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What ails our National Carrier



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by Rajeewa Jayaweera


Our national carrier SriLankan Airlines has many critics, a few defenders mostly ex and current staff for emotional reasons and many beneficiaries. Many a time, decisions to withdraw from unprofitable routes have met with resistance and objections from different interest groups who never lost an opportunity to remind the national carrier of its ‘national responsibilities’. Governments of the day are pressurized to change commercial decisions of the national carrier, or else, the government does so for its own political reasons. The last two occasions were when the withdrawal of flights from Rome, Milan and Moscow were decided, Rome was retained on a request by a religious head who wanted the direct air link to Rome maintained which the then Head of State accommodated for reasons best known to himself. Moscow was retained for purely political reasons.


The national carrier commenced operations on 01 September 1979, the same year Margaret Thatcher announced her intention of privatizing British Airways. Since then, it has undergone vast changes in terms of its operational patterns. Similarly the country’s Aviation Policy has undergone some changes, though not in a well thought out and planned manner, but rather as knee jerk reactions to various situations. In 1979, Sri Lanka and most other countries followed a restrictive aviation policy, in that traffic rights were granted after evaluation of available market size between two countries and growth potential. As a general rule, the carriers of the two countries would establish ability to market at least 60% of deployed capacity for traffic originating and terminating between the two countries, more commonly known as third and fourth freedom traffic. The balance deployed capacity could be utilized for carriage of traffic originating and terminating in other countries more commonly known as fifth and sixth freedom traffic.


Government of Sri Lanka (GoSL) has been responsible for setting both Aviation Policy as well as the role to be played by the national carrier excluding the period 1998 - 2008. The national carrier has always been handicapped by the need to be politically rather than commercially driven. In the Sri Lankan context, as pointed out by an ex colleague of mine in another publication, SriLankan Airlines’ vision statement speaks of "meeting shareholder expectations of profitably marketing Sri Lanka". Marketing Sri Lanka profitably or otherwise is the business of the Sri Lanka Tourism Promotion Bureau or whatever they wish to call themselves. The business of any airline is to fill its seats with passengers and in transporting them profitably to any destination or in airline jargon "putting bums on board!"


Successive past governments have emphasized the need for a liberal open skies policy, on the premise that foreign carriers calling in Colombo was good for the economy, a theory which cannot be found fault with except that granting of unrestricted traffic rights result in undermining the government funded national carrier, which will lose money and keep reaching to the Treasury for hand outs to remain in the sky. The charts below will demonstrate the manner in which Sri Lanka’s skies have been opened up from 1983 till today. In 1983 the only credible Middle Eastern carrier in existence was Gulf Air. Both Kuwait Airways and Saudia were peripheral players. There were charter carriers operating to Colombo out of Germany regularly and out of UK, Switzerland and Italy periodically.


As readers will observe, in 1983 the 25 weekly flights out of five European countries and UK of which 60% were operated by the national carrier has grown to 458 weekly flights rising to around 475 flights once carriers such as Oman Air, Kuwait Airways, Saudia and Jet Airways are added to the equation. In today’s context, the national carrier’s share of flights has dropped to 4.4% of the 458 weekly flights with the balance distributed amongst the aviation giants from the Middle East. The government contradicts its own policy by pouring millions if not billions to maintain a national carrier in the skies on the one hand and undermining the very same national carrier by granting unrestricted traffic rights to mega carriers who are able to totally out manoeuvre the national carrier on the other.


From a national perspective, ‘open skies’ work well especially in countries with open economies, small populations and big airlines i.e. Netherlands / KLM, Dubai / EK, Qatar / QR, Singapore /SQ. Most Western European countries do not practice open skies but evaluate and agree to traffic rights on a reciprocal basis, based on the needs of carriers operating between the two countries involved. The European Union has now commenced negotiating traffic rights on a collective basis for its member states. Despite all our attempts, France is yet to grant daily flights between France and Sri Lanka, their argument being insufficient traffic to justify daily flights. They are in effect preventing SriLankan Airlines from poaching Air France’s traffic to South Asia and Far East.


In the past, some of our Heads of State under pressure by cronies appointed General Sales Agents by foreign carriers, have granted traffic rights to countries with no known traffic originating from that country. Such carriers then poach in European markets for Sri Lanka bound traffic using low air fares compelling the national carrier to reduce their fares in order to defend market share. A little known fact is the pathetic performance and lack of consistency of some of our delegations proceeding for air talks. The priority is an overseas trip and not the negotiations. Delegations are often lead by the Secretary of the Ministry responsible for Civil Aviation. They travel for meetings totally unprepared. Their negotiating and communication skills leave much to be desired. On one occasion, the leader of the Sri Lankan delegation who proceeded to Delhi for air talks by mistake read out the strategy document prepared by the national carrier instead of the opening statement thus divulging our negotiating strategies to the Indians at the start of the air talks. Sri Lanka lost that round without firing a single shot and returned empty handed. On another occasion, the sole objective of the leader of the delegation visiting France was to visit a place of religious significance in France at the national carrier’s expense. He had little interest in the national carrier’s requirement for traffic rights for daily flights. On yet another occasion, the Minister in charge of aviation agreed to grant traffic rights during a cocktail party in a Middle Eastern capital he was visiting as a state guest notwithstanding objections by the national carrier on grounds of dual designation. The carrier of that country commenced operations even before paper work could be finalized and its first three flights were given TOP (temporary operating permit) clearance to land when they were less than one hour away from Katunayake.


The national carrier is in no position to compete with the mega carriers from the Middle East on its European routes. Even legacy carriers such as British Airways, Lufthansa, Air France to name a few are being gradually eased out of some of their traditional markets. The national carrier’s European routes have been making loses from its inception. Though contributing to network revenue which is important from a network perspective, the viability of loss making European routes need to be questioned in the context of deciding if the carrier should remain an international carrier or a carrier serving the Middle East, South Asia and selected Far Eastern destinations. The national carrier’s European stations are able to market only a handful of destinations beyond Colombo making them heavily dependent on Colombo bound leisure traffic i.e. Tourists and VFR which is seasonal. Modern airline business is all about frequency and connectivity. Each of the mega carriers from the Middle East have route networks consisting of over 100 destinations and are not dependent on traffic to their respective home bases or to a handful of destinations. Each of their overseas stations can market from 75 destinations upward. Their strategy is based on selling around five – eight seats in a given flight to each of the many destinations within their network. They also have the luxury of selecting high revenue destinations and ignoring low revenue destinations thus achieving a good revenue mix. The European stations of the national carrier with a handful of destinations to market are further constrained by lack of good connections (transit time between flights of no more than 2 - 4 hours) in both directions and is in no position to compete with mega carriers. Therefore the most meaningful step to be taken by the national carrier would be to withdraw from their operations to UK and Europe. The loss of 20 out of 458 flights will not make a dent in the accessibility to the country. Further the mega carriers from the Middle East can be depended upon to increase their frequencies as and when demand increases.


The first priority is for a careful evaluation if a government financed airline is a necessity at a day and age when governments in the developed world have handed over commercial aviation to the private sector. The advent of budget carriers has brought in a totally new dimension to commercial aviation. Our labour traffic will not be at the mercy of mega carriers as budget carriers can be depended upon to economically service labour traffic between Middle East points and Sri Lanka. The writer in a previous article urged the government to consider designating Mattala Rajapaksa International Airport (MRIA) for budget carriers which would also contribute to making MRIA a viable concern. In case the result of deliberations is for an airline servicing Middle East, South Asia and selected destination in the Far East, it need to be based on at least 51% of equity owned by private investors and not by GoSL and the appointment of the Board of Directors by the shareholders and not GoSL. Our governments lack the political will to refrain from interfering with operations and treating it as an appendage of the government.


The concept of a carrier operating to the Middle East, South Asia and selected Far Eastern destinations needs to be weighed against the alternate concept of Sri Lanka not having an airline. Maldives is a good example of a country with a high volume of tourist arrivals and yet does not have an airline international or otherwise (one or two past attempts by the government to set up an airline ended in failure).


The writer worked for Sri Lankan Airlines and Qatar Airways for over 20 years


 
 
 
 
 
 
 
 
 
 
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