Financial Times

SriLankan delays expansion, focus on reviving traffic
SriLankan Airlines has imposed a freeze on capital expenditure and put off plans to expand its aircraft fleet and fly to new destinations and is now focusing on the urgent task of reviving tourist traffic which slumped after the December 26 tsunami ravaged the island's beach resorts.

"Traffic has come down by 50-60 percent although we're seeing some signs of recovery," the airline's Head of Commercial G.T. Jeyaseelan said in an interview. "But we're not sitting back and watching.

We're already looking for opportunities to bring tourists back." The freeze on spending was originally in response to the sharp increase in fuel prices which is expected to hurt the airline's profitability, as it has in other airlines, but the downturn in tourist arrivals from key markets in Europe and Japan after the tsunami has made matters worse.

The national carrier had found it difficult to pass on higher fuel costs to customers by raising prices because of the over supply of capacity in the airline industry and intense competition.

Now with traffic down, the airline cannot consider a price hike or expanding the fleet. The fleet expansion had been based on plans to expand tourist traffic into Sri Lanka from India and expand the network of destinations, including the launch of flights to China.

"When traffic is down we can't expand - prudence is the answer," said Jeyaseelan. "The general strategy is to consolidate what we've got before getting into new ventures. The immediate priority is to bring tourists back to the island and recover traffic on existing routes."

The airline is also re-evaluating the start of flights to China to see whether it should be delayed again or started as planned. SriLankan had planned to enter the China market last November, with the launch of thrice-weekly flights between Colombo and Beijing via Bangkok, but had postponed it for this summer because of difficulties in finding an aircraft.

Jeyaseelan said the carrier still plans to operate to Ahmedabad in India and is looking out for an A-320 "at the right price." It already operates to large Indian metros.

There were "huge opportunities" in the Indian market on which the airline has been focusing in the last 2-3 years while not neglecting the traditional European and Far Eastern markets. "In India we've got liberal traffic rights and we're focusing on intra-regional tourism - there are a number of destinations we can expand into."

The airline is considering flights between South Asian countries. "We have rights out of India and are now negotiating rights for other countries," Jeyaseelan said, adding that the airline was studying possible Bombay-Karachi flights.

The carrier is also involved in a joint industry-wide initiative with travel operators, hotels and the Tourist Board to lure back visitors to the island. "The aim is to create awareness about the destination and that much of its tourism infrastructure and attractions are intact and unaffected by the tsunami," Jeyaseelan said.

"We'll organize familiarization tours for agents selling Sri Lanka as a travel destination and travel writers."

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