By Shabiya Ali Ahlam
As far as one can remember, losses are what followed SriLankan Airlines. Keen on changing its fate, the unity government after much deliberation has now decided to hunt for a suitable partner for the airline, which is currently not so attractive due to its pile of debts and continuous losses.
While the government calls the shots, it is the heads of the entity that must go ahead with the execution. And the tough task falls on the shoulders of SriLankan Airlines Chairman Ajith Dias.
As all eyes now remain on the national carrier, Dias sat down with Mirror Business in an exclusive interview where he shared the current scenario, challenges faced and the way forward for the airline, which has a recent history of gross mismanagement.
Following are the excerpts of the interview.
SriLankan Airlines has been under the spotlight for continuous losses. Can you talk us through the current status of the business?
We have had a reasonably good year. Our performance that was recently released shows that we are improving. We are still loss-making but our losses are lot less compared to the previous year. It’s been only a year since the changes in the management, so in that sense I would say the status of the business is quite satisfactory.
Was it better than expected?
Certainly. Considering the environment we were operating in, the performance was definitely better than what we expected it to be.
What were the factors that led to the improved performance as you say? How was the scenario different compared to the corresponding period of the previous year?
It had a lot to do with the reduction in the fuel prices. The drop was in favour of us. That is from the external environment. Internally there were reductions in various areas of operations. We went on a cost-cutting drive, all which helped in an improved performance.
Since you mention SriLankan has been keen on cutting down its costs, the airline has about 7,000 employees. Don’t you agree the entity is overstaffed?
It is. Yes.
As you agree the entity is overstaffed, is SriLankan looking at cutting down the number?
Rightsizing the enterprise is part of the restructuring plan, which has to be done to get the company ready for the public-private partnership (PPP). It’s a tough call but it has to be done. It’s what the government wants us to do. If we don’t get about this endeavour, nobody will want to partner with us.
How will the restructuring effort be carried out? What is the number that is looked at?
We are currently studying the employee scenario. We will be getting a foreign consultancy firm to advise us on the rightsizing, as to the number of employees we would need to operate the airline. SriLankan currently has a staff strength of approximately 6,800. We haven’t fixed a number yet but we will in the coming months.
How will this be carried out? Through a voluntary retirement scheme (VRS)?
It will be a mix of options. VRS will also be an option. How it will be executed is not firm as yet. But it will happen. We need to make sure it is done in the smoothest way possible to reduce implications, that too within six months.
Has this decision been communicated to the trade unions? How are they reacting to this?
We have spoken to them about this decision and so far it is positive. They understand the reason behind it. They realise that the government has asked for it and that the state cannot continue to subsidise an airline for so long. The losses carried forward are huge. We must prepare ourselves to anyone who is coming in as a partner. As Minister Eran said, we have to dress up the bride (laughs).
So, according to you, SriLankan is currently at a critical juncture. What would be the bottlenecks faced when moving forward?
The biggest problem would be the debt that we have inherited. And also the aircraft that were ordered are really of no use to us. The government has decided not to take them but contracts have been signed. Currently we are exploring the ways as to how at least the first four aircraft could be given to another airline. One of the four has been given already, so the remaining three we need to work on. There are four more that are coming in 2020 but that’s another problem. We will deal with that when the time comes.
What will be the implications if the ordered aircraft are not diverted elsewhere?
This is more to do with the lessors. Our negations are with them but Airbus is obviously aware of it. With regard to the implications, well it depends on the negotiation process. But if we can get another airline interested in taking these planes, then the cost will be much less.
What does the negotiation process look like at this point of time?
We would get a clear picture in about a month’s time. If we are successful in our discussion with the other airlines, then it will be reasonable. We can’t speculate at this time.
In terms of routes, we have seen discontinuations to some destinations. What more changes are to be expected in this regard?
Rome we have cut down. And Paris we planned to but delayed in doing so as we are the travel partner for the French travel agents’ congress JEV 2016 that is to take place on October 31 this year.
In terms of new routes, we won’t be adding any for the moment but we will be increasing our flights to China and India. Remember, in six months’ time there will be a new partner to this business and they will be deciding on a lot of these things. So we are keeping things going until such a time.
What is the progress in finding a suitable partner for SriLankan?
That is a decision made by the Public Enterprises Ministry. They will discuss it with the relevant authorities and based on the proposals they would receive, we will be informed.
Have you heard of any development in that area?
At the moment they are in the midst of selecting a consultant to handle the process. That is what I know of.
What are the possible changes SriLankan would undergo once a partner comes on-board?
It depends on the terms in which the partner comes in.
What type of partner do you think is necessary for the airline?
I think if it is a good airline, then that would be very positive, but if there is a financial institution, that would also augur well. We are currently open. As long as they select the right partner that would be good.
What cannot go wrong for SriLankan at this point of time?
In six months’ time, after the rightsizing, diversion of aircraft and the debt is taken out, we will be an attractive proposition to anyone. But that is six months away, so it’s not easy.
So now it’s all about the execution?
Yes. For the next six months it will be about execution. All these are instructions we get from the government and we need to do things right. So we need to ensure we do it as expected.
Any misconception on the airline you would like to clarify?
There have been quite a few but we need to realise this is the most high-profile enterprise in the country. This is the first PPP for a state enterprise, so it’s important we get it right. We have a good management, top class. A vast majority is highly passionate about getting this right. We do have a few who cause problems but such personalities are there in any organisation. What you are not hearing is that, there is no corruption. And this is a big achievement.
Are you saying corruption is being tackled?
Oh yes. Definitely. We have saved a huge amount all over. That was one of the key factors for better performance. A lot has been rationalised. Some of the factors are not in our control but a lot of changes are taking place. The important thing is to have a good product ready for a partner.