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UL: Teetering On A Razor’s Edge

Jul 31, 2010 3:55:18 PM - thesundayleader.lk

By Abdul H. Azeez

Trouble in the skies?

SriLankan Airlines has been steeped in controversy during and after its time under management by Emirates. After suffering sizeable losses last year, speculation is rife as to how the national carrier will face the future.

Speaking to The Sunday Leader, the CEO of SriLankan Airlines, Manoj Vaas Gunewardena said “The financial situation of SriLankan Airlines has improved, and the loss has been significantly reduced from the financial year 2008/09 to 2009/10″.

He went on to say that the exact audited accounts will be publicly released in the Company’s Annual Report, which would be followed by the Company’s Annual General Meeting, to be held shortly.

SriLankan has had a controversial past and many insiders say that prospects have been on the decline ever since the company was bought over by Emirates. One staff member nostalgically reminisced about the last time he got a bonus, which was way back in 1997.

Bad legacy

Many insiders accuse Emirates of badly mismanaging the company. They say that apparent profits mostly resulted from the sale of assets and were detrimental to the organisation in the long term. “Although Emirates, in the final year of its management contract of SriLankan, financial year 2007/08, recorded a profit of Rs. 4,428 million, this included a Rs. 5,634 profit on sale of three A340 aircraft. Therefore, even prior to the cessation of the management contract, the airline was losing money”, Gunewardena said.

However, SriLankan Airlines suffered losses that were significantly greater than the amount suffered by Emirates in their last year of operations even after taking away the revenue gained from selling the aircraft mentioned.

Many factors contributed to this loss. Not least the drop in traffic brought upon by the surge in hostilities during the final stages of the Eelam war. The global recession has also contributed.

Lax Management

There is a strong feeling among staff and analysts that SriLankan could have done much more to prevent this loss and indeed, capitalise on the emerging boom. The sentiments are that if management had proven to be more effective, last year’s massive loss could have been minimised and the company would have been in a stronger position to proactively market its product.

Gunewardena denies that the management has been lax in its duties, citing various cost cutting measures, marketing strategies and efficiency improvement measures taken: “The airline had 5,113 staff (at the point of taking over from Emirates) and as at the end of the last financial year on 31st March 2010 the company had 4,614 employees. So you would see that there is a clear intention to increase employee productivity. With the expansion of our capacity and the number of flights, we are in the final process of recruiting adequate pilots and cabin crew for our requirements”.

Efficiency Crisis?

However, SriLankan is still extremely behind in terms of the optimum efficiency rates adopted by many international airlines. An industry insider told The Sunday Leader that the optimum rate of staff should ideally be somewhere around 130 staff members per aircraft. “SriLankan currently has 13 aircraft and therefore their staff should not exceed 1500″.

A senior member of the Pilots Guild stressed that SriLankan’s staffing problem is complex. SriLankan is overstaffed in ground handling and other ground departments. While essential departments like cabin crew and pilots are understaffed.

“The unions are in crisis. There have been no salary increments over the last two years. Most staff are put on contracts, and don’t feel secure in their jobs. Technicians get paid only a paltry sum.”

Losing advantage

He went on to say that the management was not doing enough to take advantage of the boom in visitors to Sri Lanka. Strategies like providing packaged tours and connecting flights to lucrative areas through other regions were notably absent. He said that any success SriLankan had over past few months is attributed to the natural increase in passengers. “They could have done so much more to bring in revenue. Advertising was lackluster and promotions were almost non-existent”, he said.
“Routes to lucrative locations in India such as Coimbatore, Goa, Calicut and Cochin were removed. The last two locations have a considerable amount of people flying to the Middle East. We were the only international airline operating there and should have capitalised on this. In addition, locations like Amsterdam, Zurich and Australia are not open. Our competitors dominate these markets while we do nothing”.

To SriLankan’s credit though, capacity increases this year are projected to amount to 15 per cent. Additional flights, which include additional capacity to London, Paris, Frankfurt, Doha, Kuwait, and Bahrain, have been started. A four-times-a-week service to Shanghai and services to Milan were started last December. Gunewardena says that plans are underway for the re-introduction of the SriLankan Air Taxi service in December this year. But a lack of innovative marketing techniques is evident.


Controversy has also surrounded a recently leased Boeing 767 airplane. The lease period is for three months and started from the beginning of June. The plane has been leased, along with pilots, to make up for SriLankan’s shortage of the same. Its condition, reportedly, is well below par and cabin crew and pilots interviewed expressed doubts as to whether customers will even want to travel with the carrier after being transported in that plane.