SriLankan Airlines Chairman Ashok Pathirage
www.arabianindustry.com: Like the UAE, Sri Lanka is located in a central point between East and West and is well positioned to be a transit hub. Of course, transforming into an international hub requires huge amounts of investment in the kind of aviation infrastructure the UAE boasts.
Even so, Sri Lanka is a small country with bold ambitions and as its economy diversifies away from tourism its transport leaders are exploring the idea of making the island a gateway between East and West. And at the centre of Sri Lanka’s aviation ambitions is the country’s flag carrier, SriLankan Airlines.
SriLankan has from an economic perspective struggled over the last 10 years, admits Ashok Pathirage, who was appointed as Chairman of the SriLankan Airlines Group board in January 2020. Pathirage had hoped to lead on the airline’s transformation into a major connector but like so many aviation executives had to shelve his plans when COVID-19 struck.
“Obviously it’s been a tough time for us,” he reflects. “We went into lockdown and the airport was closed on 18 March. It was frustrating for us, as it was for all airlines, and it’s been all about survival. We are looking at different ways of creating revenues so we have been focusing on cargo flights, for example. That helps, it’s given us some form of revenue. But even with repatriation flights we’re only operating at about 20% of what we were doing before the pandemic. It’s not even enough to cover half of our costs.”
The International Air Transport Association (IATA) has predicted that passenger traffic will not return to pre-COVID levels until 2024, meaning airlines around the world have a tough few years ahead. Demand for long-haul flights will take longest to recover so routes between Sri Lanka and Europe or Australia, for example, will be slow to get back to normal. That could be frustrating for the island and its airline, which both currently rely largely on tourism.
Unsurprisingly, Pathirage and his team are waiting for tourism to pick up before the airline can begin its full recovery. He says that while the country has been one of the most successful in controlling the spread of Covid-19, the cost of strict transport restrictions has been high. Sri Lanka, like many countries, now has the tricky task of balancing the spread of the virus with encouraging tourism.
“We’re closely looking at how other countries are operating in terms of pre-boarding tests, test certificates and 14-day quarantines. I don’t think that we can realistically enforce quarantine measures otherwise I don’t think we can expect any tourists to come,” comments Pathirage.
SriLankan can expect the initial recovery in demand to be led by business travel and Sri Lankan nationals who are overseas and want to visit their families. In terms of tourism, Pathirage says, the Government is edging towards the idea of package tourism and bringing in groups of people because they are easier to track than individuals. As well as exploring travel corridors with certain states, the country is also looking at encouraging long-term visitors rather than weekend tourists, notes Pathirage.
“Potentially some of the countries we will initially look at in terms of a travel corridor are the UK, Australia and maybe Singapore and China. In terms of coming back to normal, it’s very difficult to predict, but we are hoping to be in full operation by around 2022. That should be enough time, especially if they find a vaccine.”
While Pathirage envisages a return to full operations in around two years, the question of a return to profitability is harder still to answer. SriLankan Airlines has had not insignificant issues even before Covid-19, he cedes, but the company is implementing a number of measures designed to get the business back on course towards profitability.
“I took over as Chairman and a new Board was appointed in January of this year,” Pathirage says. “Unfortunately, we have been presented with the Covid situation. Obviously the pandemic has forced us to cut our costs so we have introduced measures, for example reducing our workforce. We have laid off some of the contract staff and we’ve taken salary cuts. And we’re working with suppliers to negotiate on better rates, so we’re expecting savings from that. We’ve taken all the measures possible and right now it’s about survival. By 2022 when we get back to full operations we hope to come back to profitability. That’s our feeling right now.”
Naturally, Sri Lanka’s Government has supported the State-owned airline in recent months, especially given that the island nation partly relies on its carrier for its tourism industry and to connect it to the rest of the world. Pathirage says the Government has so far been “extremely supportive” and that the airline is currently surviving because of Government funding.
“Most state-owned airlines are being supported by their respective governments. But we also have a job to do and we can’t expect everything to come from the Government. So as a Board we have introduced measures and made sure our employees understand the situation. I think the employees have responded as positively as can be expected. They all understand that we need to survive. I’m happy to say the Government has backed us but at the same time everyone in the business has responded in a positive manner, which is just as important.”
Pathirage believes that SriLankan has already passed the most difficult period and is now in a situation where the business is realigning itself for a slightly different future. As well as working to get the right size workforce and fleet, the company is negotiating with aircraft leasing firms on pricing, which has helped SriLankan reduce its fixed costs by around 10% to 15%, according to Pathirage.
“We have structured the company in a position so that once we get back to normality this airline will start making money,” he pledges.
Part of SriLankan’s plan to recoup lost revenues will be to focus on its strongest markets. Pathirage expects the Far East market to recover fastest so SriLankan will treat it as a priority during its initial recovery. Next will be the Middle East market, which has traditionally been an important area for SriLankan. The Middle East is one of the airline’s prime sectors for fifth and sixth freedom traffic through Indian sub-continent markets traditionally.
This area suffered a major setback due to the pandemic as job losses mounted in the Middle East region, but SriLankan expects a rapid revival in these markets “due to economic strength of Middle Eastern nations and their ability to recover”. Additionally, Sri Lanka expects tourism links with the Middle East to strengthen in the coming years and as a key transit point for many destinations between Europe and Asia, Pathirage sees the Middle East as a market the airline wants to maintain a presence in post-COVID-19.
“Once you get to the point where you can start to think of expansion, more routes and more aircraft, we can concentrate on our broader plans. Geographically Sri Lanka could be a huge regional airport. We can be a regional carrier, even connecting India to the Far East and connecting the Far East to Europe and beyond. We have a huge role to play. Number one was to survive the pandemic period, number two is to get the right sizing and have a good comeback, and then once the situation returns to normal we are in a position to make full use of the opportunities.”
Beyond the pandemic there are certainly opportunities for SriLankan if it can make the best use of its location. But can the airline realistically fulfil the same role played by super-connectors Emirates and Etihad in the UAE?
Sri Lanka’s airport in the capital Colombo is already in the second phase of its expansion and lots of investment is going into its aviation infrastructure, says Pathirage. Most of the top-end Middle East carriers are already operating in Colombo, demonstrating its desirability and potential. For example, Emirates already connects Sri Lanka with Australia and the Maldives.
“I think there is a huge opportunity of developing Sri Lanka as a major hub and attracting more international carriers to Colombo to make use of our location,” says Pathirage. “The Government has already started working on that and we as the national airline expect to play a key role in that. We want to do the same as what Emirates has done for Dubai or what Singapore Airlines has done for Singapore and helped make it into a prosperous city.”
Sri Lanka’s goal of becoming a transit hub has long been in the making. The Government has for the last 15 years steadily increased investment in the island’s travel and tourism infrastructure and a by-product is that Colombo is becoming more of a financial centre. For Pathirage, SriLankan has a large role to play in helping the Government’s vision to become reality.
“Colombo is positioned very well geographically so the plan is to take advantage of that opportunity and to help make Colombo into an economic centre, not just a tourist destination. That is the Government’s vision and from SriLankan’s point-of-view, we feel we have a very big role to play. The new part of the airport will be open in around two to three years’ time, it will increase capacity by around three to four times.
“So I think the investments are there but unfortunately the airline has from an economic perspective not fared very well during the last 10 years. We are now getting it right. The COVID-19 situation has given us an opportunity and it’s been a blessing in disguise in a way because it has allowed us to review our size, efficiency and costs, negotiate better pricing and gear ourselves to handle the opportunities.”
SriLankan certainly has a long way to go before it can compete on the same level as the Gulf’s largest carriers when it comes to connecting East and West. But there is no denying the carrier’s ambition and indeed Sri Lanka’s potential to play a much more significant role in the region’s aviation market over the next decade.
While the pandemic has knocked the airline back, it has also provided SriLankan with a chance to reset and finally get things right. Pathirage and his team have a considerable task ahead but with plans to grow the fleet by between 30% and 40% over the next four years, SriLankan’s goal of becoming a major connector could come sooner than anyone predicted before the pandemic struck.