Carrier aims for lift off as it looks to capitalise on island nation's new-found stability, writes Siva Govindasamy in Colombo
Cautious optimism is slowly returning to Sri Lanka, after the government defeated the Tamil Tiger separatist rebels in May 2009 in a bloody final campaign after a 30-year civil war. Citizens are enjoying the growing economy and looking to travel, the island is once again attracting investors after a long lull, and tourist numbers have finally begun to rise after dropping sharply in 2008 and 2009 at the height of the conflict.
National carrier SriLankan hopes to ride this new optimism. The state increased its stake in the carrier to around 95% after it bought Emirates' 43.6% holding in July for $53 million, following an acrimonious end to a 10-year management deal in 2008 with the Dubai-based carrier.
Manoj Gunawardena, who became chief executive in 2008, says SriLankan is "aligned with the government's aims". This includes providing airline connections to points the government feels are the key investor and tourist destinations for the country. But he stresses the management has "total autonomy" to transform the airline to ensure a return to profitability.
"Let me make this clear - politicians are not involved in the day-to-day decision making process. The management reports to me and we have full autonomy. The government is the majority shareholder and we get the strategic direction from it," he says. "It also expects its investment to pay off and we must have a plan to ensure that happens."
There is a lot to do. SriLankan lost SLR6.03 billion ($53.8 million) for the year ended March 2010, around SLR4 billion less than its net loss from a year before. Revenues fell 15% to SLR63.4 billion, but a push to reduce costs helped cut operating expenditure 18%.
It needs stability after the end of the relationship with Emirates, which many in the industry credit with helping to transform SriLankan from its previously moribund self. "Emirates taught us the importance of customer service and marketing, and the value of a proper network. It was important to change the mindset in SriLankan, and Emirates also helped us to do that," says Gunawardena. "But the government also wants the airline to head in a different direction and that was something Emirates could not agree on. That was why the management contract was not renewed when it ended."
In January, SriLankan revealed a business transformation strategy for the next five years. It will imminently appoint a consultancy to review the plan and has enlisted airline rating organisation Skytrax to audit customers' experiences on its flights.
The airline has been studying a gradual expansion of its network, eyeing new markets in China, Russia, Canada and Australia. It also plans to increase the frequency of flights to London Heathrow, Tokyo Narita, Paris and Frankfurt. The aim is to serve countries that could bring in tourists and investors, he adds.
SriLankan's fleet will reach 25 by 2015; today it operates a mix of 15 Airbus A320s, A330s and A340s. Next year it will study its requirements beyond 2015, looking at narrowbodies, and two types of widebodies for medium and long-haul services.
"The main aim over the last few years has been to survive. Now that we have a bit more stability after the end of the war and the government buy-out, we can focus on our passengers," he adds. It plans to equip its long-haul fleet's business class cabin with flatbed seats and new in-flight entertainment systems.
"There is still a lot to do, but we have begun transforming the airline. It will take time, but I am confident that you will see a totally different SriLankan in a few years," says Gunawardena.
Source: Airline Business
