Dispute over Oman Air takes a nosedive

Oman has threatened to cancel SriLankan Airlines flights to its capital Muscat and block the use of its airspace for SriLankan flights if the Sri Lankan government fails to adhere to a bilateral agreement between the two countries, the Sunday Times learns.

The crisis follows the Sri Lankan government's refusal, on the advice of SriLankan Airlines, to allow Oman Air, that country's national airline, to resume flights to and out of Colombo, seven times a week, which is agreed under the agreement.

"This issue has reached a diplomatic level," a Civil Aviation Authority (CAA) official told the Sunday Times. Oman Air sources said the airline had been informed that President Mahinda Rajapaksa, currently in Vietnam, would resolve the impasse on his return.

On the other hand, the Sri Lankan government has been informed that if the issue persists, Oman authorities will cancel the bilateral agreement and block the use of its airspace for SriLankan flights to other destinations like Europe, and stop SriLankan flying to Muscat. SriLankan flies to Muscat via Doha (Qatar), twice a week on Thursdays and Sundays.

Airline industry sources say that if SriLankan Airlines loses airspace rights over Oman, it would have to take a detour to Europe including crossing war-torn countries like Afghanistan.

Oman Air, which pulled out in 2004, was due to resume flights on October 10 but postponed the launch saying it has not received approval as yet and cited October 17 as the new date to resume flights. The airline could not keep to the new date too as the issues remained unresolved.

At the centre of the dispute are allegations that two former SriLankan Airlines, CEO Peter Hill and Chief Commercial Officer Barry Brown, who are now serving in the same capacity with Oman Air, are trying to penetrate SriLankan Airlines' market share with a vengeance; It is also alleged that Oman Air has grabbed some of the Sri Lankan national carrier's key staff, and is asking for too many flights and want to break into the national carrier's market, according to SriLankan sources.

But the Oman Air sources say the issue is more about SriLankan Airlines concern over possibly losing a share of its European sector traffic because Oman Air has faster onward connections to Europe from Muscat in addition to better and newer aircraft with revolving seats. "That is the crux of the matter, not the number of frequencies," said one Oman Air source.

The CAA official said the bilateral agreement on air services between Oman Air and the Sri Lankan government in 1981saw Oman Air start two flights a week to Colombo. In 2003, the agreement was amended to permit seven flights a week for both airlines. But Oman Air continued to operate only two flights per week till they pulled out in 2004, saying the route was uneconomical (due to the security situation).

The Oman Air source, however, said that under the 1981 agreement the volumes (the number of flights) was to be mutually decided by the two parties but didn't have a specific number. In 2002, there was a signed contract between the two sides which provides for seven flights a week for both sides. "That number has been mutually agreed and has to be honoured," he said.

Countering this view, the CAA official said the agreement also had clauses which allow a reduction in the frequencies if the demand drops. SriLankan Airlines says there is no demand for seven flights and has asked the CAA to reduce it to two flights, which is what has been offered to Oman Air.

The CAA official said SriLankan Airlines, about two months ago, protested over Oman Air's request for seven flights a week on resumption of services.

"SriLankan said that there is no market demand for seven flights between Oman and Colombo. They also said that the SriLankan sales team in Germany and Britain had been recruited en-bloc by Oman Air and this was among 16 SriLankan staff handling these important markets for the national carrier. They said this was done in a bid to grab SriLankan Airlines' market and that Mr. Hill and Mr. Brown are behind this," he said.

Gihan Karunaratne, Country Manager for Oman Air, was not available for comment.

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