By Cheranka Mendis
National carrier SriLankan Airlines is now on an aggressive expansion plan to become the dominant force in the regional aviation market amidst rapidly rising tourism and the President’s vision of making Sri Lanka an aviation hub.
The airline, which aims to have a fleet of 30 aircraft by 2015, added a brand new A320-200 to its inventory when it touched down at the Bandaranaike International Airport in Katunayake last morning. It was the first aircraft to be acquired by SriLankan Airlines after a lapse of 11 years.
The Airbus, which has been purchased on an operating lease for US$ 350 million, flew in straight from Airbus Industrie in Toulouse, France. This is the first of three Airbus aircraft that will have the ‘SriLankan Airlines’ brand stamped across it by the end of the year.
The national carrier yesterday announced that starting with the A320 narrow-body aircraft, which was bought down to increase frequencies to the current destinations, two more will arrive in Sri Lanka soon. A wide body A340 will arrive in Sri Lanka next week, followed by an A330 later this year for US$ 350 million, SriLankan Airlines Chairman Nishantha Wickremasinghe said.
However, Wickremasinghe added that the A340 which will touch down on Lankan soil next week is not a brand new aircraft and that it had been acquired from Cathay Pacific, which used the aircraft for six years.
At present the airline has 18 aircraft to its name, which includes two De Havilland Twin Otter floatplanes for domestic flying.
The first to come under SriLankan Airlines after no aircraft were bought for 11 years, Wickremasinghe believes that the new aircraft will help bring the average age of the fleet from the current 12 years to five years.
“We want to have a young fleet and the new aircraft that are lined up to be bought to Sri Lanka with two more this year and another one in 2012, SriLankan will be able to have a young fleet, which would help the company grow as expected,” he stated.
He also mentioned that with increasing tourism arrivals and the targeted 2.5 million tourists by 2016, SriLankan, with its 50% market share in the local aviation industry, stands to benefit immensely if driven the correct way.
Within the last 12 months, SriLankan added three new destinations to its portfolio, to Shanghai, Kochi and Guangzhou. This year the airline will take its first flight to Moscow.
CEO of the Airline Manoj Gunawardena meanwhile told reporters that the new expansion plan starting with increasing the number of aircraft would add the required modernity and economic viability to the airline. Bringing in the new, the airline will not forget the old aircraft and will begin interior refurbishment on wide-body aircraft in July at an estimated cost of US$ 30 million.
“The financial situation of Sri Lanka as well the country outlook is now stable. We believe we have a strong regional presence and we have to now become the dominating forcing in it,” Gunawardena said.
“In order to do that, increasing frequency and size matters the most. With the new narrow body aircraft we got down yesterday, short haul full loads can be done effectively, which will only increase the connectivity and market presence of the airline.”
The airline’s current priority is India, where Sri Lanka had a more expansive operation a few years back.
With expansion and development now in the forefront, the airline, which suffered financial setbacks for successive years, will first target the closest neighbours – in particular Delhi and Mumbai.
“Once the complement of aircraft is complete, we will look at South East Asia – most likely Kuala Lumpur and Singapore,” he revealed.
Plans to add more frequent flights to the Far East are also in the pipeline.
The new fleet coming in would replace some of the wide-body aircrafts used for short and medium tours due to the lack of infrastructure and focus would be placed on using the wide-bodies for better long-haul destinations, such as the tourism generating markets in Europe. A more viable option for the airline, this will also allow it to concentrate more on increasing flights to expatriate community markets, which is said to be a current priority.
On the fiscal front, SriLankan after years of recording losses is now making headway and flying on more comfortable seating, Gunawardena said. “The last quarter has been difficult due to the rising fuel prices in the global market. However, during the last nine months we have performed on target and met expectations. We have managed to bring our losses down significantly, but we were slapped with US$ 30 million unexpected expenditure on fuel, which augmented our costs, contrary to what we expected.” The final revenue and profit figures cannot be revealed at the moment, he said.
“We expected the fuel prices to be approximately US$ 95 a barrel but it rose to US$ 125 and above. This immediately added US$ 25 million to our cost. This is what distracted from our good performance,” Gunawardena asserted. “Our business is affected only when there is a large, violent upscale in the fuel prices so it has to either stabilise or decrease.”
However, business is expected to recover in the April to June period with not only the price of oil dropping, but also due to the inaction of the revised fuel surcharge (YQ tax) on tickets issued after 20 April this year.
“What you see today is a changing business model. The products must be up-to-date and brand presence and recognition must be present. With development plans now underway, we will have both, which will help SriLankan fly high.”
Asked whether the airline is eyeing the Boeing aircraft, an up and coming favourite in today’s aviation world, Gunawardena stated that according to the long-term route plan that will be completed in a short time, the company will be able to measure the need for another fleet. “Depending on commercial and other operational terms, there is room for either a dual fleet (Boeing+ A30) or a single fleet by continuing with only A30 aircrafts.”
If the country is to add a Boeing 777 with a capacity of 400 passengers as well as huge cargo space, then it would have to be anticipating extreme growth in long-haul markets such as Europe, China and Japan, Gunawardena added.