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Restructuring Srilankan Airlines – A Retrospective and Prospective Look

Poor fleet management must be avoided as incompetent management of equipment could cause inefficient use of aircraft, excessive maintenance costs, and suboptimal scheduling. 

6 mins read
Photo Credit: SriLankan Airlines

“Those who cannot remember the past are condemned to repeat it.” ~ George Santayana

RETROSPECT

Each airline has a slogan.  Some of these are quite uplifting: “ a great way to fly; a symbol of freedom; a tradition of warmth; above all, we care! bringing nations together; catch the spirit.”  When I joined Airlanka (the glamourous predecessor of Sri Lankan Airlines) on my return to Sri Lanka in January 1983 armed with  a masters degree in air law from Australia, the popular slogan of the airline was “a taste of paradise”. This was just 4 years after it had been rebranded from its predecessor Air Ceylon as the national carrier of Sri Lanka. Air Ceylon, the former State-owned flag carrier was established in 1947 and collapsed after 31 years of operations in early 1978. It ceased all operations on 31 August 1979 and was replaced by Air Lanka on 10 December 1979.

Back then (in 1979) and thereafter for several years the new airline received the full support of the President of the country including immunity from answerability to the legislature – a somewhat curious fact given that  the airline was primarily funded by the taxes of ordinary citizens, including those who had never even stepped into an aircraft.

Within a month of my recruitment into the legal department of the company, I was asked to take over the subject of international relations under the supervision of an intelligent and perceptive professional.  My understanding was that international relations was primarily concerned with helping the company decide where our airline  would fly. This depended on the air services agreements we had with countries under Air Ceylon and the new agreements we would initiate, so that a viable and sustainable route structure could be developed.  My department, whose primary focus was on legal issues and negotiation with States, sought the help (and expertise) of the marketing and sales departments as to what equipment (aircraft) would be used on these routes and the pricing of our product.  There was even a section called “route evaluation” to study potentially profitable routes for the airline.

We had an excellent marketing and legal team which supported the Ministry of Defence (at that time in charge of civil aviation) at air services negotiations.  Among other initiatives we tried to gain entry inter alia into Melbourne and Sydney; to gain an extra frequency into London; to connect with capitals in the Middle East. However, our efforts did not always attain fruition and the airline did not gain leaps and bounds profitability and sound commercial standing.  There were many theories: that we should operate regionally, being a small carrier; that we should be a feeder airline; that we should shed unprofitable European cities like Vienna, but no cohesive plan emerged.

Our product remained classy – indeed a taste of paradise – with superior inflight service and unbridled courtesy and care rendered to the passenger. We went through tough times (which included the total loss of an aircraft and the loss of lives of several passengers on board when on 3 May 1986, our Lockheed L-1011 Tristar was on the ground in Colombo, about to fly on to Malé, when an explosion ripped the aircraft in two, destroying it. However, the airline survived and the powers that be made sure it did not go down.

I left in 1990 for employment with  the International Civil Aviation Organization but followed the progress of the airline, proud that my erstwhile colleagues were doing their best to keep the airline going while maintaining  its proud reputation. 

In retrospect I wonder if  our protectionist approach towards our competitors; some of our unviable and pretentious destinations, together with over dependence on government financial support and a certain feckless insouciance with regard to the importance of tourism as an income generator did the airline a disservice.  Arguably, the most perfidious and indeed pernicious consequences for the airline were egregious governmental interference and a sense of entitlement by those in power as well as the appointment of Directors to the  Board and  senior management who had no knowledge or background in aviation and air transport.

PROSPECT

I read with some disappointment in a recent issue of the Daily News that  SriLankan Airlines now is burdened with a debt of US$ 1.2 billion to various organizations, including local state banks, accumulated unpaid fuel bills while at the same time having  to cover outstanding payments for international bonds and leased planes. According to a statement issued by the Minister responsible for aviation the government is unable to sustain the financial losses incurred by the airline and it would be an injustice to the taxpayer to continue using taxpayer funds to bail out the airline.  The Government of Sri Lanka is destitute of financial resources – mainly brought to bear by economic challenges, including foreign exchange difficulties – that would provide financial support for losses as it has done in the past.

The Minister continued: “This approach is no longer equitable, which led to the decision to restructure SriLankan Airlines. The restructuring plan entails the government retaining a 51% share, with the remaining 49% to be offered to another investor. If immediate restructuring measures are not implemented there will be concerns about the potential loss of jobs for approximately 6,000 employees at SriLankan Airlines.”

Lasitha Nagahawatte and John F. O’Connell  in their 2016 article An analysis of the issues and prospects facing SriLankan Airlines and its embedded partnership with Sri Lankan tourism (which is still valid in context today)  conclude that “its ageing long-haul fleet, together with an inferior economy-class product along with high fuel prices, capacity constraints and poor management practices are the major issues faced by SriLankan Airlines. On the tourism side, uncompetitive hotel rates, unnecessarily high government taxes, visa charges and the lack of international promotion were seen as the principle drawbacks. A survey at Colombo airport revealed that fare is the principle rhetoric for passengers taking SriLankan Airlines, but when they want a wider range of additional and superior attributes they choose foreign carriers”.

Whatever restricting plan is adopted there are a few fundamental factors that must be kept in mind.   There must be a solid financial plan that would obviate inadequate financial planning. Costs must not be underestimated as uncontrolled costs could lead to  financial instability and bankruptcy. Integral to the plan must be a careful evaluation of expenses, revenue projections, and market conditions that are extrapolated strategically.  Hand in hand with this critical factor is sustained customer service.  The airline will suffer irreparable damage to its reputation unless customer complaints are addressed proactively and professionally. Neglecting to prioritize customer service can lead to dissatisfied passengers and damage the airline’s reputation. It’s important to invest in well-trained staff who can provide excellent service and address customer concerns promptly and professionally.

The financial plan must be buttressed by a Strategic Plan containing a  clear long-term strategy aimed at growth and competitiveness. This would involve but not be limited to evaluation of  market trends, strengths and weaknesses of competitors that would guide the airline’s development and expansion.

Safety is another critical factor and SriLankan Airlines must maintain its reputation for safety.    Safety is the preeminent priority in international civil aviation and the authorities of Sri Lanka as well as the airline must ensure that there is strict adherence to regulatory requirements, maintenance procedures, and training programs which are essential to ensure the well-being of passengers and crew.

There must not be any room for inefficiency that would cause delays, cancellations, and disruptions, which can negatively impact passenger satisfaction. Both the aeronautical authorities and the airline must ensure  efficient processes, effective scheduling, and good communication to minimize operational issues.

Poor fleet management must be avoided as incompetent management of equipment could cause inefficient use of aircraft, excessive maintenance costs, and suboptimal scheduling.  Factors that are important are aircraft capacity, fuel efficiency, and maintenance requirements. In this regard one of the critical factors would be the need to be technologically savvy by adopting  and leveraging new technologies and staying updated with industry advancements and embracing  technology solutions that can streamline processes, enhance passenger experience, and improve overall efficiency.

Finally, branding and marketing are important as much of airline’s success would depend on its visibility and ability to attract passengers. Targeted advertising, promotions and a distinctive brand (“brand” means “promise” and the ability to keep that promise) are a sine qua non for the airline to stand out in a competitive market.

CONCLUSION

We are back to where we started – with Santayana’s quote: “Those who cannot remember the past are condemned to repeat it”. In that context, here are some things to consider: obviate and leave no room whatsoever for governmental interference.  Make sure to always keep in mind that when the airline  was managed by  Emirates Airlines it generated a profit of Rs. 30 million but after governmental interference and a misguided sense of entitlement where Emirates was unceremoniously removed from management SriLankan Airlines  has struggled to reach profitability; consider the value of solid partnerships; do not bring in unqualified and inexperienced managers however competent they have been in other fields of commerce; avoid smooth  talking and incompetent foreigners who are intent on  exploiting resources of the airline;  avoid nepotism; have close ties with the  tourism and hospitality industries of the country; have an adequate staff training and development program. Iinsufficient training and development of airline staff can result in a lack of expertise, poor customer service, and safety concerns. Investing in comprehensive training programs and ongoing professional development can enhance staff performance and ensure high-quality service delivery. 

I have no claims to pretension of originality in writing this piece nor do I think that there is no one in Sri Lanka who has not thought of the aforesaid strategies. However, I feel that in the ultimate analysis, the wisdom of Santayana must prevail if Sri Lanka were to sustain a sensible restructuring programme for its national carrier. 

Ruwantissa Abeyratne

Dr. Abeyratne teaches aerospace law at McGill University. Among the numerous books he has published are Air Navigation Law (2012) and Aviation Safety Law and Regulation (to be published in 2023). He is a former Senior Legal Counsel at the International Civil Aviation Organization.

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