US-based private equity fund Blackstone has bought a controlling stake in both the Maldives’ seaplane operators, Trans Maldivian Airways (TMA) and Maldivian Air Taxi (MAT).
Blackstone, with annual revenue of US$3.119 billion and total assets of US$18.845 billion, bought the seaplane operators for an undisclosed sum.
Senior Managing Director and Chief Investment Officer at Blackstone’s Private Equity unit based in New York, Prakash Melwani, said the investment “will enable us to build a strong partnership with the Maldives.”
“We are excited to partner with MAT and TMA, whose seaplane operations have contributed significantly to the development of resort islands further away from Male and making them accessible to tourists. Blackstone manages, through its portfolio companies, the largest number of hotel rooms in the world and this transaction marks our sustained enthusiasm for the travel and tourism space,” he said.
Founder of MAT Lars Erik Nielsen and majority shareholders of TMA, Lars Petré and Hussain Afeef, will retain “a substantial shareholding and continue to play a significant role in the companies, including serving as directors on the board,” Blackstone said in a statement.
“The Maldivian economy will gain from the presence of one of the world’s largest and most respected investment firms,” said Petré.
Nielsen stated that the move will benefit the career growth of the workers employed by the two airlines.
“In addition, together we look forward to delivering more efficient services to the tourists coming to the Maldives and the resorts in which they are staying. This combination will increase service efficiency to our resorts,” he said.
TMA Director Afeef said Blackstone would “bring to Maldives a wide global experience and an established track record in the tourism and hospitality sector. Incorporating global best practices would be beneficial not just to the companies but to the tourism industry, in general.”
TMA was started in 1988 as a helicopter operator under the name ‘Hummingbird’, which was changed to TMA in 1998 after the fleet was switched to Twin Otter aircraft. Competing operator MAT was set up in 1992.
Together both airlines operate over 40 aircraft and play both an iconic and critical role in the country’s tourism industry, transferring arrivals at Ibrahim Nasir International Airport (INIA) to resorts in neighbouring atolls and greatly expanding the capacity for tourism around the capital. Domestic air travel over longer distances – to destinations such as Addu Atoll – is served by conventional aircraft.
The substantial investment comes months after the Maldivian government expropriated the main international airport from Indian infrastructure giant GMR, declaring its concession agreement void and ordering it out of the country within seven days. The US$511 million project was at the time the country’s single largest foreign investment.
Tourism Minister Ahmed Adheeb said the Blackstone investment was a sign of confidence in the Maldivian economy, and represented a “green light” to other foreign investors.
“When a large company such as Blackstone invests in the Maldives, it shows that investors have confidence in the Maldives. Moreover, investors have set their sights on Maldives and is on their radar,” Adheeb told local media.
Deal creates a monopoly in critical sector
Former Minister of Economic Development Mahmood Razee, also former Minister of Civil Aviation, noted that the purchase “is not really a foreign investment since no additional equity is being brought into the country. Another firm has just bought the shares,” he said.
Moreover, the purchase of a controlling stake in the only two seaplane operators by a single company had effectively monopolised the market, he warned.
“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.
“Now, without any discussion, they have been taken over and effectively become a monopoly,” he said, explaining that the Maldives did not have anti-monopoly laws which may have otherwise obstructed the sale: “We were looking at these when we were putting together the economic reform package [under the former government].”
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.
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. However the end of this practice could affect jobs, he suggested.