SriLankan Airlines strives to overcome debt burden and operating losses
Aimed at overcoming a heavy debt burden and operating losses, national carrier SriLankan Airlines this week announced a 5-year plan to secure profits of US$19 million in the financial year to March 2018 by introducing new products and other measures to boost revenue per passenger km.
SriLankan Chief Executive Officer Kapila Chandrasena told a media conference in Colombo that the airline would take over possession of 13 new aircraft under a purchase-and-lease pact from Airbus. These aircraft will be more fuel efficient saving costs and will also upgrade the product allowing better prices and yields.
Here SriLankan CEO Kapila Chandrasena explaining to journalists the airline future plans with airline chairman Nishantha Wickremasinghe watching the presentation. Pic by Mangala Weerasekera
The first of six A330-600s will arrive in the island in October 2014 and it will help the airline with 6-8 per cent in fuel savings.
From 2017, the first of A350-900s will arrive giving fuel savings of 12 to 15 per cent, he said.
The airline which operates 21 aircraft to 32 destinations at present plans to add one more aircraft and another new destination increasing the aircraft fleet to 22 and the number of destinations to 33 in 2017/18.
Mr. Chandrasena noted that SriLankan would not add new destinations other than Australia towards 2018 but would instead increase frequencies to existing destinations, particularly in Asia and improve margins and capacity utilization and yield.
He noted that the number of flights has increased to 12,734 during 2012/13 from 9,648 in 2011/12. The airline has been able to increase the number of passengers to 4.3 million in 2012/13 from 3.5 million in 2012/13 and intends to reach 4.88 million in 2017/18.
He disclosed that there was no capital infusion to the company since 1993 until 2012 from the Treasury. He pointed out that Sri Lankan has had to manage with a US$500 million capital infusion approved by Cabinet in 2011 but it has been receiving the money in installment of $100 million every year since 2012 as it ran losses for five years. Mr. Chandrasena said 47 per cent of cost of the airline was fuel and international carriers that spent more than 44 per cent on fuel cannot make profits.
However he noted that the airlines activities had a multiplier effect of adding around $1.3 billion a year or about 2.2 per cent to gross domestic product each year.
In another effort to boost revenue, SriLankan Airlines will launch a joint venture aircraft repair and maintenance organization (MRO) with Lufthansa Technik by July 2014, he said, adding that the MRO is expected to earn revenue of $100 million a year.SriLankan will invest $14 million in machinery and equipment for aircraft repair and maintenance facility at the Mattala international airport in Hambantota, he disclosed. The facility will have four bays that can service Airbus A320 and Boeing 737 aircraft, Mr. Chandrasena said adding that the company is expected to provide jobs for at least 400 youth.
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