ISSN: 1391 - 0531
Sunday April 06, 2008
Vol. 42 - No 45
Financial Times  

Call for independent decision-making at SriLankan

SriLankan Airlines this week celebrated its return, as a national carrier, to totally locally-run management control with ceremonies and advertisements reflecting its national focus and national pride but serious questions remained unanswered as to whether independent decision-making, vital for success, would be permitted.

This was also clearly reflected in opinion poll by The Sunday Times FT on the airline where a majority of the 257 respondents said in email responses that while Sri Lankans are capable of managing the airline, there were doubts as to whether the airline would be free of political interference and bias.

A top airline executive, who declined to be named, raised a valid point: “If we have skilled Sri Lankans why is it so difficult to find a chairman and a CEO?”

He also said the organization should be run as an international company since only some 15 percent of the revenue comes from local traffic. “However the promotion campaign now is more geared to Sri Lankans when it should be more international,” he said.

The poll drew responses from policymakers, SriLankan Airlines staff – present and past, CEO’s, retired bureaucrats, business leaders, travel and tourism industry executives, members of the general public and academics.

Ashok Pathirage, Chairman Softlogic Group, said the board has ‘capable’ directors and SriLankan can be managed well provided they are given a free hand. “It depends on the management having a free hand to manage the airline without any government interference,” he said, stressing that the government should sell its 51 percent stake and leave the airline alone. “The government should not manage an airline. They have more critical areas to concentrate on such as infrastructure, healthcare and education. They should not get involved in an airline and the same goes for telecom companies. They need to leave managing these industries to the private sector and leave them,” he reiterated.

Economist Dr Sirimal Abeyratne noted that in the past the government has mismanaged many things and it doesn’t have the capacity to manage business ventures efficiently and effectively without burdening the taxpayers. “Moreover, it is not certain how the government can manage the airline which is operating in a highly competitive international market. Whether the government holds the controlling stake of the airline, its management needs to be independent and private,” he said.

Prasanna Jayewardene, Chairman Tropical Management Ltd remembered that 10 years ago when Emirates Airlines’ bought 43.63 percent of Air Lanka, the name was changed to SriLankan. “The first thing that happened was to change the name thereby ‘downgrading the airline’ – in my opinion and then they dovetailed our entire operations to suit them,” he said. He said pre-Emirates, Sri Lankans ran the airline properly and created a ‘magical’ airline. “Why we struck that deal with Emirates is still a mystery,” Jayewardene noted, adding it was highly unnecessary.

“We over–emphasise and overrate foreign management. For Sri Lankans not to manage their own airline is ridiculous,” he said.

Jayewardene noted that if the government feels it should buy the Emirates stake, it should do so. S. Paramanathan, President Travel Agents’ Association of Sri Lanka (TAASL), said the move to discontinue with Emirates was a good one. “We need to show our people are good. Most sales for the airline in Sri Lanka were done by local travel agents. Also TAASL has 100 percent Sri Lankans and our dealings are with the local staff working at Sri Lankan. I feel that Sri Lankans will comprehend the issues that travel agents and passengers are facing, rather than foreigners,” he explained.

Gehan de Silva Wijeyeratne, CEO Jetwing Eco Holdings Ltd said that only if the operations of the airline are free from political interference without inconvenience to passengers should Sri Lankans manage the airline. “Now we may not have the leverage and access into the international markets which we had by partnering with an international airline,” he added.

Public voices on SriLankan Airlines under new management
The Sunday Times FT opinion poll on the future of Sri Lanka’s national carrier, SriLankan Airlines, raised some interesting issues and shows that most of the respondents doubted whether government politicians would allow the airline to resort to independent decision-making without interfering in its affairs.
Here are some comments from the survey.

* To the question whether SriLankan Airlines should be fully managed by SriLankans, the response was?
- International input is good. However if it was out of political control it does not matter whether Sri Lankans or foreigners manage it. Under state ownership/political control it will be mismanaged.

- We don’t have either the experience or the capability to do so, as AirLanka and Mihin Air have shown.

- Sri Lankan management can be successful if there is transparency and honesty.

- Foreign personnel can enrich the airline as they do at many other business enterprises. They should be employed only if there is a need, on merit and on a transparent and competitive basis.

- In the global marketplace, SriLankan needs a continuing network alliance support to make some impact in a world led by global carriers

- Sri Lankan management? Yes if free of politics.

- This is not like running a CTB bus from Ratmalana to Mattakuliya. This is serious business and professionals should be appointed, where required and appropriate.

- This is possible if part ownership is given to the public, so that they may have a say in the management of the company, reducing mismanagement by the government.

-- Governments’ running airlines haven't worked in many countries. Airlines like Biman and PIA are struggling because of poor and delayed decision making.

-- If it is a national airline, ideally it should be owned by the state. But, do we have a state in this country? It has always been a POLITICAL PARTY that is in power. So, whatever owned by the state is used to meet political and personal earning agendas - that too on a short time focus; never for a national cause.

-- Sri Lanka doesn’t have the financial resources to operate and compete and be a world class airline even though we have very competent and experienced pilots, engineering and other staff. Remember the AirLanka debacle which resulted in a bankrupt airline. From a world class airline we will now drop to a third class airline.

-- I will bet my bottom dollar that very soon SriLankan will close down. The new chairman is an economist and has no knowledge of running an airline.

-- Only efficient, experienced and non political decision makers must be hired. However, having foreign experience may be helpful in taking firm decisions mainly non political.

* Asked whether SriLankan Airlines should invite foreign management after Emirates’ exit, some respondents said:

- Maybe yes but I don’t think it will be very successful, after the current saga.

- No, since Emirates already owns half the airline and the company will have to pay massive management fees to any new company and share profits with Emirates.

-- Reputed airlines should be invited as we don’t have faith in the new management maintaining and managing a world class airline.

-- There should be an International Advisory Committee at least.

-- International input can benefit SriLankan in terms of expertise, codesharing, global reservations system and training. It is also good to have a management structure independent of state control. Singapore Airlines is a good example of a state owned enterprise under independent management performing exceedingly well.

-- International collaboration is essential to promote the brand and sales.

-- Foreign management may not have the country's interest at heart like the employment of Sri Lankan pilots and personnel which could be jeopardised.

-- It doesn’t matter whether it is foreign or local managers. What is important is efficiency and expertise.

* Responding to the third question as to whether the government should purchase Emirates stake of 43.63 percent stake and make it a fully-owned state carrier, respondents noted:
-- The 100 percent state ownership model doesn’t work anymore.

-- Yes the government should take the balance and run it smoothly as a profitable organization.

-- The Emirates shares, if up for sale, should be taken up by another foreign airline.

-- As a frequent traveller I had many benefits from the former management and always insisted on travelling on either SriLankan or Emirates. I am not sure whether I would get these benefits now.

-- If the government purchases the balance, it will be another Mihin Air story.

-- The government should look for another strategic partner.

-- Shareholders must share the burden equally and ensure that the airline carries on without collapsing. The government must make sure that Emirates doesn’t scuttle any development plans as they are one of the main competitors in most of the routes as well as they are financially stable to sustain any competitor activity.

-- It is essential that a minority stake is held by the partnership airline.

-- 100% will be easier sent for burial than 56%!

-- Emirates shares, if up for sale, should be sold to the public; otherwise it’s the taxpayers money that would be busted.

Additional comments:

-- Emirates got a more advantageous deal with the initial privatization of AirLanka, which was a very bad deal at the time. Notwithstanding this SriLankan Airlines was doing reasonably well. Thus it’s a bad idea to try to ‘fix something that isn’t broken’, particularly at a time when the government already has its hands full with more critical issues. The government, if prudent enough, will appoint some independent competent professionals to run the airline.

-- Drawbacks of Srilankan being managed by Government/Emirates: Emirates – Emirates management and interest should be analysed in the context of where it was reported in a newspaper that Emirates tried to dispose of long haul Airbus flights of SriLankan; Emirates sold an obsolete IT system to SriLankan; Most of the profits were generated by ground handling and catering, and not by flight operations. Emirates failed to develop the core activity (flight operations) of SriLankan.

In the case of the government, it nominated directors that lack airline management exposure and when Emirates initiated deals not beneficial to SriLankan, the government-appointed board failed to act; Would be politically misused as Mihin Lanka.

Thus the conclusion is that SriLankan is in better hands with Emirates than with government.

 

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