Foreign airlines to drive Lankan aviation growth

9 September 2015 02:55 am

 
By Chandeepa Wettasinghe
Foreign airlines are expected to cater to the growth of air travel into Sri Lanka in the coming few years due to internal restructuring currently being carried out at the national carrier, SriLankan Airlines Chairman Ajith Dias said.

“A lot of foreign airlines are looking to have flights here. We have no expansion plans for the near future,” Dias said.

This is in line with the liberal ‘open skies’ policy talked about by both government officials and industry experts recently to increase travel revenue coming through an expected 2.5 million tourists in 2016 and 4 million tourists in 2020.

Open skies would also facilitate the government plans to use the Mattala Airport as a maintenance and repair operations base.

Austrian Airlines is the latest entrant to the Sri Lankan market, set to start operations in October. Currently, 27 foreign carriers conduct flights into Sri Lanka.

SriLankan is in an operations restructuring phase to launch itself into profitability, and a Prime Ministerial Committee which was appointed pre-election to evaluate the best courses of action is expected to forward its findings soon.

Mirror Business recently reported that SriLankan and other state-run carrier Mihin Lanka are looking for a 3-year turnaround period, which Dias reaffirmed, but said that the task would be difficult.

“We’re going for new routes. We’re also looking at a load factor (number of seats filled) increase,” he added.

While he had earlier said that the government has to compensate SriLankan for some due expenses incurred during the previous regime, Dias added that the airline would seek additional Treasury funding and support for a short period.

“Yes, but the government has told us that they can’t be funding us all the time, so for a part of this year and next year we’ll be getting Treasury funds, but it will be a small amount. I can’t really get into the details without ministers approving the plan,” he said.

While Dias reiterated the current regime’s statements on not privatizing SriLankan, doubts have always been present in the industry over whether a state can effectively and efficiently operate an airline for maximum profitability.

Under the previous regime, a controversial US$125 million bond was undertaken to revamp the existing fleet.

Amidst gross mismanagement and controversy highlighted in the Weliamuna Report, SriLankan lost over Rs. 100 billion and and Mihin Lanka lost over Rs. 15 billion from 2010-2014.

Emirates which owned a 44 percent share and profitably managed SriLankan exited in 2008 after the Former President fired CEO Peter Hill for taking a stand on ethics.

Finance Minister Ravi Karunanayake recently said that the airline has seen a 60 percent cutback on operating losses for the first half of the year compared to a Rs. 32 billion operating loss year-on-year, and the Finance Ministry interim data showed the airline incurring a loss of Rs. 4.9 billion for the first 4 months with incurred losses increasing to Rs. 131 billion.

While Karunanayake said that the improved performance was due to better management, the cheap oil is also considered to be supporting the bottom line as air fare has not seen a correlating decrease. “Yes, the fuel drop has been huge for us, and it’s getting better day-by-day, but the CPC (Ceylon Petroleum Corporation) is still charging us 15 percent more than other segments,” Dias said.

Meanwhile, he added that the airline has fully co-operated with investigations conducted by all arms of the government into past corruption and has received commendations. 

Pic by: Pradeep Pathirana