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.
(0)Dislikes
(0)