SriLankan Airlines, best airline in the region by 2015: Chairman

By Cheranka Mendis in Mumbai

Sri Lanka’s state-run national carrier, SriLankan Airlines is confident in embracing its goal of being the best in the region by the year 2015 with a range of fuel-efficient aircraft to be added to its fleet in the next five years and new training centres coming up as well.

Speaking to the Daily FT on the sidelines of the three-day ‘Get-Sri Lankan’ed’ promotional campaign in Mumbai which ends today (Monday), SriLankan Chairman Nishantha Wickremasinghe shared the company’s investment plans and spoke on the importance of increasing connectivity to the country’s largest arrival market, the neighbouring India among others.

Q: What is the strength of the relationship between SriLankan Airlines and India?

A: SriLankan Airlines has always seen great potential in the Indian market. We were the first international airline to operate to most destinations in India. We currently have 84 weekly flights to India with Mihin Lanka flying to ten destinations which includes Buddhagaya, Waranasi and Madurai.

However we need to tighten the relationship between the countries and the airline is looking at increasing frequencies and flying to more destinations in India. We have the best ever country traffic record here. We have daily flights to Mumbai. We operate 28 weekly flights to Chennai and have carried 200,000 passengers on the Colombo-Chennai route in 2012.

Q: You speak of increasing destinations, what do you have in mind?

A: There are many destinations within India we can fly to northern India is one of them. Those people have a lot of money. They are cash-rich and they go on vacation all over the world. They go on cruises to countries like Singapore, Malaysia etc so why not Sri Lanka? We have to have flights there and promote it and tell them why Sri Lanka is important and make it attractive to them.

Q: In June last year, it was announced that SriLankan was invited to the global network Oneworld. What is the progress on that?

A: Oneworld is a frequent flyer program where an airline must be invited to join in backed by a sponsor. We were sponsored by Cathay Pacific. We are currently going through a process to get our systems in order to be compatible to their systems. Everything must be seamless for us to fly alongside the premier brands in the aviation industry. Our systems were only for SriLankan. We have now made the transition and are currently testing it. It takes a good one year lead period to test it.

Q: What are the system changes you have implemented?

A: Changes have been made to create a seamless system. If I need to send cargo to a destination I am not flying to, I should be able to do so with the network provided there is total information communication, from the unloading date, time, and destination, etc. For this we had to make our IT systems compatible and be upgraded to match other airlines. We also have to upgrade our standards in terms of the lounges and ticketing offices. These are not mandatory but we are proud to say we and Oneworld and are working shoulder to shoulder with other airlines.

Q: How much has the airline invested in this?

A: Refurbishment of the ticketing office is in operation now. The office in World Trade Centre is closed for this and will be ready by end of next month. The office has been relocated in a temporary location. The investment for this is Rs. 14 million. For the refurbishment of the lounges and airport office we have made an investment of Rs. 20 million. What is important is that these things must be done whether you join One World or not. Our lounges and ticket offices are as old as the Air Ceylon days and they must be done up.

Q: Is Sri Lanka the first S. Asian country to join Oneworld?

A: One World has many partners so that we interlink together. There is no Oneworld partner for this side of the world; therefore it is a win-win situation for both. Each continent has one party, and Oneworld will monitor this. Collectively Oneworld partners carry over a million passengers on a daily basis, flying to 160 countries and access to over 500 lounges.

Q: You have previously spoken of modernising the fleet. What has been done on this aspect?

A: We have already started this. We have a narrow body fleet and wide body fleet and we have started upgrading the narrow body fleet. We have four A320’s and they are being upgraded and modernised to be competitive to match the rest of the world. Our refurbishments of the existing fleet will be done by end this year.

We took a decision on the economics and last Friday signed a deal to purchase ten aircraft from Airbus. Six of the latest A330-300 and four A350-900s have been ordered. It is the era of A350s so we already put the slots down for four A350s.

Q: What is the estimated budget for this?

A: We will be leasing out the new aircraft, but there were initial investments on this. The down payment for the full fleet will cost US$ 83 million.

To upgrade the A320s (new seats, new entertainment systems, etc) it’ll cost US$ 12 million per aircraft.

Q: With the losses that SriLankan makes, are these upgrades and purchases viable?

A: Yes they are. With the old aircrafts costs are very high in maintenance. It is like an old car, you’ll have to go to the garage every day. We can reduce costs by 20-30% with the new fleet. One reason for refurbishing is also because of this. We have no control over fuel cost but we can mitigate that by getting new technology.

Q: Right now is SriLankan making profits or loss?

A: Operationally we make profits, we cover all costs but we have to pay for everything, upgrading, purchasing, etc. I get hammered for losses now but I’ll tell you, in four to five years time this will be a nice place to work in. There is no capital infusion now; all our revenues are used for these. I have the guts to use the revenue money and do all these because we must have a brand new fleet. I will do this even though I might now go through the worst period; because in another three years, by 2015 SriLankan will be one of the best airlines in the region. The full fleet will be under five years and we will make profits. But for that I will have to go through a tough time now.

Q: But reports show that SriLankan has been making losses for a long time?

A: I can’t say much about the past but people must remember that we bring 60% of the tourists to Sri Lanka. If we don’t bring them even with the losses, what about the revenue they bring in to the country? If you take Qatar Airlines, it is a loss for the country, but they do ground handling, airport, duty free, coaches that go from Doha airport, etc. Like hanging on to the tiger’s tail, here we are only an airline. But we will make a turnaround.

Q: You also fly to unprofitable routes?

A: If I cut down certain routes I can show you profits even now. Certain European destinations do not bring in money, it is true. But we still bring tourists from those countries. If we don’t do it, someone else will take the business or another airline will take this crowd to another country.

Q: What about Mihin Lanka?

A: Mihin Lanka is doing very well, I am very happy with it. They are doing well in the pilgrimage and worker market. I am sure they have a bright future. They provide a great service to the country. How many Sri Lankans go on pilgrimages to India? We did make losses but Mihin Lanka had a lot of accumulated losses which I do not want to talk about. If we take day-to-day; no we are not making that kind of losses. What the balance sheet shows are accumulated losses. I have to carry this on my shoulder.

Q: How is SriLankan MRO doing?

A: It is doing well. In Katunayake we have a unit to maintain our flight repairs and some Indian, Pakistani flights also come to us for MROs (Maintenance Repair Overhaul). We recently completed the 50th sea check of an Indian airline. We also conduct training there and they have 10-15% foreign students studying at the IAA.

In Mattala there is a lot of land so I am going to start a MRO there as well. We are doing it with one of the biggest international agents as a joint venture. According to the agreement we will run a training school, for local and foreigners there

Q: When are you expecting to carry this forward?

A: By the end of this year, the new hangars will come to Mattala. We just finalised the arrangement.

Q: What is the budgeted cost for this?

A: The partnering body will put in all the money. Our investment is the value of the land and the hangar we are putting up. They will do the tooling and use and train our people. For the hangar the cost estimated is Rs. 40 million.

Q: There was a recent issue with the cadet cadres with the Pilot Guild issuing notice mentioning low standards; what is your comment on that?

A: The impression given by the pilots was wrong. We take officer cadets, cadet pilots who have been licensed by the Civil Aviation in Ratmalana with the PPL (Private Pilot Licensing). That is the pre-qualification.  What must be understood is that internally what we do to recruit can be laid down by SriLankan. We can have a test or we can take cadets without a test. The test we had was to shortlist the candidates. We can make the cut off point 70, 65 or 60. For that matter we can say we don’t want to have a written test.  Some time back the cut off mark of 70 was introduced, and it was the company that laid this down. This year we thought to reduce the cut off mark to increase the number of pilots as there is a need for this. Your requirement is that you have the license; so there is no compromise on safety.

Q: What happened to the last batch of cadets?

A: We have decided to cancel that batch. We will lay down new criteria for selection which is being discussed now. The pre-qualifications, tests, or whether we will have tests will be discussed with the Pilots Guild as well and we will formulate them. Pilots are also our friends and we all work together. So we have decided to cancel that batch and will call in a new advertisement. Our CEO will discuss with the Pilots Guild and present it to the Government for approval. However the owner of the airline decides the criteria for selection.

Q: When will the new batch be called?

A: We will do this immediately; the decision was made last week.

Q: Any final comment?

A: We are on a program to upgrade our product, bring in and increase our fleet and try to give our passengers the best and nothing but the best to match any international airline in the Far East and the Middle East who are offering a good product. Otherwise we will be out of business.