IN the face of rising competition and tighter margins, SriLankan Airlines has embarked on a restructuring strategy that will see the carrier retaining its services to Europe while giving greater emphasis to Asia and growing Colombo as a regional hub.
“Our new board of directors inherited a bad situation,” said Ajith Dias, chairman of SriLankan Airlines, who was appointed in early 2015. “Our restructuring process will cut non-profitable routes, concentrate on the Far East and India, and maintain our position in Europe.”
Although SriLankan Airlines has been seeing “good” load factors on its European routes, services to low-yield Rome will be phased out from May 1 in order for the carrier to increase capacity on more commercially viable routes.
The airline will add a fifth weekly frequency to Frankfurt from July and retain its twice-daily London and four-times weekly Paris services. It will retain its slots in Rome for a re-assessment likely in two years’ time.
While the historic low global fuel prices have helped to stem losses, the current shaky economic and political outlook in Europe is posing “uncertain times” for the largely unprofitable airline. “The off season starting from May will be critical for us, but so far it’s still looking good,” said Dias.
“We are still losing money now but we have made big progress in cutting losses last year. I expect we will take another two years to overcome (the losses).”
“Serious competition” from the Middle Eastern airlines has weighed heavily on the carrier’s performance on routes out of Europe, admitted Dias, but the company is nevertheless keen to expand its codesharing partnerships with the Gulf carriers as it seeks to build Colombo as a regional air hub, particularly for traffic from the Middle East to South India and the Maldives.
The carrier is also undergoing a fleet development programme to replace its ageing A340 fleet with eight A350s on order. These will likely be deployed on operations to Europe and China when it takes delivery of them in 2016 and 2017.
With an estimated 40 per cent share of the country’s total seat capacity, Dias is confident that the “all-time high buoyancy for Sri Lanka” in terms of business and investment will work favourably for the country’s tourism sector.
The Sri Lanka Tourism Development Authority has set a target of four million arrivals by 2020, up from 1.8 million in 2015.
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