Emirates has begun meeting the Sri Lankan government to discuss a possible extension of their 10-year management contract over SriLankan Airlines.
Representatives from Emirates met Sri Lankan government officials at the end of May and it was tentatively agreed that another meeting will take place in August. The management contract expires in March 2008 and there have been no detailed talks on extending it, despite the fact that Emirates has a 43.6% stake in SriLankan.
Chief executive Peter Hill says this makes it difficult to make future capital expenditure plans for the airline, which has seen demand for air travel fall over the past year as the security situation has deteriorated in Sri Lanka. SriLankan is also now facing new competition at home from another government-owned airline, Mihin Lanka.
However, Hill says SriLankan still expects to report a "modest profit" for the year ending 31 March. This will be quite an achievement as the deteriorating security situation in Sri Lanka has been scaring away visitors.
Tamil Tiger rebels have for more than 20 years been fighting for a separate homeland in the north and north-east of Sri Lanka and in recent months fighting has stepped up.
SriLankan Airlines has shut its domestic passenger operation because renewed fighting between Tamil Tiger rebels and government-led forces has damaged the country's tourism industry and its airline. The worsening security situation, including several aerial attacks near Colombo since March, also forced the government in May to shut down the airport to all night operations. Several foreign carriers including Emirates and Singapore Airlines have had to switch to daytime operations at Colombo and Cathay Pacific Airways has suspended its Colombo services altogether.
"There has been an increasing impact over the last year as the security situation has deteriorated," says Hill. "Tourist numbers are down tremendously and travel advisories from various countries have had an impact on the country and to a degree on our loads."
But some of the impact has been eased by the fact that SriLankan has been carrying traffic into and out of the increasingly popular tourist destination the Maldives from Europe and Japan. Demand for travel between Sri Lanka and India has also been increasing.
"We have managed to keep those markets going quite well," says Hill.
"It is not all doom and gloom."
Source: Airline Business
