SriLankan Airlines Chairman Ajit Dias (left) with CEO Suren Ratwatte Pic by Samantha Perera
Reorienting SriLankan Airlines as a regional carrier, which is part of its restructuring process to seek 
interest from foreign investors, will entail the leasing of four narrow-bodied shorthaul Airbus A320neo aircraft next year, the top management said.
“Yes, we have some orders and deliveries coming next year. These are the aircraft we need, actually. These are good aircraft, very modern aircraft and they can do sectors like Colombo to Hong Kong non-stop, for example,” SriLankan Airlines CEO Suren Ratwatte said. Four of the aircraft will be leased from the US-based Air Leasing Corporation, while two will be leased from the world’s largest aircraft leasing company, AerCap Holdings N.V. He refused to mention the cost of leasing the aircraft but said they are “well within the commercial market lease rate”.
The developments this week led to the government cancelling the lease of four Airbus A350-900s from AerCap and opting to pay a fine of US $ 170 million (Rs.25 billion), which multiple sources in SriLankan contradicted and said was negotiated down to US $ 98 million, from an initial figure of US $ 250 million. Ratwatte said that the decision to cancel the A350-900s was the correct decision, since there is no use for such long-haul flights under the new strategy.
“We’re not shrinking the airline, we’re expanding the airline. We’re expanding it in different ways as opposed to what was done previously. We’re concentrating on our regional route network which is actually profitable,” he said. SriLankan is planning to cancel flights to unprofitable Frankfurt and Paris this November, on the heels of Gulf carriers flooding the market with aircraft and pushing airfares down. “For example, one well-known gulf carrier is taking a new aircraft every 10 days for the next three years. Colombo has become a focus for them to place their excess capacity and some of the cheapest airfares in the world today are out of Colombo.
To North America, the cheapest Business Class fare is out of Colombo,” Ratwatte said. He noted that SriLankan will have 10 wide-bodied aircraft and 10 narrow-bodied by end of this year after assimilating the Mihin Lanka aircraft and the fleet will increase to 24 by the end of next year with the addition of the new A320neo aircraft and the retirement of two older aircraft. Ratwatte said that Sri Lanka should focus on the Indian market, which has the potential to be the second largest air travel market in the world.
“The strategy going forward is to reduce the number of wide-bodied airplanes—the long-haul ones—and increase the number of narrow-bodied, short and medium-haul airplanes, which are the primary equipment that flies to India and the subcontinent,” he said. SriLankan will take over all the budget routes across destinations in the Indian Ocean that Mihin Lanka operates till this November, along with half of the 300 staff that Mihin Lanka currently has employed. But airfares charged by Mihin Lanka will be increased to reflect the fares charged by SriLankan. However, SriLankan Airlines Chairman Ajith Dias noted that fares to religious destinations Mihin Lanka operates to, such as Bodh Gaya, will be subsidised.
The national carrier will also start operations to Gan International Airport, which is located on the southernmost atoll in the Maldives, an area to which most tourists generally take an additional domestic flight to reach, since no international flag carriers fly to the area. Ratwatte added that SriLankan will be increasing flights to London, its only European destination, with nine flights per week starting this December. Although the airline had requested 14 flights per week,
Heathrow had not approved the higher frequency of flights due to capacity restraints. “We will operate to London nine times a week and we hope to increase this as time goes on,” he said. He added that the fate of the four A350-900s SriLankan had ordered directly from Airbus during the previous administration for delivery in 2020 will be in the hands of the government
Losses narrow amid lower fuel prices, costcutting exercises
State-owned SriLankan Airlines has cut down the losses considerably for the past financial year as well as the current year, mainly through the lower fuel prices, as the airline gets ready to be managed by a foreign partner. Official data from SriLankan showed that the net group losses for the financial year ending March 31 had been Rs.11.59 billion, compared to Rs.16.33 billion year-on-year (YoY).
SriLankan Airlines Chairman Ajith Dias speaking at a media briefing yesterday said that the operating losses for the first five months of the current financial year have improved to Rs.2.32 billion compared to Rs.3.71 billion YoY and that the interest payments for the first five months had been Rs.2.53 billion. “No doubt the cost of fuel certainly had a lot to do with it but other than that a lot of cost-cutting and other measures have contributed to this reduction (of losses),” Dias added. However, a statement by the airline said that the declining revenue performance due to increased competition had downplayed the impact.
The foreign exchange losses so far this year amount to Rs.1.03 billion due to the depreciation of the rupee, while the interest costs for the financial year will be Rs.6.2 billion. Dias said that the current management of the airline has been able to meet the expectations of the government. “What we inherited was quite a mess and the mandate that we got from the government was essentially to reduce the losses, improve productivity, change the culture of the airline and prepare the airline for a publicprivate partnership,”
he said. He added that the shortlisted candidates from the 10 parties that have shown interest to manage SriLankan are likely to be announced in November or December. Former President Mahinda Rajapaksa had kicked Emirates—which had had over 40 percent of the shares in SriLankan and managed it profitably until 2008—out of managing SriLankan due to a personal grudge. Dias said that as a measure to increase the attractiveness of SriLankan to the foreign parties, the current government is considering whether to take over the US $ 450 million in liabilities the airline has racked up over the past few years.
