Financial Times

SriLankan Airlines focusing on ancillary services

By Dilshani Samaraweera

SriLankan Airlines is dropping loss-making destinations, focussing on the region and looking to ancillary businesses of catering, cargo, engineering and ground handling, to fly out of financial difficulties.

CEO of Sri Lankan Airlines, Manoj Gunawardane, speaking at a conference organised by the Chartered Institute of Logistics and Transport this week, said the airline is seeing “temporary reductions” of passenger traffic and cargo transport is seeing an “unusual lull.”

These losses are coming on top of billions of rupees of losses from last year. According to the company’s annual report in 2007-2008, the airline made a loss of Rs. 6.156 billion from its core airline activity and a total group operating loss of Rs. 588 million.

But the airline says it is trying to turn its balance sheet around. One strategy is to expand profitable ancillary businesses. “We see a successful future for the airline flanked by the four profitable businesses of engineering services, cargo, catering services, and ground handling,” said Mr Gunawardane

Engineering and cargo services are already about to take off. The airline says it will soon sign a contract with a regional airline, for airline maintenance and is negotiating with a few more. Sri Lankan Airlines is one of the few airlines in the region with accreditation to maintain airbuses. The company is also looking at training aircraft engineers.

In January, the airline is to sign an agreement with the Airport and Aviation Services to operate a newly built cargo handling terminal at the Bandaranaike International Airport. This is expected to almost double its cargo handling capacity.

“The existing terminal will concentrate on imports. The new one will be used for exports. I am hopeful we can sign the agreement by January and then we will need a 3-4 month lead-time to start up,” said Mr Gunawardane.

The increased cargo capacity is mainly targeting the growing Indian market. “Sri Lankan Cargo has proposed a regional network for unparalleled access into India,” said Mr Gunawardane. Over the next three years the airline is looking at radical changes, from rationalising its widespread flight network, to focusing on the South Asian region.

“Over the next three years or so, we will change our customer focus and networks. Some of these measures will build sustainable business strengths for competitive access into South Asian markets,” said Mr Gunawardane.

“The first thing is, to rid ourselves of unprofitable routes and work on a sustainable network,” said Mr Gunawardane. The airline will also renew lease agreements for four narrow bodied aircraft (Airbus A320) over the period of November 2008-March 2009. The airline says this will rejuvenate its aging fleet.
The airline is also pinning hopes on an early end to the conflict, to generate more business.

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