16 October, 2019

Blog

What Ails Our National Carrier

By Rajeewa Jayaweera

Rajeewa Jayaweera

Rajeewa Jayaweera

Our national carrier SriLankan Airlines has many critics, a few defenders mostly ex and current staff for emotional reasons and many beneficiaries. Many a time, decisions to withdraw from unprofitable routes have met with resistance and objections from different interest groups who never lost an opportunity to remind the national carrier of its ‘national responsibilities’. Governments of the day are pressurized to change commercial decisions of the national carrier, or else, the government does so for its own political reasons. The last two occasions were, when the withdrawal of flights from Rome, Milan and Moscow were decided, Rome was retained on a request by a religious head who wanted the direct air link to Rome maintained which the then Head of State accommodated for reasons best known to himself. Moscow was retained for purely political reasons.

The national carrier commenced operations on 01 September 1979, the same year Margret Thatcher announced her intention of privatizing British Airways. Since then, the national carrier has undergone vast changes in terms of its operational patterns. Similarly the country’s Aviation Policy has undergone some changes, though not in a well thought out and planned manner, but rather as knee jerk reactions. In 1979, Sri Lanka and most other countries followed a restrictive aviation policy, in that traffic rights were granted after evaluation of available market size between two countries and growth potential. As a general rule, the carriers of the two countries would establish ability to market at least 60% of deployed capacity for traffic originating and terminating between the two countries, more commonly known as 3rd and 4th freedom traffic. The balance deployed capacity could be utilized for carriage of traffic originating and terminating in other countries more commonly known as 5th and 6th freedom traffic.

SrilankanGovernment of Sri Lanka (GoSL) has been responsible for setting both Aviation Policy as well as the role to be played by the national carrier excluding the period 1998 – 2008. The national carrier has always been handicapped by the need to be politically rather than commercially driven. In the Sri Lankan context, as pointed out by an ex colleague of mine in another publication, SriLankan Airlines’ vision statement speaks of “meeting shareholder expectations of profitably marketing Sri Lanka”. Marketing Sri Lanka profitably or otherwise is the business of the Sri Lanka Tourism Promotion Bureau or whatever they wish to call themselves. The business of any airline is to fill its seats with passengers and in transporting them profitably to any destination or in airline jargon “putting bums on board” !

Successive past governments have emphasized the need for a liberal open skies policy, on the premise that foreign carriers calling in Colombo was good for the economy, a theory which cannot be found fault with except that granting of unrestricted traffic rights result in undermining the government funded national carrier, who will lose money and keep reaching to the Treasury for hand outs to remain in the sky. The charts below will demonstrate the manner in which Sri Lanka’s skies have been opened up from 1983 till today. In 1983 the only credible Middle Eastern carrier in existence was Gulf Air. Both Kuwait Airways and Saudia were peripheral players. There were charter carriers operating to Colombo out of Germany regularly and out of UK, Switzerland and Italy periodically.

Airwaya

Air Lanka operated flights to Amsterdam via Abu Dhabi and Paris, to Frankfurt via Dubai and Zurich and to London via Dubai and Zurich, patterns unthinkable in today’s aviation.

Current status.

Airways 1

As readers will observe, in 1983 the 28 weekly flights out of five European countries and UK of which 57% were operated by the national carrier has grown to 458 weekly flights rising to around 475 flights once carriers such as Oman Air, Kuwait Airways, Saudia and Jet Airways are added to the equation. In today’s context, the national carrier’s share of flights has dropped to 4.4% of the 458 weekly flights with the balance distributed amongst the aviation giants from the Middle East. The government contradicts its own policy by pouring millions if not billions to maintain a national carrier in the skies on the one hand with undermining the very same national carrier by granting unrestricted traffic rights to mega carriers who are able to totally out manoeuvre the national carrier on the other hand.

From a national perspective, ‘open skies’ work well especially in countries with open economies, small populations and big airlines i.e. Netherlands / KLM, Dubai / EK, Qatar / QR, Singapore /SQ. Most western European countries do not practice open skies but evaluate and agree to traffic rights on a reciprocal basis, based on the needs of carriers operating between the two countries involved. The European Union has now commenced negotiating traffic rights on a collective basis for its member states. Despite all our attempts, France is yet to grant daily flights between France and Sri Lanka, their argument being insufficient traffic to justify daily flights. They are in effect preventing SriLankan Airlines from poaching Air France’s traffic to South Asia and Far East.

In the past, some of our Heads of State under pressure by cronies appointed General Sales Agents by foreign carriers, have granted traffic rights to countries with no known traffic originating from that country. Such carriers then poach in European markets for Sri Lanka bound traffic using low air fares compelling the national carrier to reduce their fares in order to defend market share. A little known fact is the pathetic performance and lack of consistency of some of our delegations proceeding for air talks. The priority is an overseas trip and not the negotiations. Delegations are often lead by the Secretary of the Ministry responsible for Civil Aviation. They travel for meetings totally unprepared. Their negotiating and communication skills leave much to be desired. On one occasion, the leader of the Sri Lankan delegation who proceeded to Delhi for air talks by mistake read out the strategy document prepared by the national carrier instead of the opening statement thus divulging our negotiating strategies to the Indians at the start of the air talks. Sri Lanka lost that round without firing a single shot and returned empty handed. On another occasion, the sole objective of the leader of the delegation visiting France was to visit a place of religious significance in France at the national carrier’s expense. He had little interest in the national carrier’s requirement for traffic rights for daily flights. On yet another occasion, the Minister in charge of aviation agreed to grant traffic rights during a cocktail party in a Middle Eastern capital he was visiting as a state guest notwithstanding objections by the national carrier on grounds of dual designation. The carrier of that country commenced operations even before paper work could be finalized and its first three flights were given TOP (temporary operating permit) clearance to land when they were less than one hour away from Katunayake.

The national carrier is in no position to compete with the mega carriers from the Middle East on its European routes. Even legacy carriers such as British Airways, Lufthansa, Air France to name a few are being gradually eased out of some of their traditional markets. The national carrier’s European routes have been making loses from its inception. Though contributing to network revenue which is important from a network perspective, the viability of loss making European routes need to be questioned in the context of deciding if the carrier should remain an international carrier or a carrier serving the Middle East, South Asia and selected Far Eastern destinations. The national carrier’s European stations are able to market only a handful of destinations beyond Colombo making them heavily dependent on Colombo bound leisure traffic i.e. Tourists and VFR which is seasonal. Modern airline business is all about frequency and connectivity. Each of the mega carriers from the Middle East have route networks consisting of over 100 destinations and are not dependent on traffic to their respective home bases or to a handful of destinations. Each of their overseas stations can market from 75 destinations upward. Their strategy is based on selling around 5 – 8 seats in a given flight to each of the many destinations within their network. They also have the luxury of selecting high revenue destinations and ignoring low revenue destinations thus achieving a good revenue mix. The European stations of the national carrier with a handful of destinations to market are further constrained by lack of good connections (transit time between flights of no more than 2 – 4 hours) in both directions and is in no position to compete with mega carriers.   Therefore the most meaningful step to be taken by the national carrier would be to withdraw from their operations to UK and Europe. The loss of 20 out of 458 flights will not make a dent in the accessibility to the country. Further the mega carriers from the Middle East can be depended upon to increase their frequencies as and when demand increases.

The first priority is for a careful evaluation if a government financed airline is a necessity at a day and age when governments in the developed world have handed over commercial aviation to the private sector. The advent of budget carriers has brought in a totally new dimension to commercial aviation. Our labour traffic will not be at the mercy of mega carriers as budget carriers can be depended upon to economically service labour traffic between Middle East points and Sri Lanka. The writer in a previous article urged the government to consider designating Mattala Rajapaksa International Airport (MRIA) for Budget Carriers which would also contribute to making MRIA a viable concern. In case the result of deliberations is for an airline servicing Middle East, South Asia and selected destination in the Far East, it need to be based on at least 51% of equity owned by private investors and not by GoSL and the appointment of the Board of Directors by the shareholders and not GoSL. Our governments lack the political will to refrain from interfering with operations and treating it as an appendage of the government.

The concept of a carrier operating to the Middle East, South Asia and selected Far Eastern destinations needs to be weighed against the alternate concept of Sri Lanka not having an airline. Maldives is a good example of a country with a high volume of tourist arrivals and yet does not have an airline international or otherwise (one or two past attempts by the government to set up an airline ended in failure).

*The writer worked for SriLanakn Airlines and Qatar Airways for over 20 years

Print Friendly, PDF & Email

Latest comments

  • 6
    6

    Im amazed that people with experience and professionalism like Rajeewa are not considered for any new appointments within the Airline to be turned-around( if touching the sky was indeed possible). Instead, people with no commercial experience other than fixing shady deals have been appointed to such important positions. Managing an airline is certainly not like weilding a cricket bat or tearing the hair off an umpire who returns an unfavourable decision on the field. Theres more to it. Much, much more.

  • 2
    3

    Rajiv

    Great article.

    I am no aviation expert but a few comments.

    Last 5 years to 2014 loss Rs 100 bn. 2015 loss another Rs 20 bn. Not sustainable at all. Wish we had built 25 hospitals with 1 hospital per district or upgraded our schools with that money.

    We cannot compete with regional carriers such as Emirates or Qatar or Etihad on long haul routes and there is no price difference. Brand new aircrafts and travel at same price with good connections.

    Political interference at all levels and hence the airline cannot be managed.

    A tie up with a regional carrier is a must for long term sustainability.

    The notion of Colombo becoming an aviation hub is nonsense.

    Limit the routes to the middle east and east Asia and south Asia.

    Review all GSAs. Moscow GSA is the SL Amabassador in Moscow!!!

    Maldives get more tourists than SL without having an airline and hence the notion of needing an airline to boost tourism is not true.

    Without scale airlines struggle to manage costs. For instance the ordering price of an aircraft is almost half the price when you order in bulk quantities.

    All South Asian national airlines are bankrupt including India, Pakistn, Bangladesh and Sri Lanka.

    Jagath

  • 2
    2

    Why have people who know their
    stuff when you have wheeler
    dealers like Nirj Deva?

    If Srilankan is to make money,
    they should be rid of those
    who make money using the airline.
    That is not happening and will
    not happen.

  • 5
    8

    this guy has undertaken a contract from an interested party to destroy the national carrier. speak to any staff ex or present from SriLankan Airlines about this chap.he has a very bad reputation in the industry.

    • 3
      2

      Forget about his reputation.What he has written are hard facts.Being a “National Carrier””for the sake of country’s prestige has no validity any longer.

  • 4
    4

    Mr.Rajeewa Jayaweera is spot on with his analysis. The airline should be privatised and the Executive selected on merit other than being a relative of Mahinda Rajapakse. The tourist industry is a major concern for our country. The management appear to have no professional skills whatsoever. I wouldn’t be surprised if that too is headed by a Rajapakse relative. How is it that The Maldives with no sights to see and practically no worthwhile history to see attract miles more tourists? We’d rather spend Rs.millions deploying professional promoters, who have proved useless and not use the free publicity that’s under our noses. E.g. our postage stamps have been dull and dire for a number of years, why don’t they use the thousands of picturesque scenes and sights we have on these stamps? We should also stop the blatant exploitation of tourists by charging them 50 times as much to the locals I was at Sigiriya a few years ago and charged Rs. 40.00 entrance fee while the tourists were charged Rs.2400.00. The tourists resent when taken for a mug. This stupidity is in every tourist attraction and should be stopped.

    • 0
      0

      Tourists should be charged a higher rate just as it is in India. The places need maintenance, and the local people cannot afford high entrance fees. I have been to India, and as someone visiting from Europe, I found Indian rates not unreasonable. Of course,it is human nature that everyone, whether the rate is affordable or not, would like to get in without paying anything. 2400 Rs per person (ie. 12 GBP) is the rough UK rate for National Trust properties in UK. It is also what local people in UK pay, as there is no discrimination between tourists and locals. Sri Lanka cannot afford to copy that system, because it is not sustainable in Sri Lankan economy. If the tourist is a high Western salary earner, they should consider paying the tourist rate; after all if they love their country and are proud of these national heritage places, then I am sure they would not mind helping with a bigger contribution. Ofc they might argue that because they have Sri Lankan blood, they should get in free. So it is a matter of social and personal conscience for them. Finally, if these moneies would end up for the maintenance and upkeep of the sites is a different story. It is a Sri Lankan authorities habit to divert this sort of income into private hands and families in power, just like money given to holy sites end up as gold plating for bosses motor cars, so that is a different issue. Sri lankans won’t grow up ever. It is a nation of big talk but small action.

      • 0
        0

        A better acceptable tactic would be to emulate what they do in Pinnawela Elephant Orphanage. I am not sure if they discriminate between locals and tourists, but I have seen a big box with a sign inviting donations to help upkeep the orphanage and I am sure they must be receiving much more than they would by charging the tourists disproportionately. I’ve read elsewhere the false assumption that these high earners from overseas can afford high prices. Their everyday expenses are high too and most of the tourists come here on budget package holidays and have a tight control on what they spend. E.g. A mug of coffee at popular Starbucks would set them back Rs. 680.00 (£3.40).

  • 3
    0

    Air Lanka was doing very well until the efficient Peter Hill was dismissed by Mahinda Rajapakse for refusal to offload 40 odd passengers who had booked flights weeks ahead, to accommodate MR and his entourage to fly home.

    http://www.thenational.ae/business/airline-chief-with-common-touch

    What we need is another man like Peter Hill – recruited via by world wide advertisement – to take over, prune wastage, get rid of redundant staff and merge both carriers together.
    All political lackeys must be got rid of.

    • 0
      0

      Well he is back as an adviser. Hopefully he can speak some sense into these people. Get them to drop the unfeasible routes.

      Traveling through and from BIA, I noticed a lot of Russian and CIS tourists but they were all traveling on FlyDubai and Air Arabia to the UAE. From there they use the FlyDubai or Air Arabia network to catch a connecting flight back to their home country. We have to accept that we cannot capture this market with Sri Lankan since its financially unfeasible for UL to complete against budget carriers when tourists can fly on newer aircraft, equally hospitable crew and save bundles of money.

    • 0
      1

      Peter Hill ?you must be joking. If anything was achieved during his tenure as the CEO of SriLankan it was simply because of how it was directed by its Managing Director-Mr.Tim Clark.He is the true Professional.Peter Hill was never recruited by any head hunting company but was offered the job at SriLankan by Tim Clark on account of his former association with EK while he was looking after his Pub in UK since leaving EK prematurely.

  • 1
    0

    Sylvia Haik.

    Not to worry.The flying days of the Rajapakses came to a sudden and abrupt end.They were offloaded at Medamulana!

  • 2
    2

    there was a speculation that Peter Hill was sacked from Oman Air for some rotten deal????

  • 0
    0

    I would invite the writer, perhaps in a comment or the next contribution to educate the public as regards the “ONE WORLD” concept that the Sri Lankan has signed recently and how that has affected the revenues and load factors. Also the “appointments” of General Sales Agents in “off line stations” and what portion of revenues has been paid or collected by them. How that has affected the revenues and is it viable to maintain such “off line agents”? These commercial considerations are very vital to the growth and maintenance of the carrier.

    His suggestion as regards the use of Mattala Rajapkse International Airport to be allocated to Budget Airlines is no “Break Through” at all. In that allocation one has to take into consideration its location, the accessibility, the costs to the carriers etc, that would be involved in flying there. That too has to be discussed in detail without which, merely a suggestion is not going to help.

  • 0
    0

    This comment was removed by a moderator because it didn’t abide by our Comment policy.For more detail see our Comment policy https://www.colombotelegraph.com/index.php/comments-policy-2/

  • 1
    1

    It is best to hear him out fully and encourage him to write more. After all he seems to be more experienced and knowledgeable in the field of aviation. Top stuff Rajeewa please go on and continue writing.

  • 0
    0

    In 1980s and 90s things were lot different to what it is today. It is not the fault of the routes or the people, That was the time when your customers asked “Where is Dubai? I don’t want to go there, people are treated like cattle”. Those days Bahrain was a better,decent point comparatively.That was an era when Sri Lanka had famous tour groups,coming just to enjoy the unspoiled beaches and cheap hotels & sun.The options were far and few.
    End of the war Sri Lankans saw some light at the end of the tunnel,but for the National airline it was a beginning of the end. Most Airline wanted to come here, to increase the number of flights, with a growing demand to see this new dawned destination. It was supply demand and the fares started to drop, and all above mentioned Gulf carriers had grown in a faster scale around us and when they stormed the country with increasing numbers, we were not geared to meet these challenges.As a regular business class traveler it was okay for me to fly with a stop in Qatar saving 100 thousand rupees.A BMW 7 series picked me from he aircraft door to take me to the lounge, Or to go via Dubai was not a issue.Products had changed and it was far better option with better timings and aircraft. So I suggest the National airline, it’s time to be innovative,dynamic & adventurous to garner this much needed business.

  • 0
    1

    Rajiv

    We need more insight from you.

    Keep writing please.

    Jagath

  • 0
    0

    Please privatize.

    Let private sector run it.

Leave A Comment

Comments should not exceed 300 words. Embedding external links and writing in capital letters are discouraged. Commenting is automatically shut off on articles after 10 days and approval may take up to 24 hours. Please read our Comments Policy for further details. Your email address will not be published.