Financial Times

SriLankan Airlines to re-fleet A320

By Duruthu Edirimuni Chandrasekera
SriLankan Airlines is planning to re-fleet its narrow body aircraft within the next two to three months, according to its CEO, Manoj Gunawardena. "We are currently pursuing A320 re-fleeting. Very soon, within the next two to three months, we can announce the re-fleeting decision for our narrow body fleet," he said.

The national carrier is looking to replace its aging narrow body fleet with new or very young aircraft. "We will be leasing them," Mr. Gunawardena noted. He said the airline also has plans to add a minimum of one white bodied aircraft to its fleet each year in the medium term.

However, that will be done after the six months 'crunch' period, where SriLankan will be pursuing cost cutting measures actively to beat the airline crisis. "The airline industry all over is facing a crisis. The prognosis for the future is really bad. SriLankan is no different," Mr. Gunawardena noted.

"Last year was particularly not great in our core business. It may be down to fuel and losing money in carrying passengers and cargo. In the next few months, the situation is not going to be any better," he said, adding that SriLankan is pursing a strategy of reducing losses during the current period while keeping its cash-flows intact.

Mr. Gunawardena was confident that given time, the markets would adjust. "It takes longer than six months for the markets to adjust, but empirical evidence shows that markets will adjust over time," he noted.

The airline will strive to minimise losses, while preserving its cashflow during this period. "We are trying to reduce our operating expenditure and looking at 'big ticket' items here such as fuel, overseas ground handing charges, in-flight meals and amenities, global distribution cost, compound and engine overall charges, etc," he said.

He said small units of staff at the airline are trying to unbundle such cost by negotiating, reducing and challenging these costs. He noted that out of these, two costs which cannot be adjusted in the short term are aircraft lease rentals and payroll. He also added SriLankan has implemented a whistle blowing policy where staff can identity, report and suggest unprofitable practices.

"We have presently deferred or postponed any discretionary capital expenditure such as advertising and promotions. SriLankan is not alone in this. Every airline in the world is facing the same challenges during the next few months. Therefore we have taken off brand advertising and key sponsorships-particularly new ones," Mr. Gunawardena explained.

He further noted, "You cannot carry on cost savings and overhead reductions on one hand and splurge on ad spend." Since last Sunday, SriLankan has embarked on a new schedule, where it has reduced some frequencies, downgraded some frequencies from wide bodied aircraft to narrow bodied (such as in India) and increased frequencies to Far East and some to the Middle East.

Mr. Gunawardena said that SriLankan encountered bottlenecks in the Colombo -Far East sector. "To ease that we matched aircraft capacity to the demand in this sector. We expect this exercise to give US$ 10 million additionally in the next nine months," he added.

He was confident that whatever SriLankan does in the next six months will help set the stage to make profits in the future. "A lean airline with the best revenue mix together with a high level of productivity is what we will strive for. These will lay a solid foundation," he added.

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