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Experts query SriLankan’s departure from Europe
View(s):Travel industry experts are questioning the national carrier’s move to stop flights to European destinations, a decision it started implementing last month.
“In my view, SriLankan Airlines has to explain a fundamental issue,” said Rohan J. Abeywickrama, an expert in transport and aviation. “That is, how can Middle Eastern airlines like Emirates, Qatar Airways and Etihad operate to the same European destinations from the Middle East and make profits? Most of the time, their fares are lower to the European destinations than SriLankan Airlines.”
SriLankan stopped flying to Paris and Frankfurt from October 31, 2016, citing losses. CEO Suren Ratwatte told the Sunday Times that his strategy was to make the airline more regional in outlook. “I want the ability to reorient the airline from trying to compete on these long-haul routes which are now patently obvious that we cannot, and to concentrate on our strengths,” he said. “As a regional carrier, we are very, very, competitive.”
But experts like Mr. Abeywickrama feel the company should have looked at different strategies to continue flying to Europe. One former employee of SriLankan and an airline consultant said, “Supposing the same situation arises in London. What will happen? Will you pull out of there, too?”
He suggested SriLankan looks at working with different partners, and looks at downward integration for its products. “For example, can we operate to places like Berlin by working with a partner like Air Berlin?” he said. “Air Berlin operates to almost 150 destinations in Europe and elsewhere in the world. When you pull out of Germany and France, SriLankan has no connection to Europe.”
“Yes, there may be difficulties,” he continued. “Qantas was flying at a big loss but they looked at staff and how things could be changed. They restructured and last year, they made a huge profit. The CEO of Qantas went on record to say team effort contributed to profitability. The airline business is a team business.”
Mr. Abeywickrama insisted that the taxpayer, who is bearing the losses made by SriLankan, must be told the truth. While the industry norm of a global full service airline was to have around 175 employees per aircraft, SriLankan Airlines had more than double the figure. This contributed towards additional costs like office space, utilities, staff welfare, etc. “The Middle Eastern airlines are keeping their staff levels below 175 and sometimes at around 150.”
Many analysts complained that the SriLankan Airlines’ operational hub – which is Bandaranaike International Airport – has one the highest prices for fuel in the world. The charges for airport services were also high as were terminal charges. By contrast, the Middle Eastern airlines benefited from much lower, competitive charges.
“Obviously, SriLankan Airlines is suffering from the domino effect of all these negative factors,” said Mr. Abeywickrama. “That is why it is making losses on European routes while other airlines make profits.”
Aviation professionals are shocked by what SriLankan has chosen to do to cut losses, he held. “Instead of reducing the fleet and leasing three aircrafts to Pakistan International Airlines (PIA), the sensible strategy would have been to use them to increase destinations and frequencies and earn more revenue. Of course, this requires new route planning and aggressive marketing and sales. The choice of the Sri Lankan Airlines seems to be to go backwards and cover up their inability to market and sell.”
Giving away aircraft and destinations worsened the problem of excess staff. “Can the SriLankan’s management tell the taxpayers how many employees are being retrenched when aircraft and destinations are being reduced?” asked Mr Abeywickrama.
The Middle Eastern carriers get a better yield because of their passenger mix; they had a larger per centage of high-paying business travellers who chose them due to superior service and, more importantly, frequency. Emirates has four daily flights from Paris. SriLankan had four flights a week with a majority of passengers being of the ethnic and holiday categories that generate a lower yield. The Middle Eastern carriers also get critical mass.
“If SriLankan wants to increase yield, they have to improve service quality,” said Mr. Abeywickrama. “That cannot be done by giving the aircraft they have away to PIA.”
“The path SriLankan Airlines has chosen to tread is to make further losses and reduce its global competitiveness,” Mr. Abeywickrama said. “Any company that comes into partner with SriLankan would not be pleased with the current management strategy and vision.”