model for connectivity, and to promote internal community life. The internal ancillary revenue to sustain the costs. communications function also endeavours to keep ● IFS Support for the aircraft retrofit plans of Air the organisation focused on key performance Mauritius fleet. indicators fostering a performance oriented culture.

● To plan ahead Entry In Service (EIS) of the A350 The Air Mauritius Brand is constantly reinforced for September 2017 with the elaboration and dissemination of a strong ● Entry in Service of the ATR72 for July 2016 and consistent corporate identity expressed in the Company product design language and all forms ● Opening of new stations at Maputo and Dar Es of messages circulated across both internal and Salam in May 2016 external channels. A strong brand image also helps build and maintain bonds with the airline’s ● Opening of the “Air Corridor” in Singapore in various publics. Branding and advertising plays an March 2016 important role in the support sales and in beating competition by expressing the Company’s unique The above Inflight Services activities are supported selling proposition through various advertising by a Quality Management System which has been campaigns. successfully recertified ISO 9001-2008 standards compliant. The Company hosted or supported a number of events during the year in order to enhance visibility Communications and Corporate Affairs and promote Company image. These events also provide Air Mauritius Team Members with platforms Air Mauritius is actively involved in the management of of exchange for interaction with key stakeholders its corporate image and reputation thus contributing and for the promotion of Company business. to safeguard shareholder value. This involves the building and maintaining of sound relationships As crisis situations can have far reaching impacts on with key stakeholders including shareholders, Company reputation and give rise to legal liabilities employees, media, government regulatory bodies, if not properly managed a Crisis Management organisations, customers, business partners, function is in place to ensure a perpetual state of financiers as well as the public in general. The preparedness for a broad range of crisis situations. Company’s various communities and the media are closely monitored and top management is provided with valuable insight on reputation issues while the organisation is kept abreast with latest local and international industry news. Air Mauritius Annual Report 2015/16 81

Management Discussion and Analysis

Performance and Development of the Business

Financial Performance Profit of the Group for the financial year was EUR 16.5M compared to a loss of EUR 23.6M in the previous year. Group Operating profit was EUR 17.6M for the financial year 2015/16 compared to a loss of EUR 17.1M for 2014/15.

Business Segments

Airline business The airline business segment result for the financial year 2015/16 was a profit of EUR 15.4M compared to a loss of EUR 23.7M in 2014/15. The operating profit for the financial year under review was EUR 16.5M compared to a loss of EUR 17.1M in 2014/15.

Net Profit (oss for the Company (Eur m

15.4

7.3

(3.6)

(23.7) (29.2)

2011/12 2012/13 2013/14 2014/15 2015/16

EBITDA for the Company

15.6 14.4 12.4

7.9 6.2

28,060 55,771 66,142 36,550 76,158

2011/12 2012/13 2013/14 2014/15 2015/16 EBITDA (Eur'000) EBITDA/Turnover (%) 82 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Segmental Information

1. By Product (a) Aircraft Operations

2015/16 2014/15 Revenue Composition % Change EUR million EUR million

Passenger Revenue 408.0 379.1 7.6

Freight 41.7 44.5 (6.3)

Other Passenger related & Helicopter Revenue 17.7 19.4 (8.8)

Lease Receivable & Sundry Revenue 10.6 11.5 (7.8)

Excess Baggage, Mail & Courier 3.3 3.3 -

Total 481.3 457.8 5.1

Revenue generated from aircraft operations Revenue Composition recorded an increase of 5.1% over the preceding year to reach EUR 481.3M this year. Passenger 4% 2% 1% revenue witnessed a significant growth of 7.6% 8% from EUR 379.1M in 2014/15 to EUR 408M this year. On the other hand, Freight revenue shrunk by EUR 2.8M to EUR 41.7M for the financial year under review. Other Passenger related and Helicopter revenue was also down by 8.8% from EUR 19.4M in 2014/15 to EUR 17.7M this year.

Lease Receivable & Sundry Revenue registered a fall of 7.8% from EUR 11.5M in 2014/15 to 85% EUR 10.6M this year. Revenue earned from the carriage of Excess Baggage, Mail & Courier was comparable to the previous financial year.

Passenger Revenue Freight Other Passenger related & Helicopter Revenue Lease Receivable & Sundry Revenue Excess Baggage, Mail & Courier Air Mauritius Annual Report 2015/16 83

Management Discussion and Analysis

Segmental Information (Cont’d)

Travelled Revenue (Eur m)

408.0 378.6 367.7 375.4 379.1

43.1 42.1 41.2 44.5 41.7

2011/12 2012/13 2013/14 2014/15 2015/16 Passenger Freight

(b) Ground Operations Air Mauritius provides Traffic and Technical handling services to foreign airlines operating to Mauritius. Income earned from these services was 1.5% of the total revenue for 2015/16. 84 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Segmental Information (Cont’d) Travelled Revenue by Route 2. Geographical (i) Geographical by Route 32% Travelled Revenue breakdown by route *

Operating Region EUR million %

Europe 156.6 34 34% Asia 147.7 32 Europe Africa/Middle East/ 29% Indian Ocean 130.1 2 9 Asia 5% Africa & Middle Australia 23.6 5 East/Indian Ocean Total 458.0 100 Australia

* Excluding Helicopter Revenue, Lease Receivable & Sundry Revenue Available Tonne Kilometres (ATK)

Europe - 34% The share of revenue of Europe dropped by 2 18% points to 34% this year. Available Tonne Kilometres was comparable to the previous financial year whilst Revenue Tonne Kilometres slipped by 3.3%. 36%

Asia - 32% 41% The Asian region groups all the routes operating to Europe India, mainland China, Hong Kong, Singapore and Asia 5% Malaysia. The share of revenue of this region grew Africa & Middle by 1 point to reach 32% this year.Available Tonne East/Indian Ocean Kilometres has decreased by 1.8% but Revenue Australia Tonne Kilometres went up by 1.2%. Revenue Tonne Kilometres (RTK) Africa/Middle East/Indian Ocean - 29% These segments include South Africa, Kenya,

Dubai, Madagascar, Reunion and Rodrigues. 17% The share of revenue of this region registered an increase of 1 point from 28% in 2014/15 to 29% this year. Both Available Tonne Kilometres and Revenue Tonne Kilometres recorded increases of 36% 5% and 7.2% respectively. 43% Europe

Australia - 5% Asia The share of revenue of Australia is 5% as last year. 4% Africa & Middle Available Tonne Kilometres dropped by 1.7% whilst East/Indian Ocean Revenue Tonne Kilometres went up 2.3%. Australia Air Mauritius Annual Report 2015/16 85

Management Discussion and Analysis

Segmental Information (Cont’d) Travelled Revenue by destination (ii) Geographical by Destination Travelled Revenue breakdown by destination * 23% Europe Destination EUR million % Asia

Europe 145.1 32 Mauritius 19% Other Indian Asia 104.9 23 Ocean Islands 32% Africa & Mauritius 89.6 19 Middle East Australia Other Indian Ocean Islands 57.0 12 12% America 9% Africa & Middle East 39.5 9 4%

Australia 16.9 4 1%

America 5.0 1

Total 458.0 100

* Excluding Helicopter Revenue, Lease Receivable & Sundry Revenue

Revenue by destination is described as the income generated from the original point of sale, i.e. market contribution to the network.

The European arena comprises of online markets (with direct connections) such as France and United Kingdom and offline markets (with indirect connections) such as Germany, Italy, Switzerland, Spain, Sweden and Belgium. Its share of revenue dropped by 1 percentage point to 32%.

Asia is composed mainly of India, China, Malaysia, Singapore and Hong Kong. This region registered a growth of 2 percentage points in its share of revenue which now stands at 23%.

The share of revenue of Mauritius witnessed a drop of 1 percentage point from 20% to 19%.

Madagascar, Reunion and Seychelles form part of Other Indian Ocean islands. Its share of revenue remained at 12%.

Africa and Middle East consist mainly of countries such as South Africa, Kenya and United Arab Emirates. The share of revenue of these segments remained unchanged from last year at 9%.

The share of revenue of the Australian region remained same as last year at 4%.

America comprises mainly of the northern countries of USA and Canada. Its share of revenue remained unchanged at 1%. 86 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Segmental Information (Cont’d)

Geographical by Routes (Passenger only)

% Change over % Change over Operating Region Number EUR million Last Year Last Year

Europe 278,339 1.1 136.2 0.4

Asia 388,976 11.3 131.9 13.4

Africa & Middle East 247,884 10.0 68.1 11.8

Indian Ocean 532,641 12.8 49.4 10.0

Australia 51,571 7.6 22.4 5.2

Total 1,499,411 9.4 408.0 7.6

Network Contribution by Operating Regions Air Mauritius continued to face intense competition in 2015/16 from existing airlines 100% 3% 6% operating to Mauritius as well as new entrants in 12% the Mauritian sky. 35% 17% Seat capacity offered in the network witnessed an increase of 3.4% from 1,947,766 in 2014/15 17% to 2,013,568 this year. Demand responded 32% positively to the increase in capacity as the number 26% of passengers uplifted went up by 9.4% to reach 1,499,411 which constitutes a new record for the 33% Company. On the other hand, Passenger revenue 19% increased by 7.6%, impaired to some extent by 0% a 1.6% fall in passenger yield. Passenger Load % No of Passengers % Revenue factor achieved in the network stood at 78.7%, recording an improvement of 5 percentage points Europe Asia Africa & Middle East over the preceding year. Indian Ocean Australia

Seats offered/Passengers carried/Load Factor

78.7%78.7% 76.9%76.9% 74.1%74.1% 75.5%75.5% 73.7%73.7%

1,894,463 1,324,613 1,874,266 1,296,542 1,913,249 1,330,003 1,947,766 1,370,423 2,013,568 1,499,411

2011/12 2012/13 2013/14 2014/15 2015/16 No. of Seats offered No. of Pax carried Pax Load Factor(%) Air Mauritius Annual Report 2015/16 87

Management Discussion and Analysis

Segmental Information (Cont’d)

Europe Australia Seat capacity offered on the European routes Capacity on the Perth route was curtailed by 1.2% remained comparable to the previous financial to 71,971 seats this year. Despite the reduction in year. Passenger uplift on these routes increased capacity, the number of passengers carried has by 2,943 or 1.1% to reach 278,339 this year. increased by 7.6% from 47,916 in 2014/15 to Consequently, Passenger revenue has increased, 51,571 this year. Passenger revenue increased albeit marginally by 0.4%, due to a slight decline in by 5.2%, impaired somewhat by a 2.5% decline passenger yield. Passenger Load Factor improved in average yield. Passenger Load Factor stood at by 1 percentage point to 82% this year. 71.7% this year in contrast with 65.8% achieved in the previous financial year. Africa & Middle East The total number of seats offered in 2015/16 Indian Ocean stood at 369,990 which represent an increase of Seat Capacity in the Indian Ocean region was 3.1% over the previous financial year. Similarly, the increased by 7.1% to reach 757,161 this year on number of passengers carried also went up by increasing demand. Indeed, Passenger demand 10% from 225,366 in 2014/15 to 247,884 this year. on these routes grew by 12.8% from 472,347 Passenger revenue was also up by 11.8% to reach in 2014/15 to 532,641 this year. Despite the EUR 68.1M further enhanced by an improvement negative impact of a 2.1% erosion in average yield, in passenger yield. Passenger Load Factor stood Passenger revenue has increased by 10% from at 67% as compared to 61.5% achieved in the EUR 44.9M to EUR 49.4M. Passenger Load Factor previous financial year. improved by 4 points from 69% to 73% this year.

Asia The Asia region includes the routes to India, China, Hong Kong, Singapore and Malaysia. Capacity on the China routes was curtailed by 11.7% with reduction of frequencies on the Shanghai and Beijing routes despite the introduction of Chengdu route. Overall capacity for Asia has increased by 1.1%, mainly attributable to a significant increase of 16.8% in seats on the Mumbai route. The number of passengers carried in this region grew significantly by 11.3%, increasing from 349,398 in 2014/15 to 388,976 this year and Passenger revenue witnessed an increase of 13.4% to attain EUR 131.9M. The significant increase in Passenger demand against a marginal increase in capacity resulted into a 9.5 percentage points improvement in Passenger Load Factor which increased from 72.6% to 82.1%. 88 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Segmental Information (Cont’d)

Passenger Capacity and Output (Million)

8,867 8,399 8,400 8,009 7,612 6,572 6,612 6,186 5,851 6,046

2011/12 2012/13 2013/14 2014/15 2015/16 Revenue Passenger Kilometres (RPKs) Available Seat Kilometres (ASKs)

Load Factor (%) by region

82.1 81.0 82.0

72.6 71.7 73.0 69.0 67.0 65.8 61.5

Africa & Middle East Asia Australia Europe Indian Ocean

2014/15 2015/16

Passengers Carried (Number) & Revenue (EUR m)

408.0 378.6 375.4 379.1 367.7 1,324,613 1,296,542 1,330,003 1,370,423 1,499,411

2011/12 2012/13 2013/14 2014/15 2015/16

Passengers carried Passenger Revenue Air Mauritius Annual Report 2015/16 89

Management Discussion and Analysis

Segmental Information (Cont’d)

Cargo Analysis Geographical by Routes

% Change over % Change over Operating Region Tonnes EUR million Last Year Last Year

Europe 9,511 (12.6) 17.0 (4.5) Asia 7,293 (25.2) 13.5 (8.8) Africa/Middle East/Indian Ocean 12,552 (11.2) 10.4 (4.6) Australia 545 (28.9) 0.8 (20.0) Total 29,901 (15.8) 41.7 (6.3)

Network Contribution by Operating Regions The volume of Cargo carried in the network recorded a decrease of 15.8% from 35,528 100% 2% 2% tonnes in 2014/15 to 29,901 tonnes this year 25% while average cargo yield has improved by 11.4%. 42% Accordingly, Cargo revenue has dropped by 6.3% to EUR 41.7M this year. 32%

24% Europe Cargo tonnage uplifted on the European routes dropped by 12.6% against the previous year to 41% 32% reach 9,511 tonnes this year. An improvement in cargo yield helped to mitigate the effect of the drop 0% in tonnage and revenue fell by 4.5% to EUR 17M. Tonnes (%) Cargo Revenue (%)

Africa/Middle East/Indian Ocean Europe Asia Africa/M East/Indian Ocean These regions registered a decrease of 11.2% in Australia cargo tonnage uplift which now stands at 12,552 tonnes. On the other hand, Cargo revenue slipped by 4.6% to EUR 10.4M, as the impact of the drop in tonnage was somewhat mitigated by a 7.4% improvement in yield.

Asia Asia recorded a substantial decline of 25.2% in cargo uplift from 9,750 to 7,293 tonnes but cargo yield has improved by 21.9% and Cargo revenue fell by 8.8% from EUR 14.8M to EUR 13.5M.

Australia The Australian region reported significant decreases on both Cargo tonnage and revenue of 28.9% and 20% respectively. 90 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Segmental Information (Cont’d)

Cargo carried (Tonnes) & Revenue (Eur m)

44.5 43.1 42.1 41.2 41.7

31,940 30,492 31,825 35,528 29,901

2011/12 2012/13 2013/14 2014/15 2015/16

Cargo carried Cargo Revenue

Percentage Contribution of Cargo to Gross Travelled Revenue

10.0 10.1 9.7 10.3 9.1

2011/12 2012/13 2013/14 2014/15 2015/16

Cargo Revenue Tonne Kilometres (Million)

179 169 177 196 159

2011/12 2012/13 2013/14 2014/15 2015/16 Air Mauritius Annual Report 2015/16 91

Management Discussion and Analysis

Revenue

Group revenue for the year increased from EUR 465.7M in 2014/15 to EUR 490.8M this year.

Passenger revenue (excluding helicopter revenue) went up by 7.6% to EUR 408M. Passenger yield dropped by 1.6% compared to the previous financial year and Passenger Load factor grew by 5 points to 78.7%. Capacity in terms of ASKs’ was comparable to last year.

Cargo revenue was down by 6.3% from EUR 44.5M to EUR 41.7M as compared to last year attributable to a decrease of 15.8% in cargo tonnage.

Operating Expenses Total operating expenses decreased by EUR 9.1M from EUR 453.2M to EUR 444.1M mainly due to the fall in fuel prices.

Increase/ Operating Expenditure 2015/16 2014/15 (Decrease)

EUR million EUR million %

Fuel Costs 142.3 174.7 (18.5)

Employee Costs 77.4 78.9 (1.9)

Maintenance & Overhaul * 59.0 46.6 26.6

Handling Charges, Ground Services, Catering and Other Inflight Costs 42.1 39.0 7.9

Landing Fees and en route Charges 30.0 29.5 1.7

Aircraft Operating/Wet Lease Costs 34.7 31.0 11.9

Marketing and Distribution Costs 24.2 22.6 7.1

Depreciation & Amortisation 18.7 18.5 1.1

Crew Costs & Other Operating Costs 15.7 12.4 26.6

Total Group Operating Expenditure 444.1 453.2 (2.0)

* Include Depreciation & Amortisation on Engine/Airframe overhauls 92 Air Mauritius Annual Report 2015/16

Management Discussion and Analysis

Cost Composition - 2015 /16 Cost Composition - 2015/16

4% 4% Fuel Costs 32% 5% Employee Costs Maintenance & Overhaul Handling Charges, Ground Services, 8% Catering and Other Inflight Costs Landing Fees and en route Charges Aircraft Operating/Wet Lease Costs 7% Marketing and Distribution Costs Depreciation & Amortisation 17% Crew Costs & Other Operating Costs 10%

13%

Earnings per Share Cash Flows Profit attributable to shareholders for the year was The cash and cash equivalents (after bank EUR 16.3M. This is equivalent to a profit of EUR overdrafts) of the Group at March 31, 2016 0.16 per share or Rupees 6.32 per share as at amounted to EUR 49.1M (MUR 2 billion) compared March 31, 2016. to EUR 17.6M (MUR 691M) at March 31, 2015.

Working Capital Gearing ratio At March 31, 2016, net current liabilities were EUR The gearing ratio at March 31, 2016 was 0.7:1 67.2M as compared to EUR 104.6M at March 31, compared to 1.7:1 of the previous financial year. 2015. The current liabilities include an amount of EUR 86.7M for the financial year 2015/16 compared to EUR 76.6M for 2014/15 in respect of sales in advance of carriage for tickets issued but not yet utilised.

Debt (EUR '000) and Gearing Ratio

1.71.7

1.01.0 1.01.0

0.80.8 0.70.7

84,038 76,035 63,953 65,783 53,834

2011/12 2012/13 2013/14 2014/15 2015/16 Debt Gearing Ratio Air Mauritius Annual Report 2015/16 93

Management Discussion and Analysis

Operating and Financial Statistics for the five years ended 31 March - Company

2016 2015 2014 2013 2012

Traffic and Capacity

Revenue passenger km (RPK) m 6,612 6,186 6,046 5,851 6,572

Available seat km (ASK) m 8,400 8,399 8,009 7,612 8,867

Passenger load factor (%) 78.7 73.7 75.5 76.9 74.1

Cargo tonne km (CTK) m 159 196 177 169 179

Total revenue tonne kilometres (RTK) m 760 759 733 708 786

Total available tonne kilometres (ATK) m 1,258 1,256 1,201 1,105 1,300

Overall load factor (%) 60.4 60.4 61.0 64.1 60.5

Passengers carried ('000) 1,499 1,370 1,330 1,297 1,325

Tonnes of cargo carried 29,901 35,528 31,825 30,492 31,940

Revenue flights 10,677 10,093 9,987 10,080 10,434

Financial

Net profit/(loss) margin (%) 3.2 (5.1) 1.6 (0.8) (6.5)

EBITDA m 76.2 36.6 66.1 55.8 28.1

Gearing ratio 0.7:1 1.7:1 0.8:1 1.0:1 1.0:1

Total traffic revenue per RTK Eur 0.60 0.57 0.58 0.59 0.55

Total traffic revenue per ATK Eur 0.36 0.34 0.35 0.38 0.33

Total expenditure on operations per RTK Eur 0.58 0.60 0.59 0.61 0.57

Total expenditure on operations per ATK Eur 0.35 0.36 0.36 0.39 0.35

Passenger revenue per RPK Eur 0.06 0.06 0.06 0.06 0.06

Passenger revenue per ASK Eur 0.05 0.05 0.05 0.05 0.04

Revenue per ASK (RASK) Eur Cent 6.22 6.02 6.26 6.55 5.66

Cost per ASK (CASK) Eur Cent 5.71 6.15 6.23 6.68 6.00

Cargo revenue per CTK Eur 0.26 0.23 0.23 0.25 0.24

Average fuel price (US cents/US gallon) 172 285 324 334 337

Operations

Aircraft in service at year end 12 12 12 12 12

Punctuality - within 15 minutes (%) 87.2 88.5 87.5 84.7 78.3

Dispatch Reliability overall (%) 98.5 98.7 98.6 98.3 98.6 94 Air Mauritius Annual Report 2015/16

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 Fooad Nooraully Company Secretary June 13, 2016

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 24. 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. FRAcS Mr Louis Rivalland Chairman of the Board Director & Chairman of Audit Committee June 13, 2016 Air Mauritius Annual Report 2015/16 95

Statement of Compliance

(Section 75(3) of the Financial Reporting Act) Name of PIE: Air Mauritius Limited Reporting Period: Year ended March 31, 2016 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, 2.10.3 and 3.9.1(b) which are explained below:

1. Section 2.2.3 – Two Executive Board Directors The Company currently has only one Executive Board Director, but provides for the attendance and participation of Senior Executives, as required, at all Board meetings and deliberations.

2. Section 2.10.3 –Directors Appraisal No individual assessment of Board Directors had been undertaken since the Board composition has been reviewed as from August 20, 2015. The evaluation exercise will be carried out in the financial year 2016/17.

3. Section 3.9.1 (b) – Composition of the Audit Committee The Chairman 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. FRAcS Mr Louis Rivalland Chairman of the Board Director & Chairman of the Audit Committee June 13, 2016 96 Air Mauritius Annual Report 2015/16

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. FRAcS Mr Louis Rivalland Chairman of the Board Director & Chairman of Audit Committee June 13, 2016 Air Mauritius Annual Report 2015/16 97

Independent Auditors’ Report to the Members of Air Mauritius Limited

Report on the Financial Statements We have audited the financial statements of Air Mauritius Limited (the “Company”) and its subsidiaries (the “Group”) which comprise the statements of financial position as at March 31, 2016 and the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended and a summary of significant accounting policies and other explanatory notes.

Directors’ Responsibility for the Financial Statements The directors are responsible for the preparation and fair presentation of these financial statements 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 financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the company’s preparation and fair presentation of the financial statements 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 company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Group and the Company as at March 31, 2016 and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and comply with the Companies Act 2001 and Financial Reporting Act 2004. 98 Air Mauritius Annual Report 2015/16

Independent Auditors’ Report to the Members of Air Mauritius Limited (Cont’d)

Other matter This report has been prepared solely for the Company’s members, as a body, in accordance with Section 205 of the Companies Act 2001. 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 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 disclosure in the annual report is consistent with the requirements of the Code.

ERNST & YOUNG ROGER DE CHAZAL, A.C.A. Ebène, Mauritius Licensed by FRC

KPMG JOHN CHUNG, FCA Ebène, Mauritius Licensed by FRC

Date: June 13, 2016 Air Mauritius Annual Report 2015/16 99

Financial Statements 100 Air Mauritius Annual Report 2015/16

Statements of Financial Position as at March 31, 2016

THE GROUP THE COMPANY Notes 2016 2015 2014 2016 2015 Restated Restated €’000 €’000 €’000 €’000 €’000 ASSETS Non-current assets Property, plant and equipment 6 185,800 210,196 231,206 181,792 205,919 Investment property 7 10,083 10,200 9,764 - - Intangible assets 8 266 603 947 237 563 Investment in subsidiaries 9 - - - 27,155 27,155 Investment in an associate 10 119 129 133 102 102 Available-for-sale investments 11 528 634 603 528 634 Long term deposits 12 21,545 19,625 7,376 21,545 19,625 Long term receivables 13 135 150 123 135 150 Deferred tax asset 14 100 81 24 - - 218,576 241,618 250,176 231,494 254,148 Current assets Inventories 15 14,380 16,773 15,716 14,310 16,712 Trade and other receivables 16 57,290 55,818 50,715 56,862 55,235 Derivative financial assets 20 131 1,815 1,646 131 1,815 Cash and short-term deposits 17 50,063 18,612 19,628 45,983 15,651 121,864 93,018 87,705 117,286 89,413 Total assets 340,440 334,636 337,881 348,780 343,561

EQUITY AND LIABILITIES Equity Share capital 18 41,724 41,724 41,724 41,724 41,724 Share premium 18,869 18,869 18,869 18,869 18,869 Other reserves (16,775) (35,622) (10,996) (5,592) (24,868) Retained earnings 33,207 12,014 26,945 27,479 7,209 Equity attributable to equity holders of the parent 77,025 36,985 76,542 82,480 42,934 Non-controlling interests 9 2,798 2,685 2,501 - - Total equity 79,823 39,670 79,043 82,480 42,934

Non-current liabilities Interest-bearing loans and borrowings 19 30,107 36,081 40,795 30,107 35,657 Employee benefit liabilities 21 22,061 27,952 34,357 21,254 27,279 Derivative financial liabilities 20 - 3,968 - - 3,968 Provisions 22 19,338 29,383 27,716 19,338 29,383 71,506 97,384 102,868 70,699 96,287 Current liabilities Trade and other payables 23 159,540 144,980 130,707 159,573 145,245 Interest-bearing loans and borrowings 19 23,727 29,702 23,158 30,184 36,195 Derivative financial liabilities 20 5,844 22,900 868 5,844 22,900 Dividends - - 1,237 - - 189,111 197,582 155,970 195,601 204,340 Total liabilities 260,617 294,966 258,838 266,300 300,627 Total equity and liabilities 340,440 334,636 337,881 348,780 343,561

These financial statements were approved by the Board of directors on June 13, 2016 and signed on its behalf by:

Dr Arjoon Suddhoo. FRAcS Mr Louis Rivalland Chairman of the Board Director and Chairman of Audit Committee

The notes on pages 106 to 175 form an integral part of these financial statements. Independent auditors’ report on pages 97 and 98. Air Mauritius Annual Report 2015/16 101

Statements of Profit or Loss and Other Comprehensive Income for the year ended March 31, 2016

THE GROUP THE COMPANY Notes 2016 2015 2016 2015 Restated €’000 €’000 €’000 €’000 Revenue 24 490,819 465,676 488,341 463,128 Operating expenses 24 (444,148) (453,161) (443,915) (452,200) Gross profit 46,671 12,515 44,426 10,928 Administrative expenses 24 (33,190) (32,551) (31,725) (31,046) Other operating income 24 3,920 3,201 3,779 3,044 Fair value gain/(loss) on investment property 7 194 (239) - - Operating profit/(loss) 25 17,595 (17,074) 16,480 (17,074) Share of results of an associate 10(b) (9) (4) - - Finance revenue 26 1,521 2,974 1,507 2,937 Finance costs 27 (2,480) (9,473) (2,586) (9,584) Profit/(loss) before tax 16,627 (23,577) 15,401 (23,721) Income tax expense 28 (129) (6) - - Profit/(loss) for the year 16,498 (23,583) 15,401 (23,721)

Other comprehensive income for the year Other comprehensive income to be reclassified to profit or loss in subsequent periods: Fair value movement in available-for-sale investments * 11 (64) 36 (64) 36 Movement in cash flow hedges * 19,340 (25,830) 19,340 (25,830) Exchange differences on consolidation * (490) 1,295 - - Other comprehensive income not to be reclassified to profit or loss in subsequent periods: Actuarial gains and losses on defined benefit plans 4,869 8,709 4,869 8,709 Other comprehensive income for the year, net of tax 23,655 (15,790) 24,145 (17,085) Total comprehensive income for the year, net of tax 40,153 (39,373) 39,546 (40,806)

Profit/(loss) for the year attributable to: - Owners of the Company 16,324 (23,640) - Non-controlling interests 174 57 16,498 (23,583)

Total comprehensive income attributable to: - Owners of the Company 40,040 (39,557) - Non-controlling interests 113 184 40,153 (39,373)

Earnings/(loss) per share (EUR) Basic 29 0.16 (0.23)

Diluted 29 0.16 (0.23)

* There is no tax effect on these components of other comprehensive income.

The notes on pages 106 to 175 form an integral part of these financial statements. Independent auditors’ report on pages 97 and 98. 102 Air Mauritius Annual Report 2015/16

Statements of Changes in Equity for the year ended March 31, 2016 (1,708) 23,655 - (61) Total Non- 33,207 77,025 2,798 79,823 16,324 16,324 174 16,498 12,014 36,985 2,685 39,670 (23,640) (23,640) 57 (23,583) - - (457) (1,251) (1,708) - - - *** 19,340 18,847 21,193 40,040 113 40,153 19,340 18,847 4,869 23,716 - - (457) (429) (429) ** Other reserves (11,192) (5,713) (16,775) (10,763) (25,053) (35,622) - - - * 36 1,168 (25,830) (24,626) 8,709 (15,917) 127 (15,790) 36 1,168 (25,830) (24,626) (14,931) (39,557) 184 (39,373) (64) (64) Fair Translation Hedge Total value on reserve equity other Retained shareholders' controlling Total ------€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 Share Share capital premium reserve consolidation reserve reserves earnings interest interests equity 41,724 18,869 130 41,724 18,869 158 (11,931) 777 (10,996) 26,945 76,542 2,501 79,043 41,724 18,869 158 (11,474) 777 (10,539) 28,196 78,250 2,501 80,751 41,724 18,869 194 41,724 18,869 (10,763) 194 (25,053) (35,622) 12,014 36,985 2,685 39,670 At March 31, 2016 At March Total comprehensive income comprehensive Total Other comprehensive income, as restated income, as restated Other comprehensive At April 01, 2014 (restated) restated as for the year, (Loss)/profit income Other comprehensive THE GROUP At April 01, 2014 of prior year adjustment (note 4.5) Effect At March 31, 2015 At March At April 01, 2015 Total comprehensive income, as restated income, as restated comprehensive Total Profit for the year Profit Other reserves in the Group’s statement of financial position include: in the Group’s Other reserves investments. changes in fair value of available-for-sale gains or losses arising from unrealised records * Fair value reserve the translation of financial statements subsidiaries. arising from exchange differences on consolidation is used to record reserve ** Translation hedge. the portion of gain or loss on a hedging instrument in cash flow hedge that is determined to be an effective records *** Hedge equity reserve The notes on pages 106 to 175 form an integral part of these fin ancial statements. on pages 97 and 98. Independent auditors’ report Air Mauritius Annual Report 2015/16 103

Statements of Changes in Equity for the year ended March 31, 2016 €'000 7,209 42,934 €'000 27,479 82,480 - 15,401 15,401 - (23,721) (23,721) 926 22,221 83,740 €'000 - - ** 777 €'000 (5,713) (5,592) Hedge Total 19,340 19,276 20,270 39,546 19,340 19,276 4,869 24,145 (25,053) (24,868) Other reserves - - (64) (64) * 121 185 185 (25,053) (24,868) 7,209 42,934 149 Fair €'000 value equity other Retained Total - - - - 36 (25,830) (25,794) (15,012) (40,806) - 36 (25,830) (25,794) 8,709 (17,085) - €'000 Share ------€'000 Share capital premium reserve reserve reserves earnings equity 41,724 18,869 41,724 18,869 41,724 18,869 41,724 18,869 At March 31, 2016 At March Total comprehensive income comprehensive Total Other comprehensive income Other comprehensive Profit for the year Profit At April 01, 2015 At March 31, 2015 At March Total comprehensive income comprehensive Total Other comprehensive income Other comprehensive Loss for the year At April 01, 2014 THE COMPANY Other reserves in the Company’s statement of financial position include: in the Company’s Other reserves investments. changes in fair value of available-for-sale gains or losses arising from unrealised records * Fair value reserve hedge. the portion of gain or loss on a hedging instrument in cash flow hedge that is determined to be an effective records Hedge equity reserve ** The notes on pages 106 to 175 form an integral part of these fin ancial statements. on pages 97 and 98. Independent auditors’ report 104 Air Mauritius Annual Report 2015/16

Statements of Cash Flows for the year ended March 31, 2016

THE GROUP THE COMPANY Notes 2016 2015 2016 2015 Restated

€’000 €’000 €’000 €’000 Cash flows from operating activities: Profit/(loss) before tax 16,627 (23,577) 15,401 (23,721) Adjustments for: Depreciation on property, plant and equipment 6 35,009 37,959 34,526 37,476 Fair value (gain)/loss on investment property 7 (194) 239 - - Amortisation of intangible assets 8 496 528 485 521 (Gain)/loss on the sale of property, plant and equipment (67) 69 (67) 70 Assets scrapped 252 - 252 - Employee benefit liabilities 21 (1,022) 2,165 (1,156) 2,137 Maintenance cost (4,151) 1,810 (4,151) 1,810 Unrealised foreign exchange loss 1,565 7,073 1,591 6,962 Interest and investment income 26 (170) (373) (156) (336) Interest expense 27 1,599 1,882 1,705 1,993 Impairment of investment in available-for-sale investments 11 42 - 42 - Share of results after tax of associate 10 9 4 - - 49,995 27,779 48,472 26,912

Changes in: Inventories 2,393 (1,057) 2,402 (1,040) Trade and other receivables 477 (3,592) (1,750) (5,279) Trade and other payables 7,427 9,595 9,336 11,273 60,292 32,725 58,460 31,866

Interest received 135 372 136 316 Tax paid (55) (139) - -

Net cash flows from operating activities 60,372 32,958 58,596 32,182

Cash flows from investing activities Purchase of property, plant and equipment 6 (10,830) (16,927) (10,658) (16,670) Purchase of intangible assets 8 (159) (183) (159) (151) Proceeds on sale of property, plant and equipment 86 102 74 99 Deposits received/(paid) (2,849) (12,249) (2,849) (12,249) Dividends received 20 20 20 20 Net cash flows used in investing activities (13,732) (29,237) (13,572) (28,951) Net cash flows from operating and investing activities 46,640 3,721 45,024 3,231 Air Mauritius Annual Report 2015/16 105

Statements of Cash Flows for the year ended March 31, 2016

THE GROUP THE COMPANY Notes 2016 2015 2016 2015 Restated

€’000 €’000 €’000 €’000 Net cash flows from operating and investing activities (cont’d) 46,640 3,721 45,024 3,231 Cash flows from financing activities Payments on borrowings (23,294) (98,078) (22,745) (97,993) Interest paid (1,599) (1,882) (1,705) (1,993) Dividend paid - (1,237) - (1,237) Proceeds from borrowings 11,773 96,912 11,773 96,133 Net cash flows used in financing activities (13,120) (4,285) (12,677) (5,090)

Net increase/(decrease) in cash and cash equivalents 33,520 (564) 32,347 (1,859)

Movement in cash and cash equivalents At April 01, 17,631 19,347 14,670 17,752 Exchange loss (2,042) (1,152) (1,970) (1,223) Net increase/(decrease) in cash and cash equivalents 33,520 (564) 32,347 (1,859) At March 31, 17 49,109 17,631 45,047 14,670

The notes on pages 106 to 175 form an integral part of these financial statements. Independent auditors’ report on pages 97 and 98. 106 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

1. Corporate Information

Air Mauritius Limited (the “Company”) is a for investment properties, derivative financial company limited by shares incorporated and instruments, available-for-sale investments and domiciled in Mauritius whose shares are publicly deferred revenue for customer loyalty programme traded and listed on the official market of the that have been measured at fair value. Stock Exchange of Mauritius. Its registered office is situated on the 19th Floor of Air Mauritius Statement of Compliance Centre, John Kennedy Street, Port Louis. The financial statements of the Group and the The consolidated financial statements of Air Company have been prepared on a going Mauritius Limited and its subsidiaries (collectively, concern basis in accordance with International the Group) for the year ended March 31, 2016 Financial Reporting Standards (“IFRS”) as issued were authorised for issue by the Board of by the International Accounting Standards Board Directors on June 13, 2016 and the statements (“IASB”) and in compliance with the requirements of financial position were signed on the Board’s of the Companies Act 2001 and the Financial behalf by Dr Arjoon Suddhoo and Mr Louis Reporting Act 2004. Rivalland. The financial statements will be submitted to the shareholders for approval at the Basis of consolidation annual meeting. The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at March 31, each year. 2. Principal Activities The principal activities of Air Mauritius Limited Control is achieved when the Group is exposed, and its subsidiaries are: or has rights, to variable returns from its involvement with the investee and has the ability ● the operation of international air services for to affect those returns through its power over the carriage of passengers and cargo and the investee. Specifically, the Group controls an the provision of ancillary services; investee if and only if the Group has:

● the operation of a hotel in Rodrigues; i. Power over the investee (i.e. existing rights that give it the current ability to direct the ● the owning and operating of an investment relevant activities of the investee) property for rentals; and ii. Exposure, or rights, to variable returns from its ● the operation of a call centre and provision involvement with the investee, and of Human Resources to its holding company. iii. The ability to use its power over the investee There have been no changes in the above to affect its returns activities during the year. The Group re-assesses whether or not it controls an investee if facts and circumstances 3. Basis of Preparation indicate that there are changes to one or more The financial statements of the Group and the of the three elements of control. Consolidation Company are presented in Euro which is the of a subsidiary begins when the Group obtains Company’s functional currency and all values control over the subsidiary and ceases when the were rounded to the nearest thousand (Euro’000) Group loses control of the subsidiary. Assets, except when otherwise stated. liabilities, income and expenses of a subsidiary acquired or disposed of during the year are The financial statements have been prepared included in the consolidated financial statements under the historical cost convention except from the date the Group gains control until the date the Group ceases to control the subsidiary. Air Mauritius Annual Report 2015/16 107

Notes to the Financial Statements for the year ended March 31, 2016

3. Basis of Preparation (Cont’d)

Basis of consolidation (Cont’d) A change in the ownership interest of a subsidiary, Non-controlling interests are measured at their without a loss of control, is accounted for as an proportionate share of the acquiree’s identifiable equity transaction. If the Group loses control over net assets at the date of acquisition. a subsidiary, it:

● Changes in the Group’s interest in a subsidiary Derecognises the assets (including goodwill) that do not result in a loss of control are and liabilities of the subsidiary; accounted for as equity transactions. ● Derecognises the carrying amount of any non- controlling interest; Profit or loss and each component of other comprehensive income (OCI) are attributed to ● Derecognises the cumulative translation the owners of the Company and to the non- differences, recorded in equity; controlling interests, even if this results in the non- ● controlling interests having a deficit balance. All Recognises the fair value of the consideration intra-group assets and liabilities, equity, income, received; expenses and cash flows relating to transactions ● Recognises the fair value of any investment between members of the Group are eliminated in retained; full on consolidation. ● Recognises any surplus or deficit in profit or The financial statements of the subsidiaries are loss; prepared for the same reporting period as the ● Reclassifies the parent’s share of components parent company, using consistent accounting previously recognised in other comprehensive policies. income to profit or loss or retained earnings, as appropriate.

4. Accounting Policies

4.1 CHANGES IN ACCOUNTING POLICY AND DISCLOSURES The accounting policies adopted are consistent with those of the previous financial year except that the Group has adopted the following new and amended IFRS and IFRIC interpretations as of April 01, 2015:

Effective for accounting period beginning on or after AMENDMENTS - Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) July 01, 2014 - Annual Improvements to IFRSs 2010-2012 Cycle – various standards July 01, 2014 - Annual Improvements to IFRSs 2011-2013 Cycle – various standards July 01, 2014

The effects of these standards have been described below:

Amendments to IAS 19 Defined Benefit Plans: Employee Contributions IAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans. Where the contributions are linked to service, they should be attributed to periods of service as a negative benefit. These amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. These amendments have no impact on the Group since none of the entities within the Group has defined benefits plans with contributions from employees or third parties. 108 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.1 Changes in Accounting Policy ● IFRS 8 Operating Segments - Reconciliation and Disclosures (Cont’d) of the total of the reportable segments’ assets to the entity’s assets Annual improvements ● In the annual improvements cycle, the IASB IFRS 13 Fair Value Measurement – Clarification issued amendments which are summarised of portfolio exception in IFRS 13 below for those amendments applicable to the ● IFRS 13 Fair Value Measurement – Group and the Company and are effective from Measurement of short term receivables and July 01, 2014. Earlier application is permitted payables and must be disclosed. ● IAS 16 Property, Plant and Equipment and IAS ● IFRS 3 Business Combinations - Accounting 38 Intangible Assets - Revaluation method – for contingent consideration in a business proportionate restatement of accumulated combination depreciation/amortisation ● IFRS 3 Business Combinations - Scope ● IAS 24 Related Party Disclosures – Definition exceptions within IFRS 3 of a related party ● IFRS 8 Operating Segments - Aggregation of ● IAS 40 Investment Property – Inter-relationship operating segments of IFRS 3 and IAS 40

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 financial statements are listed below. This listing is of standards and interpretations issued, whichthe Group reasonably expects to be applicable at a future date. The Group intends to adopt those standards when they become effective.

Effective for accounting period beginning on or after New or revised standards IFRS 14 Regulatory Deferral Accounts January 01, 2016 IFRS 15 Revenue from Contracts with Customers January 01, 2018 IFRS 9 Financial Instruments January 01, 2018 IFRS 16 Leases January 01, 2019

Amendments Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38) January 01, 2016 Equity Method in Separate Financial Statements (Amendments to IAS 27) January 01, 2016 Disclosure Initiative (Amendments to IAS 1) January 01, 2016 Annual Improvements to IFRSs 2012-2014 Cycle – various standards January 01, 2016 Air Mauritius Annual Report 2015/16 109

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.2 Accounting Standards and Interpretations The Group is currently assessing the impact of Issued but not yet Effective (Cont’d) IFRS 15 and plans to adopt the new standard on the required effective date. New or revised standards

The effects of these standards have been IFRS 9 Financial Instruments described below: In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments which reflects IFRS 14 Regulatory Deferral Accounts all phases of the financial instruments project IFRS 14 is an optional standard that allows and replaces IAS 39 Financial Instruments: an entity, whose activities are subject to rate- Recognition and Measurement and all previous regulation, to continue applying most of its versions of IFRS 9. The standard introduces new existing accounting policies for regulatory requirements for classification and measurement, deferral account balances upon its first-time impairment, and hedge accounting. IFRS 9 is adoption of IFRS. Entities that adopt IFRS 14 effective for annual periods beginning on or must present the regulatory deferral accounts after January 01, 2018, with early application as separate line items on the statement of permitted. Retrospective application is required, financial position and present movements but comparative information is not compulsory. in these account balances as separate line items in the statement of profit or loss and Early application of previous versions of IFRS other comprehensive income. The standard 9 (2009, 2010 and 2013) is permitted if the requires disclosures on the nature of, and risks date of initial application is before February 01, associated with, the entity’s rate-regulation and 2015. The adoption of IFRS 9 will have an effect the effects of that rate-regulation on its financial on the classification and measurement of the statements. IFRS 14 is effective for annual Group’s financial assets, but no impact on the periods beginning on or after January 01, 2016. classification and measurement of the Group’s Since the Group is an existing IFRS preparer, financial liabilities. this standard would not apply. IFRS 16 Leases IFRS 15 Revenue from Contracts with IFRS 16 was published in January 2016. It Customers sets out the principles for the recognition, IFRS 15 was issued in May 2014 and establishes measurement, presentation and disclosure a new five-step model that will apply to revenue of leases for both parties to a contract, ie the arising from contracts with customers. Under customer (‘lessee’) and the supplier (‘lessor’). IFRS 15 revenue is recognised at an amount IFRS 16 replaces the previous leases standard, that reflects the consideration to which an IAS 17 Leases, and related Interpretations. entity expects to be entitled in exchange for IFRS 16 has one model for lessees which will transferring goods or services to a customer. result in almost all leases being included on the The principles in IFRS 15 provide a more Statement of Financial position. No significant structured approach to measuring and changes have been included for lessors. recognising revenue. The standard is effective for annual periods The new revenue standard is applicable to all beginning on or after January 01, 2019, with entities and will supersede all current revenue early adoption permitted only if the entity also recognition requirements under IFRS. Either adopts IFRS 15. The transitional requirements a full or modified retrospective application is are different for lesees and lessors. The Group required for annual periods beginning on or after is assessing the potential impact on the financial January 01, 2018 with early adoption permitted. statements resulting from the application of IFRS 16. 110 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.2 Accounting Standards and Interpretations Disclosure Initiative (Amendments to IAS 1) Issued but not yet Effective (Cont’d) The amendments provide additional guidance Amendments on the application of materiality and aggregation when preparing financial statements. The Amendments to IAS 16 and IAS 38: amendments also clarify presentation principles Clarification of Acceptable Methods of applicable to of the order of notes, OCI of Depreciation and Amortisation equity accounted investees and subtotals presented in the statement of financial position The amendments clarify the principle in IAS and statement of profit or loss and other 16 and IAS 38 that revenue reflects a pattern comprehensive income. of economic benefits that are generated from operating a business (of which the asset is The amendments apply for annual periods part) rather than the economic benefits that are beginning on or after January 01, 2016 and consumed through use of the asset. As a result, early application are permitted. a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances Annual Improvements to IFRSs 2012-2014 to amortise intangible assets. The amendments Cycle – various standards are effective prospectively for annual periods The IASB’s annual improvements provide a beginning on or after January 01, 2016, with streamlined process for dealing efficiently with early adoption permitted. These amendments a collection of non-urgent amendments to are not expected to have any impact to the IFRS. This new cycle of improvements contains Group given that the Group has not used a amendments to the following four standards. revenue-based method to depreciate its non- current assets. ● IFRS 5 Non-current Assets Held for Sale and Discontinued Operations Amendments to IAS 27: Equity Method in - Changes in method for disposal Separate Financial Statements ● IFRS 7 Financial Instruments: Disclosures The amendments will allow entities to use the equity method to account for investments in - Continuing involvement’ for servicing subsidiaries, joint ventures and associates in contracts their separate financial statements. Entities already applying IFRS and electing to change - Offsetting disclosures in condensed interim to the equity method in its separate financial financial statements statements will have to apply that change ● IAS 19 Employee Benefits retrospectively. For first-time adopters of IFRS electing to use the equity method in its separate - Discount rate in a regional market sharing financial statements, they will be required to the same currency – e.g. the Eurozone apply this method from the date of transition to IFRS. The amendments are effective for ● IAS 34 Interim Financial Reporting annual periods beginning on or after January - Disclosure of information ‘elsewhere in the 01, 2016, with early adoption permitted. These interim financial report’ amendments will not have any impact on the Group’s consolidated financial statements.

No early adoption is intended by the Group. Air Mauritius Annual Report 2015/16 111

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.3 Significant Accounting Judgements, ● Investment property: estimation of fair value Estimates and Assumptions of property. The preparation of the Group’s financial ● Deferred revenue for customer loyalty statements requires management to make program: estimation of fair value of loyalty judgements, estimates and assumptions points. that affect the reported amounts of revenues, expenses, assets and liabilities and the ● Contractual maintenance expenses: disclosure of contingent liabilities and other estimation and timing of future maintenance information disclosed in certain notes at the costs. reporting date. The Group regularly revises its ● Impairment of non-financial assets. estimates and assessments to take account of past experience and other factors deemed ● Utilisation of deferred tax asset. relevant in view of the economic circumstances. If changes in these assumptions or These are discussed below: circumstances are not as anticipated, the figures reported in the Group’s future financial Estimates and assumptions statements could differ from the current estimates. The key assumptions concerning the future and other key sources of estimation uncertainty at In preparing these financial statements the the reporting date, that have a significant risk directors have used their best judgement and of causing a material adjustment to the carrying made estimates and assumptions about the amounts of assets and liabilities within the next future which are based on the current economic financial year are discussed below: situation which is however highly volatile. In particular, these assumptions have had a significant impact on the following account (i) Estimated useful lives and residual values of balances in the financial statements: property, plant and equipment Determining the carrying amounts of property, ● Property, plant and equipment: estimation plant and equipment requires the estimation of recoverable value, depreciation method, of the useful lives and residual values of these economic useful life and residual value of assets. Certain property, plant and equipment assets. of the Group, such as aircraft, are separated into their significant parts and estimates of the ● Employee benefit liability: estimation of useful lives and residual values thereof are made discount rates, expected return on plan for the purpose of calculating depreciation (refer assets, future salary increases and future to note 4.4(c)). The estimates of useful lives and pension increases. residual values carry a degree of uncertainty. ● Fair value of derivative financial assets The directors have used historical information and liabilities: the volatility of the following relating to the Group and the relevant industries underlying: in which the Group’s entities operate in order to best determine the useful lives and residual - foreign exchanges; values of property, plant and equipment. - oil prices; and - future interest rates 112 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.3 Significant Accounting Judgements, The fair value attributable to the awarded Estimates and Assumptions (Cont’d) mileage credit has been calculated based on the lowest applicable fare price throughout the Estimates and assumptions (Cont’d) 12 months. Professional judgement is exercised by management due to the diversity of inputs (ii) Employee benefit liability that go into determining the fair value of the The determination of employee benefit costs award credits and due to the possibility that the and related provisions, as described in note trend may change over time. 4.4(p) and as detailed in note 21 to the financial statements, requires the use of actuarial Revenue is recognised on unredeemed miles calculations or other assumptions that include when they expire. significant estimates in respect of, inter alia, the discount rate, the expected return on plan The carrying amount of the deferred revenue for assets, future salary increases, future medical the Kestrelflyer Programme was estimated at cost increases and future pension increases. €4M (2015: €6M). Management has reassessed the redemption rate to 60% as at March 31, These significant estimates are assessed 2016 (2015: 90%). Further details have been annually by the directors with the actuaries provided in Note 23. where applicable. Differences between actual and estimates are recorded as actuarial gains (iv) Fair value of derivative financial assets and or losses in the year in which they occur in total. liabilities The Group enters into derivative financial (iii) Deferred revenue for customer loyalty contracts including currency forward contracts programme for hedging purposes and measures these The Company operates a Frequent Flyer instruments at fair value at the reporting date. programme, Kestrelflyer, which provides a variety The fair values of such contracts are determined of awards to members based on mileage credits using valuation techniques including discounted on Air Mauritius and other airlines that participate cash flows models. The input to those models is in the programme. Members can also accrue taken from observable markets where possible, and redeem miles with non-airline partners. but where this is not feasible, a degree of judgement is required in establishing fair values. The Company accounts for award credits as The judgements include considerations of inputs a separately identifiable component of the such as volatility. Changes in assumptions about sales transaction in which they are earned. these factors could affect the reported fair value The consideration in respect of the initial sale of these financial instruments. Further details is allocated to award credits based on their on these derivative financial instruments are fair value and is accounted for as a liability provided in note 20. (deferred revenue) in the Group and Company 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. Air Mauritius Annual Report 2015/16 113

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.3 Significant Accounting Judgements, in use is based on the estimated future cash Estimates and Assumptions (Cont’d) flows, discounted to their present value using a pre-tax discount rate that reflects the current Estimates and assumptions (Cont’d) market assessments of the time value of money and the risks specific to the asset or cash (v) Contractual maintenance expenses generating unit. As at March 31, 2015, contractual maintenance expenses were provided for in accordance with Judgements the terms of maintenance agreements with technical service providers. The provisions were In the process of applying the Group’s based on the number of hours flown by each accounting policies, management has made aircraft/engine and an estimated rate. The long the following judgements, apart from those term portion of the provision was not discounted involving estimations, which have the most to its present value due to uncertainties with significant effect on the amounts recognised in respect to the final maintenance costs to be the financial statements: incurred when compared to the estimated rate applied. (i) Going concern

As from April 01, 2015 the Company has entered At March 31, 2016, the Group and the Company into a new agreement for the maintenance of had net current liabilities of EUR 67.3M (2015: its A340 engine fleet. Monthly payments are EUR 104.6M) and EUR 78.3M (2015: EUR made to the service provider based on aircraft 114.9M) respectively. Included in the net flying hours and rates pre-determined by the working capital are non-financial liabilities which contract. Further details are given in note 22. would not result in cash outflows of the Group and the Company and these include forward sales and frequent flyer provision which amount (vi) Fair valuation of investment property to EUR 86.7M ( 2015: EUR 76.6M) and EUR In preparing these financial statements, the 4.2M ( 2015: EUR 6M) respectively. On the directors have obtained from an independent other hand, the Group and the Company had professional valuer the estimated fair value undrawn facility of EUR 60.6M as at March 31, of the Group’s investment property which 2016 (2015: EUR 70.7M). is disclosed in the notes to the financial statements. These estimates have been based The improvement in the working capital for the on market data regarding current yield on similar Group and the Company was due to a better properties. The actual recoverable amount of financial performance in the current financial the investment property could therefore differ year as compared to the prior year. The Group’s significantly from the estimates. Further details and Company’s forecasts and projections, are given in note 7. taking account of reasonably possible changes in trading performance, show that the Group (vii) Impairment of non-financial assets and the Company should be able to operate within the level of their current financing and Impairment exists when the carrying value of undrawn facilities available at the reporting date. 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 114 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.3 Significant Accounting Judgements, primary economic environment in which each Estimates and Assumptions (Cont’d) entity operates; the geographical location whose competitive forces mainly determine Judgements (Cont’d) the sales prices of the entity’s goods and services; the currency that mainly influences (i) Going concern (Cont’d) the determination of costs of providing goods The Group’s management has made an and services; the currency in which funds from assessment of the Group’s and the Company’s financing activities are generated; and, the ability to continue as a going concern and is currency in which proceeds from operating satisfied that the Group and the Company have activities are usually retained. the resources to continue in business for the foreseeable future. Furthermore, management 4.4 Summary of Significant Accounting is not aware of any material uncertainties that Policies may cast significant doubt upon the Group’s and the Company’s ability to continue as a going The following is a summary of the significant concern. Therefore, the financial statements accounting policies adopted by the Group continue to be prepared on the going concern during the year. basis. (a) Functional and presentation currency

(ii) Determination of hedging relationship The functional currency of each entity within the The determination of the accounting treatment Group has been determined by reference to, of the Group’s hedging relationships is critical inter alia: the primary economic environment since the recording of gains or losses on in which the entity operates; the geographical re-measurement of hedging instruments to location whose competitive forces mainly fair value at the reporting date gives rise to determine the sales prices of the Group’s goods adjustments directly in profit or loss or other and services; the currency that mainly influences comprehensive income where such relationship the determination of costs of providing goods is treated as fair value hedge or cash flow and services; the currency in which funds from hedge respectively. As described in note 4.4 (j), financing activities are generated; and, the there are criteria that need to be considered in currency in which proceeds from operating determining the nature of hedging relationship. activities are usually retained. Hedging has only been undertaken by the Group due to the significant volume of transactions For the purpose of the consolidated financial involving the purchase of jet fuel and financial statements the results and financial position commitments involving varying currencies. The of each entity are expressed in Euro, which is directors have determined that the criteria for the functional currency of the Company, and cash flow hedging have been adequately met to the presentation currency used for the Group justify their judgement in the application of cash financial statements. For those entities in flow hedge accounting. Additional information the Group whose functional currencies differ is provided in Note 20. from the presentation currency, the following exchange rates were applicable per table (iii) Functional currency below: The Group has exercised significant judgement in determining the functional currency of the Company and each of its subsidiaries. In making this judgement, the Group has considered the Air Mauritius Annual Report 2015/16 115

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.4 Summary of Significant Accounting Policies (Cont’d) (a) Functional and presentation currency (Cont’d)

2016 2015 Closing Average Closing Average EUR/ZAR 17.01 15.19 13.13 14.02 EUR/USD 1.13 1.10 1.08 1.27 EUR/AUD 1.48 1.50 1.41 1.45 EUR/GBP 0.79 0.73 0.73 0.79 EUR/MUR 40.14 39.48 39.28 39.68

(b) Foreign currency translation contracts and options, for which the Group applies hedge accounting if appropriate, see In preparing the financial statements of the note 4.4(j). individual entities, transactions in currencies other than the entity’s functional currency (foreign For the purpose of presenting consolidated currencies) are recorded at the rates of exchange financial statements, the assets and liabilities prevailing on the dates of the transactions. At of foreign operations are expressed in Euro each reporting date, monetary assets and liabilities using exchange rates prevailing on the reporting denominated in foreign currencies are retranslated date. The income and expenses for the year are into the entity’s functional currency at the rate of translated into Euro at the average exchange rate exchange prevailing on the reporting date. for the year. The exchange differences arising from the translation of the foreign operations are Exchange differences arising on the settlement recognised in other comprehensive income and and the retranslation of monetary items taken to the Group’s translation reserve. The are recognised in profit or loss. Exchange cumulative translation differences recognised differences arising on the following items are in other comprehensive income are reclassified recognised in other comprehensive income: to profit or loss in the year in which the foreign operation is disposed of. If the Group disposes of ● available-for-sale equity investments part of its interest in a subsidiary, then the relevant (except on impairment, in which case proportion of the cumulative amount is reattributed foreign currency differences that have been to NCI. When the Group disposes of only part of recognised in other comprehensive income an associate while retaining significant influence, are reclassified to profit or loss); and the relevant proportion of the cumulative amount is reclassified to profit or loss. ● qualifying cash flow hedges to the extent that the hedges are effective. (c) Property, plant and equipment Non-monetary items that are measured in All property, plant and equipment are stated terms of historical cost in a foreign currency are at cost less accumulated depreciation and translated using the exchange rates as at the any impairment in value. Such costs include dates of the initial transactions. Non-monetary the cost of replacing part of an asset when items measured at fair value in a foreign currency that cost is incurred, if recognition criteria are are translated using the exchange rates at the met. When significant parts of property, plant date when the fair value is determined. and equipment are required to be replaced at intervals, the Group recognises such parts as In order to hedge its exposure to certain foreign individual assets with specific useful lives and exchange risks, the Group entered into forward 116 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.4 Summary of Significant Accounting Last year, management had reassessed the Policies (Cont’d) useful life of the A340 aircraft and had extended the useful lives by 3 – 4 years to be in line with (c) Property, plant and equipment (Cont’d) the delivery of the new aircraft. The depreciation depreciates them accordingly. Likewise, when a charge was reassessed in line with the change major inspection is performed on an aircraft or its in useful lives. In the current year, there was no engines which is required in order for the aircraft change in the useful lives. to be operational, its cost is recognised in the carrying amount of the asset as a replacement Leasehold land is not capitalised and the lease if recognition criteria are met. All other repair payments are charged to profit or loss on a and maintenance costs are recognised in profit straight line basis. or loss as incurred. An item of property, plant and equipment Depreciation is calculated on the straight-line is derecognised upon disposal or when no method to write off the cost of each asset to future economic benefits are expected from its residual value over its estimated useful life. its use or disposal. Any gain or loss arising on Residual value is the estimated amount that the derecognition of the asset (calculated as the Group would currently obtain from disposal of difference between the net disposal proceeds the asset after deducting the estimated cost of and the carrying amount of the asset) is disposal as if the asset were already of the age included in profit or loss of the year the asset and in the condition expected at the end of its is derecognised. useful life. Aircraft and engine overhaul The useful lives and residual values of all Costs incurred in respect of heavy maintenance property, plant and equipment are reviewed and and overhaul of aircraft engines and airframes prospectively adjusted if appropriate at each are capitalised and depreciated over the period financial year end. to the next scheduled maintenance ranging from 1.5 to 5 years. Other non-heavy maintenance The principal annual rates of depreciation for and overhaul costs are charged to profit or loss the years ended March 31, 2016 and March 31, on consumption or as incurred. 2015 are: (d) Investment property Rate (%) Aircraft on lease (frame and engine) 4.35 - 6.67 Investment property is measured initially at Aircraft and accessories: cost, including transaction costs. The carrying - Aircraft 5 amount includes the cost of replacing part of - Galley equipment 9 – 11 an existing investment property at the time that - In-flight entertainment equipment 9 – 11 cost is incurred if the recognition criteria are met; - Cabin interior and seating 9 – 11 and excludes the costs of day to day servicing - Aircraft rotables spares 5 – 50 Buildings and hangars of an investment property. Subsequent to initial on leasehold land 2 – 10 recognition, investment property is stated at fair Plant and equipment 20 – 33.33 value, which reflects market conditions at the Furniture and fittings 10 reporting date. The accounting policy for fair Computer and office equipment 10 – 33 value determination is provided in Note 36. Motor vehicles 20 – 25 Gains or losses arising from changes in the fair Airframe and engine overhaul See note below values of investment property are included in profit or loss in the year in which they arise. Air Mauritius Annual Report 2015/16 117

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.4 Summary of Significant Accounting Associate Policies (Cont’d) An associate is an entity in which the Group has (d) Investment property (Cont’d) significant influence.

Investment property is derecognised when In the Group financial statements, the Group’s either they have been disposed of or when the investment in its associate is accounted for investment property is permanently withdrawn using the equity method. In the Company from use and no future economic benefit is statement of financial position, the investment expected from its disposal. Any gains or losses in the associate is carried at cost less any on the retirement or disposal of an investment impairment losses. property are recognised in profit or loss in the year of retirement or disposal. Under the equity method, the investment in the associate is carried in the statement of financial Transfers are made to or from investment position at cost plus post acquisition changes in property only when there is a change in use. the Group’s share of net assets of the associate. For a transfer from investment property to Goodwill relating to the associate is included owner occupied property, the deemed cost in the carrying amount of the investment and for subsequent accounting is the fair value at is neither amortised nor individually tested for the date of change in use. If owner occupied impairment. property becomes an investment property, the Group accounts for such property in accordance The share of profit of the associate is shown with the policy stated under property, plant and on the face of the statement of profit or loss equipment up to the date of change in use. outside operating profit. Where there has been a change recognised directly in the other No assets held under operating lease have comprehensive income of the associate, the been classified as investment property. Group recognises its share of any changes and discloses this, when applicable, in other (e) Investments in subsidiaries and in an comprehensive income. Unrealised gains and associate losses resulting from transactions between the Group and the associate are eliminated in the Subsidiaries extent of the interest in the associate.

The accounting policy of the Group in respect The financial statements of the associate of the consolidation of subsidiaries is presented are prepared for the same reporting year in the basis of consolidation in note 3 above. In as the parent company. Where necessary, the Company financial statements, investments adjustments are made to bring the accounting in subsidiaries are carried at cost which is the policies in line with those of the Group. 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. 118 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.4 Summary of Significant Accounting market place (regular way trades) are recognised Policies (Cont’d) on the trade date, i.e., the date that the Group commits to purchase or sell the asset. (e) Investments in subsidiaries and in an associate (Cont’d) The Group’s financial assets include cash and short-term deposits, trade and other Associate (Cont’d) receivables, long term deposits, long term After application of the equity method, the receivables, available-for-sale investments, and Group determines whether it is necessary to derivative financial assets. recognise an additional impairment loss on the Group’s investment in its associate. The Group Subsequent measurement determines at each reporting date whether there is any objective evidence that the investment in The subsequent measurement of financial assets the associate is impaired. If this is the case the depends on their classification as follows: Group calculates the amount of impairment as the difference between the recoverable amount (i) Financial assets at fair value through profit or of the associate and its carrying value and loss recognises the amount in profit or loss. Financial assets at fair value through profit or loss include financial assets held for trading Upon loss of significant influence over the and financial assets designated upon initial associate, the Group measures and recognises recognition at fair value through profit or loss. any retained investment at its fair value. Any Financial assets are classified as held for trading difference between the carrying amount of the if they are acquired for the purpose of selling or associate upon loss of significant influence and repurchasing in the near term. This category the fair value of the retaining investment and includes derivative financial instruments entered proceeds from disposal is recognised in profit into by the Group that are not designated as or loss. hedging instruments in hedge relationships as defined by IAS 39. Derivatives, including (f) Financial assets separated embedded derivatives are also classified as held for trading unless they are Initial recognition and measurement designated as effective hedging instruments. Financial assets in scope of IAS 39 are Financial assets at fair value through profit and classified as either financial assets at fair value loss are carried in the statement of financial through profit or loss, loans and receivables, position at fair value with changes in fair value held-to-maturity investments or available- recognised in profit or loss. for-sale investments, as appropriate. When financial assets are recognised initially, they The Group evaluated its financial assets at fair are measured at fair value, plus, in case of value through profit and loss (held for trading) investments not at fair value through profit or whether the intent to sell them in the near loss, directly attributable transaction costs. term is still appropriate. When the Group is The Group determines the classification of its unable to trade these financial assets due to financial assets on initial recognition and, where inactive markets and management’s intent to allowed and appropriate, re-evaluates this sell them in the foreseeable future significantly designation at each financial year-end. changes, the Group may elect to reclassify

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the Air Mauritius Annual Report 2015/16 119

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.4 Summary of Significant Accounting or losses recognised as other comprehensive Policies (Cont’d) income and accumulated in the fair value reserve in equity until the investment is derecognised, (f) Financial assets (Cont’d) at which time the cumulative gain or loss is recognised in profit or loss, or determined to be Subsequent measurement (Cont’d) impaired, at which time the cumulative loss is (i) Financial assets at fair value through profit or recognised in profit or loss and removed from loss (Cont’d) the available-for-sale reserve. these financial assets in rare circumstances. The Group evaluates its available-for-sale The reclassification to loans and receivables, investments whether the ability and intention available-for-sale or held to maturity depends to sell them in the near term is still appropriate. on the nature of the asset. This evaluation does When the Group is unable to trade these not affect any financial assets designated at fair financial assets due to inactive markets and value through profit or loss using the fair value management intent significantly changes to option at designation. do so in the foreseeable future, the Group may elect to reclassify these financial assets in rare (ii) Loans and receivables circumstances. Reclassification to loans and Loans and receivables are non-derivative receivables is permitted when the financial asset financial assets with fixed and determinable meets the definition of loans and receivables payments that are not quoted in an active and has the intent and ability to hold these market. After initial measurement, such assets for the foreseeable future or maturity. The assets are carried at amortised cost using reclassification to held-to-maturity is permitted effective interest method less any allowance only when the entity has the ability and intention for impairment. The effective interest method to hold until the financial asset accordingly. is a method of calculating the amortised cost of a financial asset or a financial liability (or group Derecognition of financial assets or financial liabilities) and of A financial asset (or, where applicable a part allocating the interest income or interest expense of financial asset or part of a group of similar over the relevant period. The effective interest financial assets) is derecognised when: rate is the rate that exactly discounts estimated future cash payments or receipts through the ● the right to receive cash flows from the assets expected life of the financial instrument or, when has expired; appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. ● the Group retains the right to receive cash flows from the asset, but has assumed an (iii) Available-for-sale investments obligation to pay them in full without material delay to a third party under a ‘pass-through’ Available-for-sale investments include equity arrangement; or securities. Equity investments classified as available-for sale are those, which are neither ● the Group has transferred its right to receive classified as loans and receivables nor held- cash flows from the asset and either (a) to-maturity investment nor held for trading or has transferred substantially all the risks designated at fair value through profit or loss. and rewards of the asset, or (b) has neither transferred nor retained substantially all After initial measurement, available-for- the risks and rewards of the asset, but has sale financial investments are subsequently transferred control of the asset. measured at fair value with unrealised gains 120 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.4 Summary of Significant Accounting c. indications that a debtor or issuer will enter Policies (Cont’d) bankruptcy; (f) Financial assets (Cont’d) d. adverse changes in the payment status of borrowers or issuers; Derecognition (Cont’d) e. the disappearance of an active market for a When the Group has transferred its rights security because of financial difficulties; or to receive cash flows from an asset or has entered into a pass-through arrangement, f. observable data indicating that there is a and has neither transferred nor retained measurable decrease in the expected cash substantially all the risks and rewards of the flows from a group of financial assets. asset nor transferred control of the asset, the asset is recognised to the extent of the Financial assets carried at amortised cost Group’s continuing involvement in the asset. For financial assets carried at amortised In that case, the Group also recognises an cost the Group first assesses individually associated liability. The transferred asset and whether objective evidence of impairment the associated liability are measured on a basis exists individually for financial assets that are that reflects the rights and obligations that the individually significant, or collectively for financial Group has retained. Continuing involvement assets that are not individually significant. If the that takes the form of a guarantee over the Group determines that no objective evidence of transferred asset is measured at the lower of impairment exists for an individually assessed the original carrying amount of the asset and financial asset, whether significant or not, the maximum amount of consideration that the it includes the asset in a group of financial Group could be required to repay. assets with similar credit risk characteristics and collectively assesses them for impairment. (g) Impairment of financial assets Assets that are individually assessed for The Group assesses at each reporting date impairment and for which an impairment loss is, whether there is any objective evidence that or continues to be, recognised are not included a financial asset or a group of financial assets in a collective assessment of impairment. not classified at fair value through profit or loss is impaired. A financial asset or a group of If there is objective evidence that an impairment financial assets is deemed to be impaired if, and loss has been incurred, the amount of the loss only if, there is objective evidence of impairment is measured as the difference between the as a result of one or more events that has asset’s carrying amount and the present value occurred after the initial recognition of the asset of estimated future cash flows (excluding future (an incurred ‘loss event’) and that loss event has expected credit losses that have not yet been an impact on the estimated future cash flows of incurred). The present value of the estimated the financial asset or the group of the financial future cash flows is discounted at the financial assets that can be reliably estimated. assets’ original effective interest rate. If a loan has a variable interest rate, the discount rate for Objective evidence that financial assets are measuring any impairment loss is the current impaired includes: effective interest rate.

a. default or delinquency by a debtor; b. restructuring of an amount due to the Group on terms that the Group would not consider otherwise; Air Mauritius Annual Report 2015/16 121

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.4 Summary of Significant Accounting impairment, the cumulative loss - measured Policies (Cont’d) as the difference between the acquisition cost and the current fair value, less any impairment (g) Impairment of financial assets (Cont’d) loss on that investment previously recognised Financial assets carried at amortised cost in profit or loss - is removed from the available- (Cont’d) for- sale reserve and recognised through other The carrying amount of the asset is reduced comprehensive income into profit or loss. through the use of an allowance account and Impairment losses on equity investments are the amount of the loss is recognised in profit or not reversed through profit or loss; increases in loss. Interest income continues to be accrued their fair value after impairment are recognised on the reduced carrying amount and is accrued directly in other comprehensive income. using the rate of interest used to discount the future cash flows for the purpose of measuring (h) Cash and cash equivalents the impairment loss. The interest income is Cash and short term deposits in the statements recorded as part of finance income in profit of financial position comprise cash at bank and or loss. Loans together with the associated in hand and short term deposits with an original allowance are written off when there is no realistic maturity of three months or less. prospect of future recovery and all collateral has been realised or has been transferred to the For the purpose of the statements of cash Group. If, in a subsequent year, the amount flows, cash and cash equivalents consist of of the estimated impairment loss increases or cash and short term deposits as defined above, decreases because of an event occurring after net of outstanding bank overdrafts. the impairment was recognised, the previously recognised impairment loss is increased or (i) Financial liabilities reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery Initial recognition and measurement is credited to finance costs in the statement of profit or loss. Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, other financial Available-for-sale investments liabilities, or as derivatives designated as For available-for-sale investments, the Group hedging instruments in an effective hedge, assesses at each reporting date whether there as appropriate. The Group determines the is objective evidence that an investment or a classification of its financial liabilities at initial group of investments is impaired. recognition.

In the case of equity investments classified as All financial liabilities are recognised initially at fair available-for-sale objective evidence would value and in the case of loans and borrowings, include a significant or prolonged decline in plus directly attributable transaction costs. the fair value of the investment below its cost. ‘Significant’ is evaluated against the original The Group’s financial liabilities include trade cost of the investment and a fall of over 30% of and other payables, bank overdraft, loans and cost is considered to be significant. ‘Prolonged’ borrowings and derivative financial liabilities. is evaluated against the period in which the Derivative financial liabilities are classified as fair value has been below its original cost and financial liabilities at fair value through profit or a more than 12 months period is considered loss. All other financial liabilities are classified as as prolonged. Where there is evidence of other financial liabilities under IAS 39. 122 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.4 Summary of Significant Accounting modified, such an exchange or modification is Policies (Cont’d) treated as a derecognition of the original liability and the recognition of a new liability, and the (i) Financial liabilities (Cont’d) difference in the respective carrying amounts is Subsequent measurement recognised in profit or loss. The measurement of financial liabilities depends (j) Hedge accounting on their classification as follows: A hedging relationship exists where: Other financial liabilities ● After initial recognition, other financial liabilities at the inception of the hedge there is formal are subsequently measured at amortised cost documentation of the hedge; using the effective interest method. Gains and ● the hedge is expected to be highly effective; losses are recognised in profit or loss when the liabilities are derecognised, as well as ● the effectiveness of the hedge can be reliably through the effective interest rate method (EIR) measured; amortisation process. ● the hedge is highly effective throughout the Amortised cost is calculated by taking into reporting year; and account any discount or premium on acquisition ● for hedges of a forecasted transaction, the and fee or costs that are an integral part of the transaction is highly probable and presents EIR. The EIR amortisation is included in finance an exposure to variations in cash flows that cost in the statement of profit or loss. could ultimately affect profit or loss.

Financial liabilities at fair value through profit or Where there is a hedging relationship between loss a derivative instrument and a related item being Financial liabilities at fair value through profit or hedged, the hedging instrument is measured at loss includes financial liabilities held for trading fair value. The treatment of any resultant gains and financial liabilities designated upon initial and losses is set out below. recognition as at fair value through profit or loss. Cash flow hedge Financial liabilities are classified as held for The effective portion of the gain or loss on the trading if they are acquired for the purpose of hedging instrument is recognised directly as selling in the near term. Derivatives, including other comprehensive income and accumulated separated embedded derivatives are also in the hedge equity reserve, while any ineffective classified as held for trading unless they are portion is recognised immediately in the designated as effective hedging instruments. statement of profit or loss in finance costs. Gains or losses on liabilities held for trading are recognised in profit or loss. The Group uses forward currency contracts as hedges of its exposure to foreign currency risk Derecognition in forecast transactions and firm commitments, A financial liability is derecognised when the as well as forward commodity contracts for obligation under the liability is discharged or its exposure to volatility in the fuel prices. The cancelled or expired. When an existing financial ineffective portion relating to foreign currency liability is replaced by another from the same contracts is recognised in finance costs and lender on substantially different terms, or the the ineffective portion relating to commodity terms of an existing liability are substantially contracts is recognised in other operating income. Refer to Note 20 for more details. Air Mauritius Annual Report 2015/16 123

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.4 Summary of Significant Accounting The expense relating to any provision Policies (Cont’d) is presented in profit or loss net of any reimbursement. If the effect of the time value (j) Hedge accounting (Cont’d) of money is material, provisions are discounted Cash flow hedge(Cont’d) using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. Amounts recognised as other comprehensive When discounting is used, the increase in income are reclassified to profit or loss when the the provision due to the passage of time is hedged transaction affects profit or loss, such recognised as a finance cost. as when the hedged financial income or financial expense is recognised or when a forecast sale occurs. Where the hedged item is the cost of a (ii) Maintenance reserve non-financial asset or non-financial liability, the As at March 31, 2015, contractual maintenance amounts recognised as other comprehensive expenses were provided for in accordance with income are transferred to the initial carrying the terms of maintenance agreements with amount of the non-financial asset or liability. technical service providers. The provisions were based on the number of hours flown by each If the forecast transaction or firm commitment aircraft/engine and an estimated rate. The long is no longer expected to occur, the cumulative term portion of the provision was not discounted gain or loss previously recognised in other to its present value due to uncertainties with comprehensive income are reclassified to respect to the final maintenance costs to be profit or loss. If the hedging instrument expires incurred when compared to the estimated rate or is sold, terminated or exercised without applied. replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain As from April 01, 2015 the Company has entered or loss previously recognised in cash flow into a new agreement for the maintenance of hedge reserve remains in the cash flow hedge its A340 engine fleet. Monthly payments are reserve until the forecast transaction or firm made to the service provider based on aircraft commitment affects profit or loss. flying hours and rates pre-determined by the contract. Further details are given in note 22. (k) Provisions (l) Power by the hour (i) General Up to March 31, 2015, the Group’s provision Provisions are recognised when the Group for engine overhaul was based on maintenance has a present obligation (legal or constructive) arrangements (known as power by the hour) as a result of a past event, it is probable that with technical service providers whereby the an outflow of resources embodying economic Group made monthly payments in return for benefits will be required to settle the obligation total care maintenance service at predetermined and a reliable estimate can be made of the rates per hour flown. The accounting treatment amount of the obligation. Where the Group for these arrangements depends on whether expects some or all of a provision to be the aircraft engine is owned / finance leased by reimbursed, for example under an insurance the Group or rented under an operating lease contract, the reimbursement is recognised (see (ii) below). as a separate asset but only when the reimbursement is virtually certain. 124 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.4 Summary of Significant Accounting Gains or losses arising from derecognition Policies (Cont’d) of an intangible asset are measured as the difference between the net disposal proceeds (l) Power by the hour (Cont’d) and the carrying amount of the asset and are recognised in profit or loss when the asset is (i) Routine maintenance derecognised. For routine maintenance, the expenditure is recognised as they fall due. (n) Inventories

(ii) Major overhauls Inventory items are valued at the lower of cost and net realisable value. Cost comprises The Group accounted for the monthly payments purchase cost from suppliers and any other as prepaid expenditure until such time as the costs incurred in bringing such inventory to its engines are overhauled at which point the present condition and location. In general, cost maintenance costs incurred are capitalised in is determined on a weighted average basis. property, plant and equipment and amortised Net realisable value is the estimate of the selling until the next overhaul is due. price in the ordinary course of business, less the costs of completion and selling expenses. Assets owned or finance leased by the Group Redundant and obsolete inventories are The Group accounted for the monthly payments identified on a regular basis and written down to as prepaid expenditure until such time as the their realisable values. Consumables are written engines are overhauled at which point the down with regards to their age, condition and maintenance costs incurred are capitalised in utility. property, plant and equipment and amortised until the next overhaul is due. (o) Leases

The determination of whether an arrangement Assets rented under operating leases is, or contains a lease is based on the substance A provision is made for the maintenance of each of the arrangement at inception date of whether engine based on the number of hours flown and the fulfilment of the arrangement is dependent the rate per hour as per the power by the hour on the use of a specific asset or assets or the contracts. The monthly payments made under arrangement conveys a right to use the asset. the contracts are debited against the provisions. A reassessment is made after inception of the lease only if one of the following applies: (m) Intangible assets (a) There is a change in contractual terms, Intangible assets which comprise computer other than a renewal or extension of the software and goodwill on acquisition are arrangement; initially recorded at cost. Intangible assets are subsequently measured at cost less (b) A renewal option is exercised or extension accumulated depreciation and impairment granted, unless the term of the renewal or losses. Computer software is amortised using the extension was initially included in the lease straight-line method over its estimated useful life term; of three years. Goodwill acquired in a business (c) There is a change in the determination combination is not amortised and is assessed for of whether fulfilment is dependent on a impairment every year and the carrying amount specified asset; or is reviewed annually and adjusted for impairment where it is considered necessary. (d) There is a substantial change to the asset. Air Mauritius Annual Report 2015/16 125

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.4 Summary of Significant Accounting in negotiating an operating lease are added to Policies (Cont’d) the carrying amount of the leased asset and recognised over the lease term on the same (o) Leases (Cont’d) bases as rental income. Contingent rents are Where a reassessment is made, lease recognised as revenue in the period in which accounting shall commence or cease from the they are earned. date when the change in circumstances gives rise to the reassessment for scenarios (a), (c) (p) Employee benefit liability or (d) and at the date of renewal or extension period for scenario (b). (i) Defined benefit plans The Company contributes to a pension scheme, Group as a lessee which is a ‘Defined Benefit’ plan. Under this Leases are classified as finance leases whenever plan the qualifying employees are entitled to the terms of the lease transfer substantially retirement benefits up to a maximum of 66.6% all the risks and rewards of ownership to the of final salary on attainment of a retirement lessee. All the other leases are classified as age of 65. The assets of the fund are held and operating leases. administered by a trust specifically created for that purpose. Assets held under finance leases are recognised at an amount equal to the lower of their fair value The cost of providing benefits is determined at the date of acquisition and present value of using the projected unit credit method, with minimum lease payments. The corresponding actuarial valuations being carried out at each liability to the lessor is included in the statement reporting date. Actuarial gains and losses are of financial position as a finance lease obligation. recognised in full in the period in which they Finance costs, which represent the difference occur in other comprehensive income. Such between the total leasing commitments and the actuarial gains and losses are also immediately fair value of the assets acquired, are charged recognised in other comprehensive income to profit or loss over the term of the relevant and are not reclassified to profit or loss in lease so as to produce a constant periodic subsequent periods. rate of charge on the remaining balance of the obligations for each accounting period. Unvested past service costs are recognised as an expense on a straight line basis over The property, plant and equipment acquired the average period until the benefits become under finance leasing contracts are depreciated vested. Past service costs are recognised over the shorter of the lease term and useful life immediately if the benefits have already vested of the asset. Payments made under operating immediately following the introduction of, or leases are charged to profit or loss on a straight- changes to, a pension plan. line basis over the terms of the leases.

Group as a 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 126 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.4 Summary of Significant Accounting (iii) Other post-retirement benefits Policies (Cont’d) Other post-retirement benefits include unused, (p) Employee benefit liability (Cont’d) accumulated sick leave benefits that are refunded to employees on retirement and the severance allowance payable to employees (i) Defined benefit plans (Cont’d) of its subsidiaries in accordance with Labour The defined benefit asset or liability comprises Laws. The net present value of benefits payable the present value of the defined benefit obligation is calculated by a qualified actuary and provided (using a discount rate based on government for. The severance allowance payable and the bonds, as explained in Note 4.3), less accumulated sick leaves are unfunded. unrecognised past service costs and less the fair value of plan assets out of which the obligations are to be settled. Plan assets are assets that (iv) End of contract gratuity for pilots are held by a long-term employee benefit fund The terms of employment for pilots employed or qualifying insurance policies. Plan assets are on a fixed, long-term contract basis include a not available to the creditors of the Group, nor condition for the payment of gratuity which can they be paid directly to the Group. Fair value is calculated based on a percentage of the is based on market price information and, in the total basic salary paid to the pilots on each case of quoted securities, it is the published anniversary date of their contract over its bid price. The value of any defined benefit duration. asset recognised is restricted to the sum of any unrecognised past service costs and the present (q) Taxes value of any economic benefits available in the form of refunds from the plan or reductions in the (i) Current income tax future contributions to the plan. Current income tax assets and liabilities for the current and prior periods are measured at the Re-measurements, comprising of actuarial amount expected to be recovered from or paid gains and losses, the effect of the asset to the taxation authorities. The tax rates and tax ceiling, excluding net interest (not applicable laws used to compute the amount are those to the Group) and the return on plan assets that are enacted or substantively enacted by (excluding net interest), are recognised the reporting date. Current tax is recognised in immediately in the statement of financial correlation to underlying transactions either in position with a corresponding debit or credit to profit and loss or, other comprehensive income retained earnings through other comprehensive or directly in equity. income in the period in which they occur. Re- measurements are not reclassified to profit or loss in subsequent periods. (ii) Deferred tax Deferred tax is provided, using the liability (ii) Defined contribution plans method, for all temporary differences arising between the tax bases of assets and liabilities The Company operates a defined contribution and their carrying values for financial reporting scheme, created in April 2002, the assets purposes. The tax rates and tax laws used to of which are held separately from the Group compute the amount are those that are enacted and are administered by an independent or substantively enacted by the reporting date fund administrator. All new employees of the that are expected to apply in the year when the Company from that date become members of asset is realised or the liability is settled. the defined contribution plan. Payments by the Company to the defined contribution retirement plan are charged as an expense as they fall due. Air Mauritius Annual Report 2015/16 127

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.4 Summary of Significant Accounting The net amount of value added tax recoverable Policies (Cont’d) from, or payable to, the taxation authority is included as part of receivables or payables in (q) Taxes (Cont’d) the statements of financial position.

(ii) Deferred tax (Cont’d) (iv) Corporate Social Responsibility Current tax items are recognised in correlation to underlying transactions either in profit and In line with the definition within the Income Tax loss, other comprehensive income or directly Act 1995, Corporate Social Responsibility (CSR) in equity. is regarded as a tax and is therefore subsumed with the income tax shown within the statement Under this method the Group is required to of comprehensive income and the income tax make provision for deferred income taxes on liability on the statement of financial position. the revaluation of certain non-current assets and, in relation to an acquisition, on the The CSR charge for the current period is difference between the fair values of the net measured at the amount expected to be paid assets acquired and their tax base. to the Mauritian tax authorities. The CSR rate and laws used to compute the amount are The principal temporary differences arise from those charged or substantively enacted by the depreciation on property, plant and equipment, reporting date. revaluations of certain non-current assets, tax losses carried forward, employee benefit liability (r) Impairment of non-financial assets and on provisions. The Group reviews the carrying amounts of Deferred tax assets relating to the carry forward its assets other than investment property, of unused tax losses are recognised to the inventories and deferred tax assets at each extent that it is probable that future taxable reporting date to determine whether there is any profit will be available against which the unused indication that those assets have suffered an tax losses can be utilised. impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in Deferred tax assets and deferred tax liabilities order to determine the extent of the impairment are offset, if a legally enforceable right exists loss (if any). An asset’s recoverable amount is to set off current tax assets against current tax the higher of an asset’s or cash generating unit’s liabilities and the deferred income taxes relate to fair value less costs to sell and its value in use the same taxation authority. 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 (iii) Value added taxes groups of assets. In assessing value in use, the Revenues, expenses and assets are recognised estimated future cash flows are discounted to net of the amount of value added taxes except: their present value using a pre-tax discount rate that reflects current market assessments of the ● Where the value added tax incurred on time value of money and the risks specific to the a purchase of assets or services is not asset. In determining fair value less costs to sell, recoverable from the taxation authority, in an appropriate valuation model is used. which case the value added tax is recognised as part of the cost of acquisition of the asset or If the recoverable amount of an asset is as part of the expense item as applicable; and estimated to be less than its carrying amount, the carrying amount of the asset is reduced to ● Receivables and payables that are stated its recoverable amount. An impairment loss is with the amount of value added tax included. recognised immediately in profit or loss. 128 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.4 Summary of Significant Accounting (iii) Dividend income Policies (Cont’d) Dividend income is recognised when the (s) Customer loyalty programme Company’s right to receive payment has been established. The Company operates a customer loyalty programme, the Kestrelflyer Programme that (iv) Interest income entitles customers to accumulate mileage credits that entitle them to a choice of various Interest is recognised as it accrues using the awards, primarily free travel and upgrading of effective interest method. The effective interest tickets. The fair value attributed to the awarded rate is the rate that exactly discounts estimated mileage credits is deferred as a liability and future cash receipts through the expected life recognised as revenue on redemption of the of the financial instrument to the net carrying miles by the participants to whom the miles are amount of the financial asset. issued. (v) Rental income The deferred revenue is reduced to reflect the Rental income arising from operating leases outstanding obligation as participants redeem on investment properties is accounted for on a award credits or as their entitlement expires straight line basis over the lease terms. after 3 years. (vi) Redemption of miles on Customer Loyalty (t) Revenue recognition Programme (Kestrelflyer)

(i) Passenger and cargo sales Redemption revenue received for the issuance of points is deferred as a liability (sales in Passenger ticket and cargo airway bills, net of advance on carriage) until the miles are discounts are recorded as current liabilities in redeemed or the passenger is uplifted in the the ‘Sales In Advance of Carriage’ account until case of flights redemptions. Redemption recognised as revenue when the transportation revenue is measured based on management’s service is provided. Revenue is recognised on estimate of the fair value of the expected a gross basis. awards for which the miles will be redeemed. The fair value of the awards is reduced to take Commission costs are recognised at the same into account the proportion of miles that are time as the revenue to which they relate and expected to expire (purged). are charged to operating expenses. Ticket sales that are not expected to be used for transportation (unused tickets) are recognised (vii) Finance revenue and finance cost as revenue using estimates regarding the The Group’s finance income and finance costs timing of recognition based on the terms and include: conditions of the tickets and historical trends. ● interest income; (ii) Room revenue, sale of food and beverages and ● interest expense; income from other normal hotel services ● dividend income; Revenue is recognised upon consumption and acceptance of services, net of Value Added Tax and discounts. Air Mauritius Annual Report 2015/16 129

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.4 Summary of Significant Accounting (u) Fair value measurement Policies (Cont’d) The Group measures financial instruments, (t) Revenue recognition (Cont’d) such as, derivatives, and non-financial assets such as investment properties, at fair value at (vii) Finance revenue and finance cost(Cont’d) each reporting date. Also, fair values of financial ● the net gain or loss on the disposal of instruments measured at amortised cost are available-for-sale financial assets; disclosed in Note 36.

● the foreign currency gain or loss on financial Fair value is the price that would be received to assets and financial liabilities; sell an asset or paid to transfer a liability in an ● impairment losses recognised on financial orderly transaction between market participants assets (other than trade receivables); at the measurement date. The fair value measurement is based on the presumption that ● the net gain or loss on hedging instruments the transaction to sell the asset or transfer the that are recognised in profit or loss; and liability takes place either: ● the reclassification of net gains previously ● In the principal market for the asset or liability, recognised in other comprehensive income. or Interest income or expense is recognised using ● In the absence of a principal market, in the the effective interest method. most advantageous market for the asset or liability (viii) Dividend income The principal or the most advantageous market Dividend income is recognised in profit or must be accessible to by the Group. loss on the date on which the Group’s right to receive payment is established. The fair value of an asset or a liability is measured using the assumptions that market participants (ix) Operating segment would use when pricing the asset or liability, For management purposes, the Group is assuming that market participants act in their organised into business units based on their economic best interest. A fair value measurement services and the operating segments are aircraft of a non-financial asset takes into account a operations, ground operations, investment market participant’s ability to generate economic property, hotel and restaurant services and call benefits by using the asset in its highest and best centre. use or by selling it to another market participant that would use the asset in its highest and best Management monitors the operating results of use. The Group uses valuation techniques that are its business units separately for the purpose appropriate in the circumstances and for which of making decisions about resource allocation sufficient data are available to measure fair value, and performance assessment. Segment maximising the use of relevant observable inputs performance is evaluated based on operating and minimising the use of unobservable inputs. profit or loss and is measured consistently with operating profit or loss in the consolidated All assets and liabilities for which fair value financial statements. is measured or disclosed in the financial statements are categorised within the fair value Transfer prices between operating segments hierarchy, described as follows, based on the are on an arm’s length basis in a manner similar lowest level input that is significant to the fair to transactions with third parties. value measurement as a whole: 130 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.4 Summary of Significant Accounting 4.5 Prior Year Adjustment Policies (Cont’d) The investment property is held by Mauritius (u) Fair value measurement (Cont’d) Estate Development Corporation Limited (“MEDCOR”), a subsidiary of the Company, Level 1 - Quoted (unadjusted) market prices in and is rented out to various tenants, including active markets for identical assets or liabilities the Company. The part of the investment property which is lent out to the Company, is Level 2 - Valuation techniques for which the owner occupied from a Group perspective lowest level input that is significant to the fair and is therefore reclassified as an item of value measurement is directly or indirectly Property, plant and equipment in the Group’s observable financial statements on consolidation. This Level 3 - Valuation techniques for which the reclassification requires the reversal of lowest level input that is significant to the fair cumulative fair value movements on the value measurement is unobservable investment property occupied by the Group and the recognition of accumulated depreciation For assets and liabilities that are recognised in calculated on the historical cost of the owner the financial statements on a recurring basis, occupied portion. Whilst the reclassification was the Group determines whether transfers have done over the years, the amount reclassified occurred between levels in the hierarchy by re- had been incorrectly calculated. assessing categorisation (based on the lowest level input that is significant to the fair value To correct the above, in accordance with the measurement as a whole) at the end of each provisions of IAS 8 ‘Accounting Policies, Changes reporting period. in Accounting Estimates and Errors’, the figures were recalculated since the beginning of owner For the purpose of fair value disclosures, the occupation and comparatives have been restated Group has determined classes of assets and for the Group, with adjustments made to the liabilities on the basis of the nature, characteristics following captions: retained earnings, translation and risks of the asset or liability and the level of reserves, Property, Plant and Equipment in the fair value hierarchy as explained above. the Group Statement of Financial Position and administrative expenses and exchange differences (v) Share Capital on consolidation in the Group Statement of Profit or Loss and Other Comprehensive Income. Ordinary shares There was no impact to the Company’s reported Incremental costs directly attributable to the figures. The following adjustments were made to issue of ordinary shares are recognised as a comparatives for the Group: deduction from equity.

Statement of financial position:

2015 (€’000) 2014 (€’000) As previously Adjustments As restated As previously Adjustments As restated stated stated Property, plant and equipment 212,523 (2,327) 210,196 232,914 (1,708) 231,206 Retained earnings 13,952 (1,938) 12,014 28,196 (1,251) 26,945 Translation reserves (10,374) (389) (10,763) (11,474) (457) (11,931) Net assets * 139,381 (2,327) 137,054 183,619 (1,708) 181,911 Total equity 41,997 (2,327) 39,670 80,751 (1,708) 79,043

* Net assets have been calculated as total assets less current liabilities. Air Mauritius Annual Report 2015/16 131

Notes to the Financial Statements for the year ended March 31, 2016

4. Accounting Policies (Cont’d)

4.5 Prior Year Adjustment (Cont’d) Statement of Profit or Loss and Other Comprehensive Income:

2015 (€’000) 2014 (€’000) As previously Adjustments As restated As previously Adjustments As restated stated stated Administrative expenses 32,506 45 32,551 28,562 600 29,162 Fair value gain/(loss) on investment property 403 (642) (239) 12 (651) (639) (Loss)/profit before tax (22,890) (687) (23,577) 8,617 (1,251) 7,366 Exchange differences on consolidation 1,227 68 1,295 (887) (457) (1,344) Earnings per share (Basic and diluted) (0.22) (0.01) (0.23) 0.08 (0.01) 0.07

Statement of Changes in Equity:

2015 (€’000) 2014 (€’000) As previously Adjustments As restated As previously Adjustments As restated stated stated

(Loss)/profit for the year (22,896) (687) (23,583) 8,465 (1,251) 7,214

Other comprehensive income, net of tax (15,858) 68 (15,790) (394) (457) (851)

Total comprehensive income, net of tax (38,754) (619) (39,373) 8,071 (1,708) 6,363

Statement of Cash Flows:

2015 (€’000) 2014 (€’000) As previously Adjustments As restated As previously Adjustments As restated stated stated

(Loss)/profit before tax (22,890) (687) (23,577) 8,617 (1,251) 7,366

Depreciation on property, plant and equipment 37,914 45 37,959 35,914 600 36,514

Fair value gain/(loss) on investment property (403) 642 239 (12) 651 639 132 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

5. Financial Risk Management Objectives and Policies

The fundamental objective of financial risk Group’s receivables from customers and management at Air Mauritius is to protect and, investments in debt securities. where possible, improve on future budgeted and forecast cash flows, and the financial performance Trade and other receivables and financial position of the Group, by: The Group’s sales are made principally through ● Protecting the Group from adverse market International Air Transport Association (IATA), movements that manifest as financial Cargo Accounts Settlement System (CASS) and downside for the business and endanger Billing Settlement Plan (BSP) settlement systems. stakeholders (shareholder, employees and the As such, the credit risk arising from defaults from community), and threaten the sustainability travel agents, other airlines, forwarding agents and competitive position and reputational risk and tour operators are considerably reduced. of the Group in the market; and The Group also trades directly with recognised creditworthy third parties. It is the Group’s policy ● Reducing the volatility and resultant uncertainty that all customers who wish to trade on credit of operating revenues and cash flows that terms are subject to credit verification procedures. result from financial market volatility. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s The Group’s principal financial liabilities, other exposure to bad debts is not significant. The than derivatives, comprise loans and borrowings maximum exposure is the carrying amount as and trade and other payables. The main disclosed in note 16. There are no significant purpose of these financial liabilities is to raise concentrations of credit risk within the Group. finance for the Group’s operations. The Group has various financial assets such as trade and With respect to credit risk arising from the other other receivables, cash and short-term deposits, financial assets of the Group, which comprise available-for-sale investments, loans and cash and cash equivalent, available-for-sale receivables and derivative financial assets which investments and certain derivative instruments, arise directly from its operations. the Group’s exposure to credit risk arises from default of the counterparty, with maximum The main risks arising from the Group’s financial exposure equal to the carrying amount of these instruments are cash flow interest rate risk, instruments. liquidity risk, foreign currency risk, credit risk and fuel price risk. The Board of directors reviews Cash and cash equivalents and agrees policies for managing each of these risks which are summarised below. The Group and the Company held cash and cash equivalents of EUR 50,063K and EUR The Group enters into derivative transactions, 45,983K at March 31, 2016 (2015: EUR primarily forward currency contracts, corridors, 18,612K and EUR 15,651K). The cash and cash collars, options and swaps. The purpose is equivalents are held with bank and financial to manage the currency risks and jet fuel price institution counterparties, which are at least of risk arising from the Group’s operations and its investment grade based on Moody’s (Baa3), sources of finance. Fitch (BBB-) and Standard & Poor (BBB-).

(i) Credit risk Derivatives Credit risk is the risk of financial loss to the The derivatives are entered into with bank and Group if a customer or counterparty to a financial institution counterparties, which are at financial instrument fails to meet its contractual least of investment grade based on Moody’s obligations, and arises principally from the (Baa3), Fitch (BBB-) and Standard & Poor (BBB-). Air Mauritius Annual Report 2015/16 133

Notes to the Financial Statements for the year ended March 31, 2016

5. Financial Risk Management Objectives and Policies (Cont’d)

(ii) Liquidity risk Liquidity risk is the risk that the Group 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 approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group monitors its 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 financial liabilities at March 31, based on contractual undiscounted payments.

The Group

Contractual cash flows Less Carrying On than 3 3 to 12 1 to 5 Above 5 At March 31, 2016 amount demand months months years years Total €’000 €’000 €’000 €’000 €’000 €’000 €’000 Interest bearing loans and borrowings 53,834 1,521 1,678 21,683 27,052 5,426 57,360 Derivative financial liabilities 5,844 - 2,646 3,198 - - 5,844 Trade and other payables 155,328 938 147,554 6,836 - - 155,328

Total 215,006 2,459 151,878 31,717 27,052 5,426 218,532

Carrying On Less than 3 to 12 1 to 5 Above 5 At March 31, 2015 amount demand 3 months months years years Total €’000 €’000 €’000 €’000 €’000 €’000 €’000 Non-derivative financial liabilities Interest bearing loans and borrowings 65,783 1,117 7,455 5,008 44,219 13,088 70,887 Derivative financial liabilities 26,868 - 6,853 16,039 4,268 - 27,160 Trade and other payables 138,970 - 135,794 3,176 - - 138,970 Total 231,621 1,117 150,102 24,223 48,487 13,088 237,017 134 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

5. Financial Risk Management Objectives and Policies (Cont’d)

(ii) Liquidity risk (Cont’d)

The Company

Contractual cash flows Carrying On Less than 3 to 12 1 to 5 Above At March 31, 2016 amount demand 3 months months years 5 years Total €’000 €’000 €’000 €’000 €’000 €’000 €’000 Interest bearing loans and borrowings 60,291 7,978 1,660 21,683 27,052 5,426 63,799 Derivative financial liabilities 5,844 - 2,646 3,198 - - 5,844 Trade and other payables 155,361 938 148,382 6,041 - - 155,361 Total 221,496 8,916 152,688 30,922 27,052 5,426 225,004

Carrying On Less than 3 to 12 1 to 5 Above At March 31, 2015 amount demand 3 months months years 5 years Total €’000 €’000 €’000 €’000 €’000 €’000 €’000 Interest bearing loans and borrowings 71,852 7,737 7,455 4,966 44,090 12,634 76,882 Other financial liabilities 26,868 - 6,853 16,039 4,268 - 27,160 Trade and other payables 139,235 907 135,795 2,533 - - 139,235 Total 237,955 8,644 150,103 23,538 48,358 12,634 243,277

(iii) Interest rate risk (iv) Interest rate risk table The Group finances its aircraft principally in Euro The following table demonstrates the sensitivity and US dollars. Changes in interest rates of the to a reasonably possible change in interest Euro zone and US will therefore impact on the rates, with all other variables held constant, of cash flows and profits of the Group, when the the Group’s and the Company’s profit before tax financing is based on floating rate terms. As at (through the impact on floating rate borrowings). March 31, 2016, none of the Group’s borrowings There is no impact on the Group’s and the were at a fixed rate of interest (2015: Nil). Company’s equity.

THE GROUP AND THE COMPANY Increase/ decrease in Effect on profit or loss/ basis points equity €‘000 2016 Financial instruments denominated in Euro +15 (50) Financial instruments denominated in US dollar +20 (205)

Financial instruments denominated in Euro -10 33 Financial instruments denominated in US dollar -15 154 2015 Financial instruments denominated in Euro +15 (60) Financial instruments denominated in US dollar +20 (249)

Financial instruments denominated in Euro -10 40 Financial instruments denominated in US dollar -15 187 Air Mauritius Annual Report 2015/16 135

Notes to the Financial Statements for the year ended March 31, 2016

5. Financial Risk Management Objectives and Policies (Cont’d)

(v) Commodity price risk The following table demonstrates the sensitivity One of the Group’s principal variable cost to a reasonably possible change in fuel price, components is jet fuel. The price of jet fuel is with all other variables held constant, of the indexed according to international commodity Group’s and the Company’s profit before tax and prices and accordingly the Group’s profitability equity. As at March 31, 2016, the fair value of the is exposed to commodity price risk. The risk Group’s derivative financial instruments relating associated to fluctuations in the price of jet fuel is to commodity hedges was EUR 5,169k (2015: managed by various hedging techniques as well Liability of EUR 26,574k). as the use of a fuel surcharge, whereby some of the cost is passed on to the customer.

THE GROUP AND THE COMPANY Increase/decrease Effect on profit Effect in USD before tax on equity €‘000 €‘000 2016 Increase in fuel price +10 15,736 17,495 Decrease in fuel price -10 (15,736) (17,398) 2015 Increase in fuel price +10 13,245 17,848 Decrease in fuel price -10 (13,245) (15,622)

(vi) Foreign currency risk The Group manages its foreign currency risk by Revenue is generated principally in Euro because hedging transactions that are expected to occur the principal market of the Group is Europe, while in mainly USD by using foreign currency swaps USD mainly influences the determination of costs and forwards. It is the Group’s policy to negotiate as fuel expenses are borne in USD. Therefore, the terms of the hedge derivatives to match the the prospective cost in non-euro operations will term of the hedged item to maximise hedge be hedged in this manner to a level of between effectiveness. 30% and 70%. The following table demonstrates the sensitivity The Group has transactional currency exposures. to a reasonably possible change in the US dollar Such exposure arises from sales or purchases exchange rate, with all other variables held by an operating unit in currencies other than constant, of the Group’s profit or loss before the unit’s functional currency. Approximately tax (due to changes in the fair value of monetary 35% of the Group’s sales are denominated in assets and liabilities) and the Group’s equity (due the functional currency of the operating unit to changes in the fair value of forward exchange making the sale, whilst almost 44% of costs contracts). are denominated in USD. The forward currency contracts must be in the same currency as the hedged item. 136 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

5. Financial Risk Management Objectives and Policies (Cont’d)

(vi) Foreign currency risk (Cont’d)

THE GROUP AND THE COMPANY Increase/decrease Effect on profit Effect in USD before tax on equity €‘000 €‘000 2016 +5% (8,773) (10,076) -5% 9,697 11,376 2015 +5% 3,218 2,086 -5% (3,556) (2,318)

(vii) Hedging by the Company Fuel-hedging instruments are used to protect The Risk Management Steering Committee the Company against sudden and significant sets out the objectives and policies for hedging increases in fuel prices while ensuring that the transactions in order to mitigate exposure on Company is not significantly affected in the event changes in foreign exchange rates and fuel of a substantial fall in the price of fuel. prices. The Company’s hedging policies are risk averse. As such, derivatives are not used to These fuel and foreign exchange derivative generate profits but to hedge against anticipated instruments are both accounted for as “cash flow exposures. hedges” as per IAS 39.

As derivatives are only used for the purposes When a derivative is entered into for the purpose of risk management, they do not expose the of being a hedge, the Group negotiates the Group to market risk because gains and losses terms of the derivative to match the terms of on the derivatives offset losses and gains on the the hedged exposure. For hedges of forecast matching asset, liability, revenues or costs being transactions, the derivative covers the period of hedged, except to the extent that the hedge is exposure from the point the cash flows of the ineffective. transactions are forecasted up to the point of settlement of the resulting receivable or payable Foreign currency risks in relation to expected that is denominated in the foreign currency. 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. Air Mauritius Annual Report 2015/16 137

Notes to the Financial Statements for the year ended March 31, 2016

5. Financial Risk Management Objectives and Policies (Cont’d)

(vii) Hedging by the Company (Cont’d) The movement in derivative financial instruments are as follows:

2016 2015 Currency Commodity Currency Commodity derivatives derivatives derivatives derivatives €000 €000 €000 €000 At April 01, 1,521 (26,574) (842) 1,619 Movement during the year Hedge (receipts)/payouts (1,350) 26,570 (2,601) 10,107 Fair value movement (715) (5,165) 4,964 (38,300) At March 31, (544) (5,169) 1,521 (26,574)

(viii) Capital management The primary objective of the Group’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, amongst other things, aims to ensure that it meets 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 was not subject to any externally imposed capital requirements during the years ended March 31, 2016 and March 31, 2015.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group 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, 2016 and March 31, 2015.

The Group monitors capital using a gearing ratio, which is interest bearing loans and borrowings divided by equity. The Group’s policy is to keep the gearing ratio at a reasonable level which is 1:1. Interest bearing loans and borrowings exclude derivatives and collaterals. Capital comprises equity attributable to the equity holders of the parent.

THE GROUP THE COMPANY 2016 2015 2016 2015 Restated

€000 €000 €000 €000 Interest bearing loans and borrowings 53,834 65,783 60,291 71,852 Equity 79,823 39,670 82,480 42,934 Debt to equity ratio 67% 166% 73% 167%

The Group did not pledge any financial assets as collateral for liabilities or contingent liabilities as at March 31, 2016 (March 31, 2015: Nil) 138 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

5. Financial Risk Management Objectives and Policies (Cont’d)

(ix) Financial instruments Set out below is a comparison by category and class of carrying amounts and fair values of all of the Group’s financial instruments, which are carried in the financial statements:

The Group Category Carrying amount Fair value 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Financial assets Cash and short-term deposits L.R 50,063 18,612 50,063 18,612 Long-term deposits L.R 21,545 19,625 21,545 19,625 Long-term receivables L.R 135 150 135 150 Available-for-sale investments A.F.S 528 592 528 592 Trade and other receivables L.R 34,529 38,727 34,529 38,727 Derivative financial assets F.V.T.P.L 131 1,815 131 1,815

Financial liabilities Bank overdraft O.L (954) (981) (954) (981) Interest-bearing-loans and borrowings: - Obligations under finance lease O.L (35,650) (40,936) (35,650) (40,936) - Other loans O.L (17,230) (23,866) (17,230) (23,866) Derivative financial liabilities F.V.T.P.L (5,844) (26,868) (5,844) (26,868) Trade and other payables O.L (155,328) (138,970) (155,328) (138,970)

The Company Category Carrying amount Fair value 2016 2015 2016 2015 €’000 €’000 €’000 €’000 Financial assets Cash and short-term deposits L.R 45,983 15,651 45,983 15,651 Long-term deposits L.R 21,545 19,625 21,545 19,625 Long-term receivables L.R 135 150 135 150 Available-for-sale investments A.F.S 528 592 528 592 Trade and other receivables L.R 35,062 38,368 35,062 38,368 Derivative financial assets F.V.T.P.L 131 1,815 131 1,815

Financial liabilities Bank overdraft O.L (936) (981) (936) (981) Interest-bearing-loans and borrowings: - Obligations under finance lease O.L (35,650) (40,936) (35,650) (40,936) - Other loans O.L (23,705) (29,935) (23,705) (29,935) Derivative financial liabilities F.V.T.P.L (5,844) (26,868) (5,844) (26,868) Trade and other payables O.L (155,361) (139,235) (155,361) (139,235) Air Mauritius Annual Report 2015/16 139

Notes to the Financial Statements for the year ended March 31, 2016

5. Financial Risk Management Objectives and Policies (Cont’d)

(ix) Financial instruments (Cont’d) Fair value hierarchy Market values have been used to determine the fair value of listed available-for-sale financial The Group uses the following hierarchy for assets. The fair value of derivatives and determining and disclosing the fair value of borrowings has been calculated by discounting financial instruments by valuation techniques: the expected future cash flows at prevailing Level 1: quoted (unadjusted) prices in active interest rate. The fair value of other financial markets for identical assets or liabilities assets has been calculated using market interest rates. Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value The short term financial instruments carrying are observable, either directly or indirectly value approximates their fair value. Long term loans and borrowings have been contracted Level 3: techniques that use inputs that have a with financial institutions and carry variable significant effect on the recorded fair value that interest rates which are at par with market rates. are not based on observable market data. Therefore, the amortised cost approximates the fair value. The impact of discounting on long The Group has cash flow hedges which are term deposits is not material. As such, their classified under level 2. carrying value approximates their fair value.

L.R- Loans and receivables

A.F.S- Available-for-sale

F.V.T.P.L- Fair value through profit or loss

O.L- Other financial liabilities 140 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016 Total 231,206 39 Motor vehicles Owned Leased & office Computer equipment & fittings Furniture Furniture Plant & equipment ------(292) (7) (706) (380) (28) (33,299) ------(292) (5) (707) (373) (28) (33,040) land leasehold hangars on Buildings & 62,484 36,811 20,810 7,028 10,244 2,774 275 627,884 62,484 35,606 20,810 7,028 10,244 2,774 275 626,679 73,893 38,188 21,156 7,206 10,594 2,673 275 640,825 50,997 39,017 33,650 21,412 23,917 7,318 18,859 10,280 6,422 2,319 9,353 247 618,235 1,978 236 394,970 33,650 24,420 18,859 6,422 9,353 1,978 236 395,473 49,197 25,692 19,459 6,626 9,753 1,975 265 430,629 31,081 26,603 19,726 6,841 9,590 1,854 247 432,435 Airframe overhaul & engine spares Aircraft Aircraft 26,966 26,966 26,348 26,153 21,181 21,181 20,051 20,607 Aircraft & Aircraft accessories - - - - (1,205) - - - - - (1,205) - - 1,117 (1,117) - - 882 12,526 2,275 343 146 582 173 - 16,927 - - - (2,617) - - - - (4) 311 (87) 90 (4) 36 (246) (279) 14 - 5 (3,237) - 456 - - 590 8,205 871 591 138 405 30 - 10,830 - - (785) (31,101) - - - - (42) (43) (19) (13) (4) - (121) - - - - 503 - - - - - 503 - - - (2,472) - - - - (4) 176 (87) 48 (4) 21 (239) (262) 14 - 6 (3,068) - 265 - - (534) (31,101) - - - - (108) (26) (15) (12) (2) - (163) (140) 140 128 (128) 4,899 13,338 1,214 15,675 1,100 639 187 625 253 29 37,959 4,070 14,205 1,090 12,985 1,019 585 235 556 254 10 35,009 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 49,736 410,756 41,437 237,937 41,437 237,937 46,196 251,415 12,782 303,104 36,954 107,652 5,546 19,916 12,414 1,686 477 690 465 - 185,800 72,764 90,117 6,297 24,696 12,496 1,697 580 841 698 10 210,196 77,523 103,595 5,785 28,834 11,186 1,951 606 891 796 (69,224) 69,224 - - (37,484) 37,484 - - Aircraft Aircraft on lease 118,960 341,532 118,960 341,532 118,960 341,532 stated) stated) previously previously (restated) (restated) (As (As 2014 2014 2014 2014 01, 01, 01, 01, ch 31, 2016 April April April April Effect of prior year adjustment (note 4.5) Effect At At Transfer (Note (a)) Transfer The Group (Restated) Additions Cost Disposals Exchange differences At March 31, 2015 At March Transfer (Note (a)) Transfer Additions Disposals Exchange differences Exchange differences 31, 2016 At March Depreciation At of prior year adjustment (note 4.5) Effect At Transfer (Note (a)) Transfer Charge for the year (restated) Disposals Exchange differences At March 31, 2015 At March Transfer (Note (a)) Transfer Charge for the year At March 31, 2016 At March Disposals Net book values At Mar Exchange differences Exchange differences At March 31, 2015 (Restated) At March At March 31, 2014 (Restated) At March 6. Property, Plant and Equipment 6. Property, (a) The transfer is in respect of aircraft previously held under finance lease which were transferred to owned assets upon final payment of the lease. transferred held under finance lease which were previously of aircraft The transfer is in respect (a) of the Group. and accessories amounting to Eur 62.3M (2015:Eur 62.3M) have been pledged as security against borrowings Aircraft Air Mauritius Annual Report 2015/16 141

Notes to the Financial Statements for the year ended March 31, 2016 - - - - Total 226,894 - - - - 39 - - - - 30 - 10,658 Motor vehicles Owned Leased 399 & office Computer equipment & fittings Furniture Furniture Plant & equipment - (67) (4) (246) (275) - - (3,209) (67) (4) (239) (258) - (3,040) ------land leasehold hangars on Buildings & - - - Airframe overhaul & engine - 882 12,526 2,256 222 91 568 125 - 16,670 590 8,205 764 546 124 (785) (31,101) - (282) (5) (534) (31,101) (704) (365) - (28) (33,270) (282) (5) (703) (358) (28) (33,011) 1,117 (1,117) - - - - (2,617) (2,472) spares Aircraft Aircraft ------Aircraft & Aircraft accessories ------(Cont’d)

(140) 140 128 (128) - - - - 4,899 13,338 1,214 15,675 874 465 127 616 239 29 37,476 4,070 14,205 1,090 12,985 800 491 89 546 240 10 34,526 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 49,736 410,756 26,153 41,437 50,997 237,937 32,685 21,181 33,650 19,463 21,623 46,196 6,574 251,415 17,938 20,051 10,017 49,197 6,048 22,497 2,171 12,782 9,125 247 303,104 18,336 608,799 1,881 20,607 36,954 31,081 6,171 107,652 72,764 236 23,297 391,056 77,523 90,117 5,546 9,502 19,916 103,595 18,545 6,297 1,862 9,388 24,696 5,785 6,255 28,834 265 9,424 425,492 8,042 9,345 918 1,744 863 1,106 247 319 427,007 284 320 672 820 875 427 644 775 - 181,792 10 205,919 Aircraft Aircraft (69,224) 69,224 (37,484) 37,484 on lease 118,960 341,532 26,966 62,484 29,665 19,044 6,368 10,000 2,656 275 617,950 118,960 341,532 26,348 73,893 31,921 19,199 6,455 10,322 2,506 275 631,411 Additions Disposals Charge for the year Disposals At April 01, 2014 (Note (a)) Transfer At March 31, 2015 At March (Note (a)) Transfer Additions Disposals 31, 2016 At March Depreciation At April 01, 2014 (Note (a)) Transfer 31, 2015 At March (Note (a)) Transfer Charge for the year Disposals 31, 2016 At March Net book value 31, 2016 At March 31, 2015 At March 31, 2014 At March The Company Cost (a) The transfer is in respect of aircraft previously held under finance lease which were transferred to owned assets upon final payment of the lease. transferred held under finance lease which were previously of aircraft (a) The transfer is in respect of the Company. and accessories amounting to Eur 62.3M (2015:Eur 62.3M) have been pledged as security against borrowings Aircraft 6. Property, Plant and Equipment 6. Property, 142 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

7. Investment Property- at Fair Value

2016 2015 The Group €’000 €’000 At April 01, 10,200 9,764 Exchange differences (311) 675 Fair value gain/(loss) 194 (239) At March 31, 10,083 10,200

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 by an independent valuer, Property and Assets Valuation Ltd, Chartered Valuer, at March 31, 2016, which has experience in the valuation of investment property of the same nature and location. 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.

2016 2015 €’000 €’000 (a) Rental income from the investment property 1,301 1,177 (b) Operating expenses arising on the investment property: - that generated rental income during the year 503 728 - that did not generate rental income during the year 343 603

Description of valuation techniques used and key inputs to valuation on investment properties:

Valuation technique Significant unobservable Inputs Range Office properties DCF method Estimated rental value per sqm per month € 11.65 Rent growth p.a. Nil Long-term vacancy rate 5-10% Discount rate 8-8.5% Ground floor DCF method Estimated rental value per sqm per month € 10.13 properties Rent growth p.a. Nil Long-term vacancy rate 5-10% Discount rate 8-8.5% First floor properties DCF method Estimated rental value per sqm per month € 9.50 Rent growth p.a. Nil Long-term vacancy rate 5-10% Discount rate 8-8.5% Parking DCF method Estimated rental per month € 10,716

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. Air Mauritius Annual Report 2015/16 143

Notes to the Financial Statements for the year ended March 31, 2016

7. Investment Property- at Fair Value (Cont’d)

Description of valuation techniques used and key inputs to valuation on investment properties: 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, 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 ina 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.

Generally, a change in the assumption made for the estimated rental value is accompanied by:

● A directionally similar change in the rent growth per annum and discount rate (and exit yield) ● An opposite change in the long term vacancy rate

8. Intangible Assets

THE GROUP THE COMPANY 2016 2015 2016 2015 Carrying amount €000 €000 €000 €000 Computer software (see below) 252 589 237 563 Goodwill on acquisition of subsidiary 14 14 - - 266 603 237 563 Computer software Cost At April 01, 7,830 7,643 7,727 7,576 Additions 159 183 159 151 Disposals (1,176) - (1,176) - Exchange differences (2) 4 - - At March 31, 6,811 7,830 6,710 7,727 Amortisation At April 01, 7,241 6,710 7,164 6,643 Charge for the year 496 528 485 521 Disposals (1,176) - (1,176) - Exchange differences (2) 3 - - At March 31, 6,559 7,241 6,473 7,164 Net book value At March 31, 252 589 237 563

Management has reviewed the carrying amount of goodwill and does not consider it to be impaired. 144 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

9. Investment in Subsidiaries

2016 2015 The Company €’000 €’000 Cost At April 01, and March 31, 27,155 27,155

Details of the subsidiaries included in the Group financial statements are as follows:

Nominal value of Percentage holding Country of Class of investment Name of companies and incorporation shares activities and operation held 2016 2015 2016 2015 €’000 €’000 % % Management company Air Mauritius (S.A.) (Proprietary) Ltd South Africa Ordinary 0.1 0.1 100% 100% Air Mauritius Holidays (Pty) Ltd (Australia) (Dormant) Australia Ordinary 14.0 14.0 100% 100% Mauritian Holidays Ltd (UK) (Dormant) England Ordinary 0.1 0.1 100% 100% Investment property Mauritius Estate Development Corporation Limited Mauritius Ordinary 25,707 25,707 93.70% 93.70% Hotel and restaurant Pointe Coton Resort Hotel Co. Ltd Mauritius Ordinary 1,263 1,263 54.19% 54.19% Call centre Airmate Ltd Mauritius Ordinary 171 171 100% 100% Helicopter operations Mauritius Helicopter Limited Mauritius Ordinary 0.1 0.1 100% 100% (Dormant)

* Air Mauritius Holidays Limited was incorporated in October 01, 2012 but shares are yet to be subscribed to the proposed shareholder Air Mauritius Limited. The Company is engaged as a tour operator and sell online holiday packages on its website. The investment made by Air Mauritius Limited amounting to EUR 256k is currently recognised as deposit on shares in other receivables.

Non-controlling interest Non-controlling interest has been recognised at the proportionate share of the net assets of Pointe Coton Resort Hotel Co. Ltd and Mauritius Estate Development Corporation Limited. The directors have determined that the non-controlling interest is not material and has therefore not disclosed a summary of financial information of the subsidiaries. Air Mauritius Annual Report 2015/16 145

Notes to the Financial Statements for the year ended March 31, 2016

10. Investment in Associate

2016 2015 The Group €’000 €’000 (a) Carrying value of investment in associate Cost 102 102 Share of post-acquisition profits, net of dividend received 17 27 Carrying value 119 129

The Company The Company has accounted for the investment in associate at cost less impairment.

The details on the associate, which is incorporated in Mauritius, are as follows:

Name of company Activity Country of Class of Nominal value Percentage operation shares held of investment holding 2016 & 2015 2016 & 2015 €’000 % The Mauritius Shopping Paradise Company Ltd Dormant Mauritius Ordinary 102 41.65%

(b) Summarised financial information of the Group’s associate is set out below:

2016 2015 €’000 €’000 Total assets 589 619 Total liabilities (301) (309) Net assets 288 310 Carrying amount of the investment 119 129 Revenue - - Loss after tax for the year (22) (10) Group’s share of loss for the year (9) (4) 146 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

11. Available-For-Sale Investments

2016 2015 The Group and the Company €’000 €’000 At April 01, 634 603 Disposal - (5) Impairment (42) - Fair value movement (64) 36 At March 31, 528 634

Available-for-sale - quoted unit trust The Group holds 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 528k have been classified as Level 1 fair value hierarchy (2015: EUR 592k).

Available-for-sale - unquoted equity share In the year ended March 31, 2015, the Group held unquoted equity shares in a private company amounting to EUR 42k whose fair value could not be reliably measured and had been stated at cost. The fair value of this investment could not be reliably measured as the variability in the range of reasonable fair value estimates was too significant. In the year ended March 31, 2016, the Group impaired this investment.

12. Long Term Deposits

2016 2015 The Group and the Company €’000 €’000 Security deposits on finance/ operating leases 7,588 7,828 Advance payments to aircraft manufacturers 13,957 11,797 21,545 19,625

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. Advance payments relate to pre-delivery payments made to aircraft manufacturers for the acquisition of new aircraft.

13. Long Term Receivables

2016 2015 The Group and the Company €’000 €’000 Loans 135 150

The loans are unsecured, bear interest at a rate of LIBOR+1% per annum and is repayable in terms ranging between 2 to 10 years. Air Mauritius Annual Report 2015/16 147

Notes to the Financial Statements for the year ended March 31, 2016

14. Deferred Tax Asset

THE GROUP 2016 2015 €’000 €’000 At April 01, 81 24 Exchange differences (2) 2 Charge to statement of profit or loss and other comprehensive income (note 28) 21 55 At March 31, 100 81

Deferred tax assets are attributable to the following items: 2016 2015 €’000 €’000 Provisions 105 87 Accelerated depreciation (5) (6) 100 81

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% (2015: 17%). The current tax rate includes income tax rate of 15% and charge for CSR 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 deferred tax has been provided for in the financial statements of the Company. No tax expense has been set off against other comprehensive income. Not withstanding the tax exemption, the Company had unused tax losses of EUR 16M at March 31, 2016 (2015: EUR 21M) on which no deferred tax asset has been recognised.

15. Inventories

THE GROUP THE COMPANY 2016 2015 2016 2015 At cost €000 €000 €000 €000 Aircraft spares 17,211 18,120 17,211 18,120 Cabin services 1,188 1,061 1,188 1,061 Ground support services 1,574 1,587 1,574 1,567 Others 765 507 695 466 Provision for obsolete inventory (6,358) (4,502) (6,358) (4,502) 14,380 16,773 14,310 16,712

During the year, EUR 9.4M (2015: EUR 8.3M) was recognised as an expense for inventories. Inventory write down during the year amounted to EUR 1M (2015: EUR 1M). 148 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

16. Trade and Other Receivables

THE GROUP THE COMPANY 2016 2015 2016 2015 €000 €000 €000 €000 Trade receivables (net of allowances) 36,439 38,727 35,062 37,558 Receivable from subsidiaries - - 1,264 810 Other receivables and prepayments 20,851 17,091 20,536 16,867 57,290 55,818 56,862 55,235

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 on 30-90 days’ terms.

At March 31, 2016, trade receivables at nominal value of EUR 3.9M (2015: EUR 3.7M) for the Group and EUR 3.7M (2015: EUR 3.6M) for the Company were impaired and fully provided for. In assessing provision for impairment the Group considers the historical factors for debtors exceeding 90 days and who do not repay their debt.

Movements in the provision for impairment of receivables were as follows:

THE GROUP THE COMPANY Individually impaired Individually impaired €000 €000 At April 01, 2014 3,322 3,227 Charge for the year (note 25(a)) 1,148 1,104 Utilised (751) (751) At March 31, 2015 3,719 3,580 Charge for the year (note 25(a)) 225 209 Utilised (79) (64) At March 31, 2016 3,865 3,725

At March 31, the ageing analysis of trade receivables is as follows:

Past due but not impaired Neither past due Total nor impaired <30 days 31 - 90 days >90 days The Group €’000 €’000 €’000 €’000 €’000 2016 36,439 33,553 187 246 2,453 2015 38,727 36,332 739 327 1,329

The Company 2016 35,062 32,797 - 128 2,137 2015 37,558 36,193 64 104 1,197 Air Mauritius Annual Report 2015/16 149

Notes to the Financial Statements for the year ended March 31, 2016

17. Cash and Short Term Deposits

THE GROUP THE COMPANY 2016 2015 2016 2015 €000 €000 €000 €000 Cash and short-term deposits 50,063 18,612 45,983 15,651 Bank overdraft (note 19) (954) (981) (936) (981) 49,109 17,631 45,047 14,670

Cash resources of the Group and the Company include deposits totalling EUR 30,747k (2015: EUR 1,665k) which earn interest at rates ranging between 0.35% and 6.8% per annum (2015: 0.1% and 5.2% per annum).

18. Share Capital

The Group and the Company 2016 2015 2016 2015 Number Number €000 €000 Authorised Ordinary shares of Rs 10 each 200,000,000 200,000,000 81,566 81,566 Issued and fully paid Ordinary shares of Rs 10 each 102,305,000 102,305,000 41,724 41,724

The ordinary shares are denominated in Mauritian rupees.

19. Interest-Bearing Loans and Borrowings

THE GROUP THE COMPANY 2016 2015 2016 2015 €000 €000 €000 €000 Non-current Obligations under finance leases [note (c)] 30,107 35,657 30,107 35,657 Bank loans (notes (b) & 35 (a)) - 424 - - 30,107 36,081 30,107 35,657 Current Bank overdraft (notes 17 & 35 (a)) 954 981 936 981 Bank loans (notes (b) & 35 (a)) 433 5,930 433 5,803 Loan from subsidiary - - 6,475 6,620 Other loans (note 35 (a)) 16,797 17,512 16,797 17,512 Obligations under finance leases (note (c)) 5,543 5,279 5,543 5,279 23,727 29,702 30,184 36,195 Total interest-bearing loans and borrowings 53,834 65,783 60,291 71,852 150 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

19. Interest-Bearing Loans and Borrowings (Cont’d)

(a) Details of the interest-bearing loans and borrowings are given in note 35 (a).

THE GROUP THE COMPANY (b) Bank loans 2016 2015 2016 2015 €000 €000 €000 €000 Repayable by instalments: - within one year 433 5,930 433 5,803 - after one year and before two years - 127 - - - after two years and before five years - 297 - - 433 6,354 433 5,803

(c) Obligations under finance leases

Minimum lease Present value of minimum payments Interest lease payments Amounts payable under finance leases: 2016 2015 2016 2015 2016 2015 €’000 €’000 €’000 €’000 €’000 €’000 - within one year 6,368 6,360 825 1,081 5,543 5,279 - after one year and before two years 6,267 6,510 691 948 5,576 5,562 - after two years and before five years 20,387 14,268 1,204 2,189 19,183 12,079 - after five years 5,417 18,095 69 79 5,348 18,016 38,439 45,233 2,789 4,297 35,650 40,936 Less: Amount due for settlement within 1 year (5,543) (5,279) Amount due for settlement after 1 year 30,107 35,657

The Company has acquired certain aircraft under finance leases. The average remaining lease terms of these contracts are 1 to 5 years (2015: 1 to 6 years). Borrowings rates vary according to LIBOR and EURIBOR on which the lease agreements have been negotiated.

(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 is 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 hedges approximately 30% of its expected fuel cost in the next reporting period. The remaining volume of jet fuel purchases is exposed to price volatility. Air Mauritius Annual Report 2015/16 151

Notes to the Financial Statements for the year ended March 31, 2016

20. Derivative Financial Assets and Liabilities (Cont’d) a) Hedging activities and derivatives

The Group and the Company 2016 2015 Assets Liabilities Net Assets Liabilities Net €’000 €’000 €’000 €’000 €’000 €’000 Cash flow hedge Forward foreign exchange agreements - (534) (534) 1,527 (6) 1,521 Commodity derivatives 131 (5,310) (5,179) 288 (26,862) (26,574) 131 (5,844) (5,713) 1,815 (26,868) (25,053)

Derivatives designated as hedging instruments The Group uses foreign exchange forward contracts to manage some of its transaction 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 other comprehensive income 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 statement of 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 715,000 (2015:gain of EUR 4,964,000) relating to the hedging instruments, is included in other comprehensive income for the year.

The amount removed from other comprehensive income during the year and included in the carrying amount of the hedged items as a basis adjustment for 2016 is detailed in below in Note 20(d) totalling EUR 1.3M (2015: EUR 2.6M). The amounts retained in other comprehensive income at March 31, 2016 are expected to mature and affect the statement of profit or loss in financial year March 2017. Reclassifications of gains or losses to profit or loss during the year included in other comprehensive income are shown in Note 20(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 options 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. 152 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

20. Derivative Financial Assets and Liabilities (Cont’d)

c) Commodity price risk (Cont’d)

As at March 31, 2016, the fair value of outstanding commodity forward contracts amounted to a liability of EUR 5.8M (2015:liability of EUR 25M). No ineffectiveness was recognised in the current year (2015: nil). The cumulative effective portion of EUR 5.2M (2015: EUR 38.3M) is reflected in other comprehensive income for the year and will affect the profit or loss in the 2017.

d) Components of OCI

2016 2015 Cash flow hedges: €000 €000 Gains/(losses) arising during the year Currency forward contracts* Reclassification during the year to profit or loss (1,350) (2,601) Net gain/(loss) during the year of the not-yet matured contracts (715) 4,964 Commodity forward contracts Reclassification during the year to profit or loss 26,570 10,107 Loss of the not-yet matured commodity forward contracts (5,165) (38,300) 19,340 (25,830)

21. Employee Benefit Liabilities

THE GROUP THE COMPANY 2016 2015 2016 2015 Amount of provisions recognised in the statement of financial position: €000 €000 €000 €000 Defined benefit pension schemes [note (a)] 20,623 26,664 20,623 26,664 Other post retirement benefits [note (b)] 1,438 1,288 631 615 At March 31, 22,061 27,952 21,254 27,279

For the year ended March 31, 2016 the valuation exercise was carried out by Hewitt LY, Actuaries and Consultants. The Company contributes to a defined benefit pension plan in respect of some employees and has recognised a net liability of EUR 21m for such employees as at March 31, 2016 (2015: EUR 27M). Employees of the Company are entitled to unused, accumulated sick leave benefit paid upon retirement. The Company has recognised a net liability of EUR 631k for them as at March 31, 2016 (2015: EUR 615k). The employees of Airmate Ltd and Pointe Coton Resort Hotel Co. Ltd are entitled to paid sick leave benefits upon retirement. A net liability ofEUR 807k has been recognised as at March 31, 2016 (2015: EUR 673k). Air Mauritius Annual Report 2015/16 153

Notes to the Financial Statements for the year ended March 31, 2016

21. Employee Benefit Liabilities(Cont’d)

(a) Defined benefit pension schemes

(i) Reconciliation of net defined benefit liability

THE GROUP AND THE COMPANY 2016 2015 €000 €000 At April 01, 26,664 33,212 Amount recognised in profit or loss (note (iv)) 4,172 5,431 Employer contributions (4,903) (4,900) Amount recognised in other comprehensive income (note (v)) (4,838) (8,574) Exchange differences (472) 1,495 At March 31, 20,623 26,664

Amount of provision recognised in the statement of financial position

2016 2015 €000 €000 Present value of funded obligations (note (iii)) 87,411 85,953 Fair value of plan assets (note (ii)) (66,788) (59,289) At March 31, 20,623 26,664

(ii) Reconciliation of fair value of plan assets

THE GROUP AND THE COMPANY 2016 2015 €000 €000 At April 01, 59,289 51,386 Interest income 4,149 4,368 Employer contributions 4,903 4,900 Benefits paid (2,205) (2,763) Exchange differences (1,390) 1,637 Gain/(loss) on plan asset excluding interest (note (v)) 2,042 (239) At March 31, 66,788 59,289 154 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

21. Employee Benefit Liabilities(Cont’d)

(a) Defined benefit pension schemes (Cont’d)

(iii) Reconciliation of present value of defined benefit obligation

THE GROUP AND THE COMPANY 2016 2015 €000 €000 At April 01, 85,953 84,598 Current service cost 2,511 2,889 Interest expense 5,810 6,910 Benefits paid (2,205) (2,763) Exchange differences (1,862) 3,132 Liability gain due to change in financial assumptions (note (v)) (2,796) (8,813) At March 31, 87,411 85,953

(iv) Components of amounts recognised in profit or loss

THE GROUP AND THE COMPANY 2016 2015 €000 €000 Current service cost 2,511 2,889 Net interest on net defined benefit liability 1,661 2,542 Total 4,172 5,431

(v) Components of amount recognised in other comprehensive income

THE GROUP AND THE COMPANY 2016 2015 €000 €000 Return on plan assets (above)/below interest income (2,042) 239 Liability loss due to change in financial assumptions (2,796) (8,813) Total (4,838) (8,574)

(vi) Distribution of plan assets at March 31,

THE GROUP AND THE COMPANY 2016 2015 Allocation of Plan Asset at end of year % % Equities - overseas quoted 43 43 Equities - overseas unquoted 4 5 Equities - local quoted 8 8 Debt - overseas quoted 4 4 Debt - local unquoted 13 11 Property -Overseas 2 3 Investment funds 4 4 Cash and other 22 22 100 100

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. Air Mauritius Annual Report 2015/16 155

Notes to the Financial Statements for the year ended March 31, 2016

21. 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:

THE GROUP AND THE COMPANY 2016 2015 Principal Assumptions used at End of Period Discount rate 7.5% 7.0% Future salary increases 3.0% 3.0% Future pension increases 3.5% 3.0% Average retirement age (ARA) 62.5 62.5 Average life expectancy for: - Male at ARA 17.7 years 17.7 years - Female at ARA 22.1 years 22.1 years

Sensitivity analysis on defined benefit obligation at end of year - Increase due to 1% decrease in discount rate: EUR 14.9M - Decrease due to 1% decrease in discount rate: EUR 12.2M - Increase due to 1% rise in future salary increases: EUR 6.6M - Decrease due to 1% decrease in future salary increases: EUR 5.8M

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 or the future salary increases while leaving all other assumptions unchanged. Any similar variation in the other assumptions would have shown smaller 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 5.1M

- Weighted average duration of the defined benefit obligation: 16 years 156 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

21. Employee Benefit Liabilities(Cont’d)

(b) Other post retirement benefits

(i) Reconciliation of net defined benefit liability

THE GROUP THE COMPANY 2016 2015 2016 2015 €000 €000 €000 €000 At April 01, 1,288 1,145 615 639 Amount recognised in profit or loss (note (iii)) 227 239 79 98 Amount recognised in other comprehensive income (note (iv)) (31) (135) (31) (135) Less Employer contributions (19) (18) (19) (18) Exchange differences (27) 57 (13) 31 At March 31, 1,438 1,288 631 615

(ii) Reconciliation of present value of defined benefit obligation

THE GROUP THE COMPANY 2016 2015 2016 2015 €000 €000 €000 €000 At April 01, 1,288 1,145 615 639 Current service cost (note (iii)) 140 143 38 45 Interest expense (note (iii)) 87 96 41 53 Other benefits paid (19) (18) (19) (18) Exchange differences (27) 57 (13) 31 Liability gain due to change in financial assumptions (note (iv)) (31) (135) (31) (135) At March 31, 1,438 1,288 631 615

(iii) Components of amounts recognised in profit or loss

THE GROUP THE COMPANY 2016 2015 2016 2015 €000 €000 €000 €000 Current service cost 140 143 38 45 Net interest on net defined benefit liability 87 96 41 53 Total 227 239 79 98

(iv) Components of amounts recognised in other comprehensive income

THE GROUP THE COMPANY 2016 2015 2016 2015 €000 €000 €000 €000 Liability gain due to change in financial assumptions (31) (135) (31) (135) Total (31) (135) (31) (135) Air Mauritius Annual Report 2015/16 157

Notes to the Financial Statements for the year ended March 31, 2016

21. 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 2016 2015 Discount rate 7.5% 7.0% Future salary increases 3.0% to 6.5% 3.0% to 6.0% Average retirement age (ARA) 62.5 62.5

Sensivity analysis on defined benefit obligation at end of year - Increase due to 1% decrease in discount rate: EUR 64,000 - Decrease due to 1% decrease in discount rate: EUR 55,000

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 20,000 - Weighted average duration of the defined benefit obligation: 10 years

(c) Additional information (i) The employee benefit liabilities have been provided based on the report from Hewitt LY, Actuaries and Consultants. (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 increases was 6.5%.

Exposure to risks The key risks that the Group and 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, 2016, 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.

Under the Private Pension Schemes (Investment) Rules 2013, the scheme is required to maintain an Investment Policy Statement (IPS) in order to guide its investment strategy. The Investment Policy Statement (IPS) has already been prepared and put in place. The IPS has also been filed with the Financial Services Commission (FSC). 158 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

22. Provisions

THE GROUP AND THE COMPANY Contractual maintenance expenses 2016 2015 €000 €000 At April 01, 31,917 29,540 Net accrued for the year 3,378 1,810 Reversal of provision (7,529) - Payment (1,894) (2,782) Exchange differences (493) 3,349 At March 31, 25,379 31,917

Provided as follows: - less than one year (note 23) 6,041 2,534 - after one year and before two years 9,387 3,311 - after two years and before five years 7,951 19,933 - after five years 2,000 6,139 19,338 29,383 25,379 31,917

Up to March 31, 2015 the Group and the Company had maintenance agreements (known as power by the hour) for aircraft engines with technical service providers whereby the Group and the Company made partial payments in return for total care maintenance service at predetermined rates per hour flown. A provision was made for the maintenance of each engine based on the number ofhours flown and the rate per hour as per the contract. The monthly payments were then net off against the provisions in the financial statements.

As from April 01, 2015 the Group and the Company has entered into a new agreement for the maintenance of its A340 engine fleet. Monthly payments are made to the service provider based on aircraft flying hours and rates pre-determined by the contract.

Provisions also include restoration and handback costs to meet the contractual return conditions on aircraft held under operating leases. Air Mauritius Annual Report 2015/16 159

Notes to the Financial Statements for the year ended March 31, 2016

23. Trade And Other Payables

THE GROUP THE COMPANY 2016 2015 2016 2015 €000 €000 €000 €000 Trade payables 57,483 56,758 57,112 56,379 Deferred revenue for customer loyalty programme 4,212 6,010 4,212 6,010 Sales in advance of carriage (see note below) 86,689 76,564 86,689 76,564 Amounts due to subsidiaries - - 938 907 Other payables and accruals 5,115 3,114 4,581 2,851 Contractual maintenance expenses (note 22) 6,041 2,534 6,041 2,534 159,540 144,980 159,573 145,245

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 30-60 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 financial statements and is classified as Level 3 in the fair value hierarchy. The significant unobservable input in the valuation is the redemption rate assumed at 60% (2015: 90%). An increase or decrease in the redemption rate by 5 percentage points will increase or decrease the fair value by €351k (2015: €301k).

Reconciliation of Level 3 fair values - Deferred revenue for customer loyalty programme

THE GROUP AND THE COMPANY 2016 2015 €000 €000 Balance at April 01, 6,010 5,951 Net transactions in miles 308 59 Movement due to change in assumptions (2,106) - Balance at March 31, 4,212 6,010

The Company reduced its redemption rate from 90% to 60% during the current year following a re- assessment based on actual redemption rate and management’s expectation for coming years. 160 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016 (6) (4) 57 634 129 (239) 2,685 2,974 3,201 2015 €’000 (9,473) 38,487 17,110 36,985 12,515 (23,583) (23,640) (23,583) (23,577) (32,551) Restated 334,636 294,966 334,636 333,873 465,676 (453,161) TOTAL (9) 528 119 174 194 (129) THE GROUP 2,798 1,521 3,920 2016 €’000 (2,480) 35,505 10,989 77,025 16,498 16,324 16,498 16,627 46,671 (33,190) 340,440 260,617 340,440 339,793 490,819 (444,148) ------1 45 (4) (45) 634 129 160 (691) (691) (691) (691) (160) (642) 4,962 2015 €’000 (4,962) 36,985 ------1 (9) 49 (14) 528 119 158 158 158 158 133 181 (133) Unallocated Adjustment / 5,257 2016 €’000 (5,257) 77,025 ------3 (6) 26 32 27 27 27 33 10 613 192 (211) 1,010 4,484 2015 €’000 (4,292) - - -

------1 3 23 15 (71) (71) (71) (86) 684 105 (195) 1,004 4,259 2016 €’000 (4,154) ------8 9 6 17 17 17 (49) 412 232 997 137 (677) 1,230 3,681 1,172 1,849 2015 €’000 (1,249) ------4 (27) 415 170 524 279 128 151 279 279 131 (748) 1,328 3,425 1,427 2,175 2016 SUBSIDIARIES €’000 (1,256) Hotel & restaurant Call centre ------7 24 49 10 (39) 338 785 736 785 824 188 403 223 (954) 1,455 1,177 2015 €’000 23,438 ------7 1 7 46 13 573 731 685 731 875 142 713 (144) (588) 1,470 1,301 2016 €’000 23,893 Investment property ------2,937 3,044 2015 €’000 (9,584) 37,997 16,821 10,928 (23,721) (23,721) (23,721) (23,721) (31,046) 293,018 305,744 463,128 (452,200) ------TOTAL 1,507 3,779 2016 €’000 (2,586) THE COMPANY 35,011 10,817 15,401 15,401 15,401 15,401 44,426 (31,725) 258,836 311,471 488,341 (443,915) - - - - 984 679 6,332 5,360 2015 €’000 (1,643) (7,003) 12,740 - - - - 152 1,048 1,164 9,906 6,570 7,063 2016 €’000 (6,911) - - - - 2015 €’000 THE COMPANY 37,013 16,142 12,571 280,278 299,412 457,768 (445,197) - - - - 9,653 2016 €’000 33,963 44,274 Aircraft operationsAircraft operations Ground 248,930 304,901 481,278 (437,004) Depreciation and Depreciation amortisation Capital additions Non-controlling interests Non-controlling Capital and reserves Equity and liabilities Segment liabilities Unallocated corporate assets Investment in associate Assets Segment assets - Non-controlling interests - Non-controlling Profit/(Loss) attributable to: - Owners of the Company Profit/(Loss) for the year Income tax expense Profit/(Loss) before tax Finance cost Finance revenue Fair value gain on investment property Other operating income Share of result of associate of result Share Administrative expenses Segment results Operating expenses Revenue 24. Operating Segments (a) Air Mauritius Annual Report 2015/16 161

Notes to the Financial Statements for the year ended March 31, 2016

24. Operating Segments (Cont’d)

(b) Secondary reporting geographical segments

The Group and the Company

2016 2015 Revenue by destination €000 €000 Africa and Middle East 39,539 36,917 America 4,964 4,723 Asia 104,958 92,920 Australia 16,876 16,630 Europe 150,654 149,454 Indian Ocean 56,958 52,375 Mauritius 114,392 110,109 Total Company revenue 488,341 463,128

Other revenue from subsidiaries - Mauritius 2,478 2,548 Total Group revenue 490,819 465,676

(c) Main analysis of revenue

THE GROUP 2016 2015 €000 % €000 % Passenger (including helicopter revenue) 409,526 83% 380,354 82% Cargo 41,685 9% 44,452 10% Others 39,608 8% 40,870 8% Total revenue 490,819 100% 465,676 100%

(d) Geographical Information

The Group and the Company operate primarily in Mauritius. As such, the majority of its non-current assets, excluding financial instruments and deferred tax assets, are located in Mauritius

25. Depreciation, Amortisation, Foreign Exchange Differences and Costs of Inventories Included in the Statements of Profit or Loss and Other Comprehensive Income

THE GROUP THE COMPANY 2016 2015 2016 2015 €000 €000 €000 €000 (a) Operating profit/(loss) is arrived after: Crediting: Revenue from redemption of miles 1,543 1,567 1,543 1,567 Rental income 1,418 974 118 119 Gain/ (loss) on disposal of property, plant and 67 (69) 67 (70) equipment Ticket cancellation and penalty fees 1,230 1,123 1,230 1,123 Service charges 2,053 2,076 2,053 2,076 162 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

25. Depreciation, Amortisation, Foreign Exchange Differences and Costs of Inventories Included in the Statements of Profit or Loss and Other Comprehensive Income (Cont’d)

THE GROUP THE COMPANY 2016 2015 2016 2015 Restated (a) Operating profit/(loss) is arrived €000 €000 €000 €000 after: (Cont’d) Charging: -Included in operating expenses: Depreciation of property, plant and equipment 32,732 35,530 32,321 35,075 Fuel costs 142,274 174,731 142,274 174,731 Operating lease rental 24,177 21,119 24,177 21,119 Cost of inventories recognised as expenses 9,388 8,303 9,388 8,303 Increase in provision for stock obsolescence 1,856 92 1,856 92 Employee benefit expenses 77,381 78,911 73,764 74,916

-Included in administrative expenses: Depreciation of property, plant and equipment 2,277 2,429 2,205 2,401 Increase in provision for impairment on trade receivables (note 16) 225 1,148 209 1,104 Impairment on available-for-sale investments 42 - 42 - Amortisation of intangible assets (note 8) 496 528 485 521 Outside service costs 3,636 3,801 3,619 3,779 Professional fees 4,775 3,574 4,716 3,478 Motor vehicle running expenses 2,163 2,382 2,039 2,267 Communication cost services 1,318 1,217 1,297 1,199 Employee benefit expenses 9,643 10,844 9,006 10,037

(b) Analysis of employee benefit expenses

THE GROUP THE COMPANY 2016 2015 2016 2015 €000 €000 €000 €000 Salaries and wages 79,182 80,818 75,269 76,407 Social security costs 2,458 2,563 2,265 2,313 Defined benefit pension schemes (note 21(a)(iv)) 4,172 5,431 4,172 5,431 Other post retirement benefits (note 21(b)(iii)) 227 239 79 98 Defined contribution pension scheme 985 704 985 704 87,024 89,755 82,770 84,953 Air Mauritius Annual Report 2015/16 163

Notes to the Financial Statements for the year ended March 31, 2016

26. Finance Revenue

THE GROUP THE COMPANY 2016 2015 2016 2015 €000 €000 €000 €000 Other interest income 150 353 136 316 Unrealised gain on translation of monetary assets and liabilities - - - - Gain on currency hedge 1,351 2,601 1,351 2,601 Dividend income - unquoted 20 20 20 20 1,521 2,974 1,507 2,937

27. Finance Costs

THE GROUP THE COMPANY 2016 2015 2016 2015 €000 €000 €000 €000 Foreign exchange: Unrealised loss on translation of monetary assets and liabilities 881 7,591 881 7,591 881 7,591 881 7,591 Interest expense: Finance leases 1,149 1,383 1,149 1,383 Bank overdraft 1 2 1 2 Other loans 422 448 555 608 Bank loans 27 49 - - 1,599 1,882 1,705 1,993 Total 2,480 9,473 2,586 9,584

28. Income Tax Expense

THE GROUP THE COMPANY 2016 2015 2016 2015 Restated €000 €000 €000 €000 (a) Income tax In profit or loss: Deferred tax charge for the year (note 14) (21) (55) - - Corporate Social Responsibility 20 28 - - Underprovision of income tax in prior year (5) 10 - - Current income tax charge 135 23 - - 129 6 - - In other comprehensive income: Deferred tax credit related to items recognised in other comprehensive income during the year - - - - 164 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

28. Income Tax Expense (Cont’d)

THE GROUP THE COMPANY 2016 2015 2016 2015 Restated €000 €000 €000 €000 (b) Tax reconciliation Profit/(loss) before tax 16,627 (23,577) 15,401 (23,721) Tax at the rate of 15% (2015: 15%) 2,494 (3,537) 2,310 (3,558) Corporate Social Responsibility 20 28 - - Expenses not allowable for tax purposes 531 135 549 21 Exempt income (9) (60) (3) - Deferred CSR - (2) - - Deferred tax underprovided in previous year - (32) - - Additional relief obtained on salaries paid to resident staff (107) (73) - - Under/ (over) provision of income tax in previous year (5) 10 - - Deferred tax movement for the year not recognised 61 - - - Effect of tax holiday* (2,856) 3,537 (2,856) 3,537 Tax charge for the year 129 6 - -

* The Company is not taxable by virtue of an agreement with the Government of Mauritius.

29. Earnings/(Loss) Per Share

The Group

2016 2015 Restated €000 €000 Earnings/(loss) per share is based on: Profit/(loss) for the year 16,324 (23,640) Weighted average number of shares 102,305,000 102,305,000

Basic and diluted earnings/(loss) per share were the same for both years since there was no potential dilutive ordinary shares at March 31. Air Mauritius Annual Report 2015/16 165

Notes to the Financial Statements for the year ended March 31, 2016

30. Commitments

(a) Operating lease commitments

(i) The Group as lessor The Group has entered into leases on its property portfolio. 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:

2016 2015 €000 €000 Within 1 year 892 1,065 After 1 year, but not more than five years 660 729 1,552 1,794

(ii) The Group and Company as lessee

2016 2015 €000 €000 The Group and the Company have the following commitments under non-cancellable operating leases: - within one year 25,293 24,351 - after one year and before two years 40,668 25,028 - after two years and before five years 111,999 124,796 - after five years 244,310 283,619 422,270 457,794

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, 2016. Included in the non-cancellable commitments above 2 years are commitments relating to operating leases for 2 new aircraft A350-900. 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 expenditure commitments

Capital expenditure authorised and contracted for in respect of the acquisition of four new A350-900 aircrafts from Airbus amounts to EUR 623M (contract value) as at March 31, 2016 (2015:EUR 642M) and part of it has already been advanced as a deposit at the reporting date. The remaining commitments have not been provided for in the accounts. The capital expenditure commitments are denominated in US dollars, as such the commitments are subject to exchange movements.

The outstanding commitments will be settled over the period 2015 to 2020 in accordance with the contractual terms entered into with Airbus. 166 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

31. Substantial Shareholders

At March 31, the following shareholders held more than 5% of the ordinary share capital of the Company.

2016 & 2015 Direct Indirect Effective % % % Air Mauritius Holding Ltd 51.00 - 51.00 The Government of Mauritius 8.37 36.05 44.42 The State Investment Corporation Ltd 4.54 9.19 13.73 Rogers & Company Limited 4.28 9.24 13.52 Compagnie Nationale Air France 2.78 5.72 8.50 Air India 2.56 4.50 7.06

32. Related Party Transactions For the purposes of these 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 44.42% 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 state-controlled entities relate generally to taxes, civil aviation and related charges, utility costs, amounts relating to pension, air tickets, hotel rooms and rental of office space.

The Group

2016 2015 €000 €000 Income for the year 6,993 6,465 Expenses for the year 7,043 8,299 Amount receivable as at March 31, 786 1,420 Amount payable as at March 31, 806 973 Air Mauritius Annual Report 2015/16 167

Notes to the Financial Statements for the year ended March 31, 2016

32. Related Party Transactions (Cont’d)

(ii) Key management personnel Key management personnel are persons having authority and responsibility for planning, directing and controlling the activities of the Company, including directors.

Compensation THE GROUP THE COMPANY 2016 2015 2016 2015 €000 €000 €000 €000 Short-term benefits 2,262 2,285 2,225 2,233 Post-employment benefits: - Defined benefit 145 135 145 135 2,407 2,420 2,370 2,368

(iii) Other related parties (1) Mr Philippe Espitalier-Noël who is a Director of the Company, is also a director of Rogers & Company Limited (“Rogers”). 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 2016 2015 €’000 €’000 Income for the year 27,528 23,122 Expenses for the year 638 491 Amount receivable as at March 31, 4,187 3,724 Amount payable as at March 31, 34 48

(2) Mr Ashwani Lohani, who is a Director of the Company, is also the Chairman and Managing Director of Air India. 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 2016 2015 €’000 €’000 Expenses for the year 930 812 Amount payable as at March 31, 6 35

(3) Mr Patrick Roux, 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 during the year and the summary of transactions are as follows:

The Group and the Company 2016 2015 €’000 €’000 Income for the year 965 806 Expenses for the year 51,613 36,310 Amount receivable as at March 31, 128 118 Amount payable as at March 31, 4,021 7,660 168 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

32. Related Party Transactions (Cont’d)

(4) Mr Kremchand Beegoo, who is the Managing Director of Cargotech Ltd resigned as director of the Company on December 12, 2014. Mr Francois Woo, G.O.S.K. who is also related to Cargotech Ltd resigned as director of the Company on July 30, 2015. Cargotech Ltd ceased to be a related party as from July 30, 2015. Cargotech Ltd has transacted with the Group for cargo operations and the summary of transactions are as follows up to July 30, 2015:

The Group and the Company 2016 2015 €’000 €’000 Income for the year 790 1,949 Expense for the year - 61 Amount receivable as at March 31, - 172

(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, 2016, the Group has not made any provision for doubtful debts relating to amounts owed by related parties (2015: 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

Mauritius Estate Pointe Coton Air Mauritius Development Resort Hotel Co. (S.A.) 2016 Airmate Ltd Corporation Limited Ltd (Proprietary) Ltd Total €000 €000 €000 €000 €000 Income for the year 46 76 12 - 134 Expenses for the year 4,260 447 550 - 5,257 Amount receivable as at March 31, 16 34 1 1,263 1,314 Amount payable as at March 31, 370 471 97 - 938 Loan from subsidiary (note 19) - 6,475 - - 6,475

Mauritius Estate Pointe Coton Air Mauritius Development Resort Hotel Co. (S.A.) (Proprietary) 2015 Airmate Ltd Corporation Limited Ltd Ltd Total €000 €000 €000 €000 €000 Income for the year 45 89 22 - 156 Expenses for the year 4,484 482 366 - 5,332 Amount receivable as at March 31, 25 19 - 766 810 Amount payable as at March 31, 498 297 - - 795 Loan from subsidiary (note 19) - 6,620 - - 6,620 Air Mauritius Annual Report 2015/16 169

Notes to the Financial Statements for the year ended March 31, 2016

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.

35. Details of Borrowings and Financial Derivatives

(a) Borrowings and financial derivatives

2016 2015 Loans, Loans, overdraft and Fair value overdraft and Fair value obligations of financial obligations o nania under finance derivative nder nane derivative Last Base currency Interest rate % leases liability leases liability repayment date €’000 €’000 €’000 €’000 Variable interest bearing loans EUR Euribor +1.2% 29,033 n/a 33,347 n/a October 2021 MUR PLR + 2% 6,617 n/a 7,589 n/a October 2021 Bank loans USD Libor + 1.25% 433 n/a 5,803 n/a On demand Other loans USD 2.11% to 16,797 n/a 17,512 n/a October 2016 Libor +1.25% MUR 1.05% to 6,475 n/a 6,620 n/a March 2017 3.40% Bank overdraft MUR 6.65% to 936 n/a 981 n/a On demand 8.25% Financial derivatives (note 20) - 5,844 - 26,868 March 2017 COMPANY TOTAL 60,291 5,844 71,852 26,868 Bank loan MUR PLR+0.5% - - 551 n/a July 2017 Other loans MUR 1.05% to (6,475) - (6,620) n/a March 2017 3.40% Bank overdraft MUR 6.65% to 18 n/a - n/a On demand 8.25% GROUP TOTAL 53,834 5,844 65,783 26,868

All the above loans have variable market rates. The fair value of the loans are determined by using discounted cash flow method using discount rate that reflects the issuer’s borrowing rate at the end of the reporting date. 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 36. 170 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

35. Details of Borrowings and Financial Derivatives (Cont’d)

(b) Derivative financial instruments

The Group and the Company 2016 2015 €’000 €’000 Currency derivatives (notes (i) and 20) - Assets - 1,527 - Liabilities (544) (6) Fair value of commodity derivatives (notes (ii) and 20): - Assets 131 288 - Liabilities (5,300) (26,862) (5,713) (25,053)

(i) Fair value of currency derivatives

Amount with remaining life Between Less than three months More than three months and one year one year Total €000 €000 €000 €000 OTC traded forward rate agreements At March 31, 2016 (171) (373) - (544) At March 31, 2015 634 887 - 1,521

The currency derivatives have been classified as Level 2 of the fair value hierarchy in both 2016 and 2015.

(ii) Fair value of commodity derivatives

Amount with remaining life Between Less than three months More than three months and one year one year Total €000 €000 €000 €000 OTC traded forward rate agreements At March 31, 2016 Assets - OTC Traded - Swap (2,391) (2,778) - (5,169) At March 31, 2015 Assets - OTC Traded - Swap (6,950) (15,656) (3,968) (26,574)

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 2016 and 2015. Air Mauritius Annual Report 2015/16 171

Notes to the Financial Statements for the year ended March 31, 2016

36. Fair Value Measurement

The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities.

2016 Fair value measurement using Quoted prices Significant Significant in active observable unobservable Date of markets inputs inputs The Group valuation Total (Level 1) (Level 2) (Level 3) €000 €000 €000 €000 Assets measured at fair value: Investment property (Note 7) March 31, 2016 10,083 - - 10,083 Available-for-sale investments * March 31, 2016 528 528 - - Derivative financial assets March 31, 2016 131 - 131 - Liabilities measured at fair value: Derivative financial liabilities March 31, 2016 5,844 - 5,844 - Deferred revenue for customer March 31, 2016 4,212 - - 4,212 loyalty programme (note 23) Interest-bearing loans and borrowings: - Floating rate borrowings March 31, 2016 53,834 - 53,834 -

* There have been no transfers between Level 1 and Level 2 during the year (2015: none).

2016 Fair value measurement using Quoted prices Significant Significant in active observable unobservable Date of markets inputs inputs The Company valuation Total (Level 1) (Level 2) (Level 3) €000 €000 €000 €000 Assets measured at fair value: Available-for-sale investments * March 31, 2016 528 528 - - Derivative financial assets March 31, 2016 131 - 131 - Liabilities measured at fair value: Derivative financial liabilities March 31, 2016 5,844 - 5,844 - Deferred revenue for customer March 31, 2016 4,212 - - 4,212 loyalty programme (note 23) Interest-bearing loans and borrowings: - Floating rate borrowings March 31, 2016 60,291 - 60,291 -

* There have been no transfers between Level 1 and Level 2 during the year (2015: none). 172 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

36. Fair Value Measurement (Cont’d)

2015 Fair value measurement using Quoted prices Significant Significant in active observable unobservable Date of markets inputs inputs The Group valuation Total (Level 1) (Level 2) (Level 3) €000 €000 €000 €000 Assets measured at fair value: Investment property (Note 7) March 31, 2015 10,200 - - 10,200 Available-for-sale investments * March 31, 2015 592 592 - - Derivative financial assets March 31, 2015 1,815 - 1,815 - Liabilities measured at fair value: Derivative financial liabilities March 31, 2015 26,868 - 26,868 - Deferred revenue for customer March 31, 2015 6,010 - - 6,010 loyalty programme (note 23) Interest-bearing loans and borrowings: - Floating rate borrowings March 31, 2015 65,783 - 65,783 -

2015 Fair value measurement using Quoted prices Significant Significant in active observable unobservable Date of markets inputs inputs The Company valuation Total (Level 1) (Level 2) (Level 3) €000 €000 €000 €000 Assets measured at fair value: Available-for-sale investments * March 31, 2015 592 592 - - Derivative financial assets March 31, 2015 1,815 - 1,815 - Liabilities measured at fair value: Derivative financial liabilities March 31, 2015 26,868 - 26,868 - Deferred revenue for customer March 31, 2015 6,010 - - 6,010 loyalty programme Interest-bearing loans and borrowings: - Floating rate borrowings March 31, 2015 71,852 - 71,852 - Air Mauritius Annual Report 2015/16 173

Notes to the Financial Statements for the year ended March 31, 2016

36. Fair Value Measurement (Cont’d)

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.

Long-term deposits are deposits on leases which are reimbursable at the end of the lease period and are estimated 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 financial assets 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, 2016 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, 2016 was assessed to be insignificant.

* The Group had investments in unquoted shares amounting to EUR 42k which were not fair valued and fall outside the scope of fair value measurement in the year ended March 31, 2015. Same was impaired in the year ended March 31, 2016.

37. Contingent Liabilities

Litigation There are currently a number of lawsuits that have been filed against the Company for diverse reasons. The net estimated value of claims against the Company amounts to EUR 9.2M (2015: EUR 7.8M). The timing and outcome of these claims is dependent upon the judicial system and cannot be reliably assessed. The amount of liability recognised at March 31, 2016 with respect to those litigations amounts to EUR 300k (2015: EUR 125k). 174 Air Mauritius Annual Report 2015/16

Notes to the Financial Statements for the year ended March 31, 2016

38. Financial Summary

(a) The Group

2016 2015 2014 Restated Restated

€’000 €’000 €’000

Statements of Profit and Loss and Other Comprehensive Income

Revenue 490,819 465,676 461,463

Share of results of associates (9) (4) (24)

Profit/(loss) before tax 16,627 (23,577) 7,366

Profit/(loss) for the year 16,498 (23,583) 7,214

Other comprehensive income 23,655 (15,790) (851) Total comprehensive income attributable to the shareholders 40,153 (39,373) 6,363

Statements of Financial Position

Non-current assets 218,576 241,618 250,176

Current assets 121,864 93,018 87,705

Current liabilities (189,111) (197,582) (155,970)

Non-current liabilities (71,506) (97,384) (102,868)

Share Capital Authorised

Ordinary shares of Rs. 10 each 81,566 81,566 81,566 Issued and fully paid

Ordinary shares of Rs. 10 each 41,724 41,724 41,724

Reserves

Share premium 18,869 18,869 18,869

Other reserves (16,775) (35,622) (10,996)

Retained earnings 33,207 12,014 26,945 Air Mauritius Annual Report 2015/16 175

Notes to the Financial Statements for the year ended March 31, 2016

38. Financial Summary (Cont’d)

(b) The Company

2016 2015 2014 Restated Restated

€’000 €’000 €’000

Statements of Profit and Loss and Other Comprehensive Income

Revenue 488,341 463,128 459,192

Profit/(loss) for the year 15,401 (23,721) 7,331

Statements of Financial Position

Non-current assets 231,494 254,148 263,186

Current assets 117,286 89,413 85,307

Current liabilities (195,601) (204,340) (162,755)

Non-current liabilities (70,699) (96,287) (101,998)

Share Capital Authorised

Ordinary shares of Rs. 10 each 81,566 81,566 81,566 Issued and fully paid

Ordinary shares of Rs. 10 each 41,724 41,724 41,724

Reserves

Share premium 18,869 18,869 18,869

Other reserves (5,592) (24,868) 926

Retained earnings 27,479 7,209 22,221 176 Air Mauritius Annual Report 2015/16

Translation of the Statement of Financial Position as at March 31, 2016

THE GROUP THE COMPANY 2016 2015 2016 2015 Restated MUR ‘m MUR ‘m MUR ‘m MUR ‘m Assets Non-current assets Property, plant and equipment 7,432 8,255 7,272 8,087 Investment property 403 401 - - Intangible assets 11 24 9 22 Investment in subsidiaries - - 1,086 1,067 Investment in an associate 5 5 4 4 Available-for-sale investments 21 25 21 25 Long term deposits 862 771 862 771 Long term receivable 5 6 5 6 Deferred tax asset 4 3 - - 8,743 9,490 9,259 9,982 Current assets Inventories 575 659 572 656 Trade and other receivables 2,292 2,192 2,274 2,169 Other financial asset 5 71 5 71 Cash and short-term deposits 2,003 731 1,839 615 4,875 3,653 4,690 3,511 Total assets 13,618 13,143 13,949 13,493

Equity and Liabilities Equity Share capital 1,724 1,724 1,724 1,724 Share premium 780 780 780 780 Other reserves (751) (1,523) (306) (1,100) Retained earnings 1,328 472 1,099 283 Equity attributable to equity holders of the parent 3,081 1,453 3,297 1,687 Non-controlling interests 112 105 - - Total equity 3,193 1,558 3,297 1,687 Non-current liabilities Interest-bearing loans and borrowings 1,204 1,417 1,204 1,400 Employee benefit liabilities 882 1,098 850 1,071 Other financial liabilities - 156 - 156 Provisions 774 1,154 774 1,154 2,860 3,825 2,828 3,781

Current liabilities Trade and other payables 6,382 5,694 6,383 5,704 Interest-bearing loans and borrowings 949 1,167 1,207 1,422 Other financial liabilities 234 899 234 899 Dividend - - - - 7,565 7,760 7,824 8,025 Total equity and liabilities 13,618 13,143 13,949 13,493

The above 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 financial statements. Air Mauritius Annual Report 2015/16 177

Cascade Holding Structure 178 Air Mauritius Annual Report 2015/16

Cascade Holding Structure

Air Mauritius Holding Ltd

51%

100% Air Mauritius 100% Limited Airmate Ltd Air Mauritius Holidays Limited

100% 100% Air Mauritius (S.A.) Air Mauritius Holidays (Proprietary) Ltd (Pty) Ltd (Australia) 100% 100% Mauritius Mauritian Helicopter Limited Holidays Ltd (UK) 41.7% 93.7% Mauritius Shopping 54.2% Mauritius Estate Paradise Company Development Ltd Pointe Coton Corporation Limited Resort Hotel Co. Ltd

Shareholders of Air Mauritius Holding Ltd % of Shareholding The Government of Mauritius 43.83 The State Investment Corporation Ltd 18.02 Rogers & Company Limited 18.12 Compagnie Nationale Air France 11.21 Air India 8.82 Air Mauritius Annual Report 2015/16 179

Directors in Subsidiaries 180 Air Mauritius Annual Report 2015/16

Directors in Subsidiaries

Mauritius Estate Development Corporation Airmate Ltd Limited (MEDCOR) The Company is a 100% subsidiary, which Air Mauritius Limited holds 93.7% of the shares of provides call centre services to the airline. The Mauritius Estate Development Corporation Limited Board members are as follows: (MEDCOR), a real estate Company. The Board Directors of MEDCOR are: ● Mr Megh Pillay, C.S.K. – Chairman (as from April 14, 2016) ● Dr Arjoon Suddhoo - Chairman (as from June ● Mr Andries Nathaniel Viljoen (up to August 29, 18, 2015) 2015) ● Mr Andries Nathaniel Viljoen (up to August 29, ● Mr Vijay Seetul 2015) ● Mr Dindoyal Sookun (as from May 15, 2015) ● Mrs Banoomatee Veerasamy (alternate Director ● Mr Indradev Buton (as from May 15, 2015) to Mr Raj Ringadoo up to June 08, 2015) ● Mr Donald Payen (as from May 15, 2015) ● Mrs Banoomatee Veerasamy (as from June 09, 2015) Secretary ● Mr Indradev Buton (as from June 09, 2015) Mr Fooad Nooraully ● Mr Vijay Seetul (as from June 09, 2015) ● Mr Dindoyal Sookun Air Mauritius Holidays Limited The Company is a fully owned subsidiary and the Secretary: Board members are as follows: ● Mr Fooad Nooraully ● Mr Megh Pillay, C.S.K. - Chairman (as from April Pointe Coton Resort Hotel Co. Ltd 15, 2016) ● Mr Andries Nathaniel Viljoen (up to August 29, Air Mauritius Limited has a shareholding of 54.2% 2015) in Pointe Coton Resort Hotel Co. Ltd, which owns a hotel in Rodrigues. The Board Directors of Pointe ● Mr Vijay Seetul (as from October 05, 2015) Coton Resort Hotel Co. Ltd are as follows: ● Mr Indradev Buton ● Mr Donald Payen (as from October 05, 2015) ● Dr Arjoon Suddhoo - Chairman (as from June 18, 2015) Secretary ● Mr Andries Nathaniel Viljoen (up to August 29, ● Mr Fooad Nooraully 2015) ● Mrs Anista Ramphul Punchoo ● Mrs Banoomatee Veerasamy (alternate Director to Mr Raj Ringadoo up to June 09, 2015) ● Mrs Banoomatee Veerasamy (as from June 09, 2015) ● Mr Indradev Buton (as from June 09, 2015) ● Mr Patrice Leal ● Mr Vijay Seetul ● Mr Dindoyal Sookun Secretary: ● Mr Fooad Nooraully – Secretary Air Mauritius Annual Report 2015/16 181

Directors in Subsidiaries

Mauritius Helicopter Limited Mauritian Holidays Ltd (UK) The Company is a fully owned subsidiary and the The Company was set up with the objective of Board members are as follows: conducting a tour operating business in the UK. The Board member is: ● Mr Megh Pillay, C.S.K. - Chairman (as from April 14, 2016) ● Mr Ian Nash ● Mr Andries Nathaniel Viljoen (up to August 29, Secretary 2015) ● Mrs Dhanwantee Bucktowonsing ● Mr Garth Gray ● Mr Dharmacharya Ramjutun (on leave) Air Mauritius Holidays (Pty) Ltd (Australia) ● Mr Vijay Seetul (as from October 05, 2015) The Company is a fully owned subsidiary and it is ● Mr Indradev Buton (as from October 05, 2015) intended to operate the tour packaging business in these markets. The Board member is: Secretary ● Mr Fooad Nooraully ● Mr Donald Payen

Air Mauritius (S.A.) (Proprietary) Ltd 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:

● Mr Isidore Bronstein ● Mrs Carla Da Silva ● Mr Donald Payen Secretary ● Scribe Holding (Pty) Ltd South Africa 182 Air Mauritius Annual Report 2015/16 Air Mauritius Annual Report 2015/16 183

Shareholders’ Information 184 Air Mauritius Annual Report 2015/16

Shareholders’ Information

Key Data per Share

2015/16 2014/15 Key Data per Share Amount (MUR) Amount (MUR)

Market Capitalisation 1,386,232,750 1,422,039,500

Highest Closing Price 14.50 18.20

Lowest Closing Price 10.00 13.90

Closing Price 13.55 13.90

Average Price 11.42 16.90

Value of Shares traded 37,551,287 70,373,485

Net worth per share 30.23 14.20

Share Price/Equity per share at year end 44.8% 97.9%

P/E ratio (average) 1.81 (1.85)

Earnings/(Loss) per share 6.32 (9.13)

No. of shares traded during the year 3,194,113 4,105,827

No. of shares at year end 102,305,000 102,305,000

Air Mauritius Share Price v/s Semdex

22.0 2,000

20.0

18.0 1,900

16.0 1,800 14.0

Share Price (Mur) 12.0 Semdex (Points) 1,700 10.0

8.0 1,600 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb16 Mar16

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 1995. Air Mauritius Annual Report 2015/16 185

Shareholders’ Information

Share Price Development

The shares of Air Mauritius Limited were quoted at Mur 13.80 per share on April 01, 2015 at the Stock Exchange of Mauritius. The share price took a downward trend during the period May to mid December 2015. It reached a low of Mur 10.00 in the month of September 2015. However, it started gaining value from mid December 2015 to peak to Mur 14.50 in February 2016. The share price was quoted at Mur 13.60 on March 31, 2016.

The highest number of shares traded was 242,276 for a value of Mur 2,534,575. Market capitalisation stood at Mur 1.4 billion at March 31, 2016.

Air Mauritius Share Price: 2015/16 v/s 2014/15

20.00

18.00

16.00

14.00 Mur

12.00

10.00

8.00 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

2015/16 2014/15

Shareholders’ Diary

Financial Year End March 31, 2016 Annual Meeting July 21, 2016

Abridged Financial Statements 1st Quarter Apr-Jun 15 Published August 13, 2015 Half Year Results Published November 12, 2015 3rd Quarter Oct-Dec 15 Published February 11, 2016 Annual Financial Statements Published June 13, 2016

Registered Office Air Mauritius Limited Air Mauritius Centre President John Kennedy Street Port Louis Website: http//www.airmauritius.com

Company Information For any information regarding Air Mauritius, please consult our website - http//www.airmauritius.com

Air Mauritius Annual Report 2015/16 187

Notice of Meeting Air Mauritius Annual Meeting 2015 – 2016 Notice is hereby given that the Annual Meeting of the Shareholders of Air Mauritius Limited will be held at Swami Vivekananda International Convention Centre, Les Pailles, on Thursday July 21, 2016 at 15.00 hours for the following purposes: (1) To adopt the Minutes of Proceedings of the last Annual Meeting held on July 30, 2015. (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, 2016. (5) To elect the Directors who are already in place and who offer themselves for re-election, namely: - Dr Arjoon Suddhoo - Mrs Banoomatee Veerasamy - Mrs Kan Oye Fong Weng-Poorun - Mr Philippe Espitalier-Noël - Mr Marc Hein, G.O.S.K. - Mr Daniel Mackay - Mr Dev Manraj, G.O.S.K. - Mr Ramprakash Maunthrooa - Mr Bissoon Mungroo, G.O.S.K. - Mr Louis Rivalland - Mr Muhammad Yoosuf Salemohamed - Mr Sateeaved Seebaluck, G.O.S.K. (6) To elect the following directors who have been nominated by the Board and who offer themselves for election: - Mr Megh Pillay, C.S.K. - Mr Ashwani Lohani - Mr Patrick Roux

(7) To ratify the appointment of Mr Megh Pillay, C.S.K. as Chief Executive Officer of the Company as from the 15 day of March 2016, made by the Board of Directors on February 24, 2016 in accordance with Article 23.1.1.1 of the Articles of Association of the Company and in conformity with Article 23.1.2 of the said Articles. (8) To fix the remuneration of the Directors. (9) To authorise the Directors to fix the remuneration of the Auditors. By Order of the Board

Mr Fooad Nooraully Company Secretary Air Mauritius Limited

June 27, 2016

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 asvalid.

Registration of Shareholders at the meeting will start as from 14.00 hours.

Air Mauritius Annual Report 2015/16 189

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 Swami Vivekananda International Convention Centre, Les Pailles, on Thursday July 21, 2016 at 15.00 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 30, 2015 ❏ ❏ (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, 2016 (5) To elect the Directors who are already in place and who offer themselves for re-election, namely: ❏ ❏ - Dr Arjoon Suddhoo ❏ ❏ - Mrs Banoomatee Veerasamy ❏ ❏ - Mrs Kan Oye Fong Weng-Poorun ❏ ❏ - Mr Philippe Espitalier-Noël ❏ ❏ - Mr Marc Hein, G.O.S.K. ❏ ❏ - Mr Daniel Mackay ❏ ❏ - Mr Dev Manraj, G.O.S.K. ❏ ❏ - Mr Ramprakash Maunthrooa ❏ ❏ - Mr Bissoon Mungroo, G.O.S.K. ❏ ❏ - Mr Louis Rivalland ❏ ❏ - Mr Muhammad Yoosuf Salemohamed ❏ ❏ - Mr Sateeaved Seebaluck, G.O.S.K. ❏ ❏ (6) To elect the following directors who have been nominated by the Board and who offer ❏ ❏ themselves for election: - Mr Megh Pillay, C.S.K. ❏ ❏ - Mr Ashwani Lohani ❏ ❏ - Mr Patrick Roux ❏ ❏ (7) To ratify the appointment of Mr Megh Pillay, C.S.K. as Chief Executive Officer of the Company as from the 15 day of March 2016, made by the Board of Directors on February 24 2016 in ❏ ❏ accordance with Article 23.1.1.1 of the Articles of Association of the Company and in conformity with Article 23.1.2 of the said Articles (8) To fix the remuneration of the Directors ❏ ❏ (9) To authorise the Directors to fix the remuneration of the Auditors ❏ ❏

Dated this ...... of ...... 2016

…………………………………………… 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.

T Air MauritiusCentre President John KennedyStreet -PortLouisMauritius +2302077070 F +2302088331 E [email protected] W www.airmauritius.com

Communications & Corporate Affairs - June 2016 - Designed & Printed : Précigraph Ltd. - Mauritius

Annual Report 2015/16 Annual Report 2015/16