Several multinational hospitality groups have alleged that the decision to sell the Maldives’ two main seaplane operators to US-based private equity fund Blackstone is having a “significant” negative impact on industry profitability – potentially compromising local jobs.
Blackstone announced back in February this year that it had purchased a controlling stake in both the Maldives’ seaplane operators, Trans Maldivian Airways (TMA) and Maldivian Air Taxi (MAT) for an undisclosed sum. Since the merger, the company has been operating under the TMA brand.
Major resort groups – speaking on condition of anonymity – have alleged that a number of properties were losing money on a monthly basis as a result of being reliant on services provided by the now-consolidated national seaplane operator.
“Worst fears”
In a letter addressed to the Secretary General of the Maldives Association of Tourism Industry (MATI) – obtained this week by Minivan News – one of the largest multinational companies operating in the country expressed concern that “our worst fears about the [seaplane] monopoly situation are becoming a reality.”
“You are of course aware that The Blackstone Group’s recent entry into the market has had the effect of eliminating competition and creating a monopoly in the charter seaplane market in the Maldives,” wrote the multinational’s CEO in a letter dated August 5, 2013.
“We were concerned from the outset about the potential disruptions this could cause in the market and have been monitoring the situation closely.”
The CEO added that, with discussions ongoing over securing a seaplane charter contract for its resort properties in the country, the company was particularly concerned at several contractual points being “forced” onto the group by TMA.
According to the letter, these concerns include:
- A significant increase in prices from previous seaplane contracts
- A reduction in services and benefits being offered to hospitality groups
- An exclusivity clause forbidding any deals between the company and other seaplane operators
- A “contractual link” to use landplane operations it alleges are set to be launched by TMA
- Minimum contract term of three years for seaplane operations
“As you can see, the terms being forced upon hotel owners are highly anti-competitive and will have a significant negative impact on the market. We are being forced to accept unfavourable terms and TMA is trying to lock itself into a monopoly position by insisting on long-term exclusive contracts,” the multinational hospitality group’s CEO continued in his letter to MATI.
“Ultimately, these costs will be passed on to tourists, which will make the Maldives an even more expensive tourist destination and ultimately deter tourists from visiting , this will cost Maldivian jobs and damage the industry and economy.”
“Sensitive issue”
A senior official for another major multinational hotel group using TMA’s services said it had been experiencing a number of problems in recent months related to transporting clients by seaplane – describing the matter as a “sensitive issue”.
As well as general concerns about service costs, which it said were now “quite high”, the resort source claimed they had also noted issues with TMA cancelling flights without providing prior notification to the resort or its passengers.
In some cases, the resort official alleged that the resort had been given no choice but to provide customers with free meals and even additional nights stay on their property as a result of what it said were last minute cancellations by TMA.
“Although we have had no complaints from guests themselves, this has become quite expensive for the resort,” added the resort official. “I speak with many other resorts and many have said they are losing money monthly by having to provide these transfers [by seaplane].”
The source also noted what they believed was a decline in service in recent months, personally finding travelling with TMA a comparatively “unpleasant experience”.
“Right now, there is no competition as it is only TMA offering services,” the source said.
Domestic alternatives
Meanwhile, the general manger of a resort based in the north of the country, which is currently in negotiations with TMA to renew its contract, also raised concerns over the recent services being provided to guests since the takeover by Blackstone.
“We are not the only resort I know of who believes the services are not as good. There are less flights and more island hopping,” the source claimed.
The manager said that with the recent inauguration of a domestic airport in the country, the resort’s own reliance on TMA was no longer as strong, though they added that many guests preferred the opportunity to travel the country by seaplane where possible.
Despite the preference of many tourists to fly by seaplane, the general manager said that tour operators were now opting to use domestic air travel for customers travelling to the resort as “standard”.
“We are expecting more clients to travel by domestic flights, although some would rather pay to upgrade and fly by seaplane,” added the general manager.
Minivan News was awaiting responses from TMA, Blackstone, MATI Seceretary General Ahmed Nazeer, and Tourism Minister Ahmed Adheeb at time of press.
Investment climate
Speaking this week during a live question and answer session ahead of the upcoming election on September 7, President Dr Mohamed Waheed took full credit for securing Blackstone’s purchase of the country’s seaplane operators.
He cited the deal as an indication of the health of foreign investment under his administration, amidst criticism over his government’s termination of two high-profile foreign investment contracts, including a US$511 million valued agreement with India-based GMR to develop and manage Ibrahim Nasir International Airport (INIA).
“It is ridiculous to claim we are not getting foreign investments now. They are very eagerly coming, even more now. One example of a great investor that I brought in recently is Blackstone,” President Waheed said during the televised event.
Attorney General Azima Shukoor last month accused the previous government of failing to conduct sufficient research before signing several major foreign investment projects that have since been terminated by the present administration.
Speaking at the time of the sale back in February, former Minister of Economic Development Mahmood Razee, also former Minister of Civil Aviation, noted that the purchase of a controlling stake in the only two seaplane operators by a single company had effectively monopolised the market.
“This is a very exclusive market, and critical to the tourism industry. Even though both MAT and TMA operate the same aircraft, they have not previously been willing to cooperate,” Razee said, explaining that the Maldives did not have anti-monopoly laws which may have otherwise obstructed the sale.
Previously, resort managers could approach both companies seeking the better price for seaplane services, upon which they were reliant for the vast majority of their guest arrivals: “Now there is no effective competition, as the major shareholder is one and the same,” Razee said at the time.
He acknowledged that “in an ideal world” prices could come down, as the two companies have been operating identical aircraft but duplicating maintenance and other services.
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What a success !!!!
“It is ridiculous to claim we are not getting foreign investments now. They are very eagerly coming, even more now.
One example of a great investor that I brought in recently is Blackstone,” President Waheed said during the televised event.
What now ??? More "great investors" ???
GMR had monopoly of the state owned airport and that is different from this.
Nasheed should not have sold airport investment for peanuts.
Seaplane operation was privately owned and the deal is different .
but agree monopoly is not something good for the country.
I am in this industry for more than 25years; it is not only a big investment, but monopoly too. So now you have enjoy the big investment, no problem politician backing this deal got good money and free transfer for their personal use as well as political campaign. This monopoly is hurting the business badly and will realize it soon.
FDI's are good for the country. This is what happens when we do not have proper legislation. This country can be controlled by a few without an anti trust law. We cannot allow this nation to be a playground for a few to make their bucks at the expense of the poor. Now the resorts will put the pressure on the staff and all other jobs that involve Maldivians so that they can save on the money they lose paying Blackstone. What a disaster! The current President has declared that he is a winner but he is loser in everyway.
Don't worry, Blackstone will set it off shortly. This is American capitalism at its best, or worst, depending on your point of view. The company has to generate significant year on year profit for it to remain attractive to these "investors". Otherwise, they'll just strip it off and sell it as spare parts to the highest bidder.
It's a dog-eat-dog world. Welcome to the dark side of capitalism.
this has happened due to the lack of enforcemt of an anti-trust or an anti- competion mechanisms in current legislation. The business regulator, the Economic Minister must have slept on the job OR is simply unaware of the wide regulatory authority she holds.
Pure incompetence. Or may be a sell out
@Root cause on Thu, 5th Sep 2013 1:38 AM.
Who is worried about enforcing anything except making hay while the sun is shining?
Waheed and his split-up, hypocritical government is all set to bring down the in-coming democratic system which can never be good for the rich and powerful.
If governments can set up a mechanisms to curb monopoly and inequality, the poor will not have to go up to the rich capitalists begging for everything.
Waheed who have learned this kind of begging from childhood, perhaps should have been hating it!!!!
By the look of it, the feud is between tourist resorts and Blackstone and Waheed is a sitting duck!
US monopoly is here to stay unless resort owners/operators can apply pressure to the correct point.
The arrival of Blackstone is clear violation of international antitrust laws. The merger has cancelled competition and the monopolistic position, Blackstone can command its nonnegotiable terms of contracts.
Ignorance of politicians who took pride with the arrival of Blackstone is absurd.
They are charging an exorbitant price of $350.00 for a 25 minute flight per passenger 1 way.
And the USA wonders why it is hated so much by the civilized world!
This shows the total irresponsibility of a government incapable of understanding what are good investments for this country. I do not doubt if money has changed hands between officials who facilitated such a deal so quickly.This must be a deal between the most corrupt 'so called' big four businessmen and their puppet Master Waheed! For God's sake even if their isn't an antitrust law they should have checked what would have happened to the charges they would levy on the tourists who we need so much to sustain our economy.While still the European crisis continues and while the trend is more for an Asian market, we need to lure back the European market to our waters.This can be done only by making our resorts and accessibility to the resorts more affordable. Instead of making and bringing the ultimate changes that are required to boost the industry and the economy as a whole, this mad man has allowed the sale of the industry wholesale to one big giant Blackstone. This is totally unacceptable.If they love the people so much as they say they should have submitted an antitrust anti monopoly bill to the parliament first before allowing such a merger/acquisition in this country. Where are all the economists? Yameen, the self declared Master Professor on 'economy'-where are you buddy? Please answer the real issues people.
A slow but an easy way to establish its policies in Maldives. Americans are now here to say and soon may start to dictate.
a) Monopoly of of sea transport and taking over resorts through Blackstone umbrella
b) Access and would be control to 100% immigration records through the USA sponsored border control system introduced recently
c)MOU with the the government and defense Ministry on establishing a base within the Maldives
d) Legalizing the recent coup
Sooner or later, American NSA & CIA would setup electronic surveillance office in the name of 'fighting terrorism', and spy on us, neighboring countries like Pakistan, India, Iran, China, etc.
A few businessmen and lawmakers are selling off the country without thinking of its implications. A decade ago, 90% resorts were fully owned and operated by local companies. Today, a handful established local companies such as Sunland, Suntravel, Villa still survive and support the economy better. The rest are foreign owned and just meager tax collected from them leaving our foreign reserves dry. Foreign investment is a great idea however we must have proper laws that make it compulsory that each dollar earned is taxed! At the moment, room revenue is not as its paid in advance abroad.
....when would we ever learn from mistakes????
Black stone never purchased the public assets for peanuts but bringing the President and señor offical like GMR. They bought a privately owned company .
US is going to be much better than Indian who are trying to bully Maldives.
Minivan will try to divert the attention of Nasheed corruption by publishing article like this and then hide the truth behind Nasheed corruption.
Minivan and Nasheed can try hard to cover all corruption and we will show the result on 7th Sept.
Since blackstone gained a monopoly here they would make a fine profit at the expense of their client industey, american capitalism loves a america. Monopoly outside of US soil.
Its a dog it dog capitalsim without proper regulatory legislature.
Has anyone checked if blackstone has any ties with Waheed's son in law a and into democracy advisor.
This situation has a very similar vibe to the Nexbiz deal.
We can go on and on debating whether blackstone fdi is right or wrong. What everyone is seeing is that its hurting the tourism ndustry. What everyone doesnt see is it is hurting the localemployees who are working i this company.
Employees are overexhaustd making them work 14 to 15 hrs at a stretch without giving off days just becaus blackstone have given kpis and the managers need to meet these so called kpis. Local employe talents ar being ignored and repaced by foriegners. Soon we will see all lcal employees bei g redundant.
Tourism board pls look into all aspects. Not only resorta. But this practice will hurt he cuntry in many ways. Himan resource ministry needs ti jntrrvene n se if the local employment are secured n f they are worki g as pe the labor law.
Othrrwise soon u will see the seappane operator under foreigners.
Blackstone being an intrrnatjonal company..they still dfferentiate tma and mat employees widely. They are promoting mat expats who do not have the real talent but only favorism to srilankans.
Thes are all asprcts the government need to look into. All employes are scard of loosing thei jobs so they work like slaves qithout sayjng anything.
We went on strike twice during lousy fauzy's leadership. both the times ex-tma helped the company. Blackstone should not have brought back fauzy to this company again. He was and is hated by the employees. Wonder if blackstone wants profits or loss for this investment. it is really sad to know that Blackstone have made a clear stand on where they stand; MAT. Even if we have worked for MAT for so long, we liked the new COO - British champ - md of ex TMA. But lousy fauzy made sure that that fellow is removed and he has succeeded on it.
WE pledge MCAA to audit the company again. Because than you will see that our working hours are exhausted. We are asked to report to duty early in the morning and asked to remain without flying. we start at 5am and finish by 7pm. Our flying hours are mismanaged.
The article is based on no facts. Blackstone has not increased rates. what people don't understand is Blackstone owns most hotel beds in the entire world. They also owns Hilton Brand and the Conrd hotel in Maldives is owned by them too. So if ppl think wise, anyone will know Blackstone will be the first to party to know just increasing price will not generate business to them cos they know how hotels are operated. They know hotels will pay any amount happily if service is good hence the reason Blackstone is working hard to get the service improved. By reading many comments i know most comments are ppl like me who are working there but being very unloyal and writing all rubbish about the company.
Those days seaplane contract were made minimum 2 or 3 years and those are exclusive contracts so why blaming blackstone for some thing which exist for years and all the resort owners were happy with it until blackstone bought it. These are all fake stories.
Fyi, TMA has operated wheel base aircraft in the past but they never put clause so why would they do now as cos even today the leading figures in the company are the old staff.
Please ensure you dont put this in rubbish bin cos this will change the reason of your article.
The previous commentator (Theuboatu) has put things in correct perspective. Some vested interests who either want to get back at someone or some employees who are not interested in working efficiently and productively are putting in such comments into the article and comments above. Only if business's are managed well can they survive and prosper in turn bringing prosperity to the nation and all other stakeholders, key amongst them being employees. The company is a service organisation and service can only be delivered through its employees.
Jamtime and theuboatu - your comments clearly reflect you two are part of the blackstone management team the way you have given details on how you are trying to strategise price and contract deals. But as an ex-mat employee i know how many resorts were unhappy and happy. And for a fact i know that ex-tma managed resorts were pretty good with thier previous deals. So now if they were already on board with their contracts why blackstone people need to review and change the terms of the condition. This clearly shows you want to monopolise and do it your way.
Sad that as part of management person while you commented you have not bothered to assure us-the employees that we are not squeezed. Fauzy and his junior indian chaps you guys will see a downfall by forcing things on employees. You never know fauzy maybe this time the whole company will go on a strike becuase of your lousy management, becuase of your biaseness towards employees and because of your negligence in
managing the employees, because of your favorism to sri lankans and the indian youngsters(blackstone people) not our indian working employees.