How has COVID-19 impacted SriLankan Airlines?
Just like anywhere else we have been impacted in an unprecedented way. All over the world airlines are vastly affected.
When our airport [Bandaranaike International Airport (CMB)] was locked down on March 20 last year, it was very, very difficult even working out how we could survive, just to pay our aircraft leases, so we restructured all our lease contracts.
Even before the pandemic hit us, SriLankan Airlines was struggling. Our mandate from the government was to get the airline back to profitability. I was appointed from last year and we had a business plan to get into profit in two years' time.
But then pandemic knocked us down. We used to have almost a billion dollars in revenue before COVID. For the 2020/21 financial year we will end up with about $300 million, so we’re down to about 30% of our business.
Despite these challenges, we have done fairly well, I would say. We operated a lot of humanitarian flights, bringing back Sri Lankans who are stranded in some part of the world—mainly those who had gone to work in the Middle East, Malaysia and neighboring countries.
Then we switched into more cargo business. We have to serve the country in terms of our exports and we realized that there's opportunity in freight business and all this time we have been focusing on the passenger side.
The government has also supported us: they announced a $500 million support package. In December we got about $150 million of this and we’re expecting the other $350 million this year and next year.
What is the outlook for the short and medium-term?
Even this year we are not forecasting a very rosy picture. We have done our business plan based on about a 40% recovery throughout the year.
As a country we are a tourist destination. Before the pandemic we had an income of almost $4 billion from tourism and that has become almost zero. So now we are gradually restarting tourism. We have announced travel bubbles where tourists can come and stay within a bubble for 14 days, then take a negative PCR test and go anywhere.
We are getting some business from Ukraine, Russia and that part of the world. But previously our number one source of tourism was India. At the moment, although we allow Indian tourists to travel here, their government does not. We are lobbying on that, so we hope that the Indian Government will reopen this.
China was our number two in terms of visitors and is also not allowing citizens to leave. From our country's perspective we have relaxed lots of rules; if you have taken both the vaccines, you can come to Colombo. But there are also restrictions from the UK and EU.
So at the moment we are struggling. But we expect that from about November this winter, with the vaccination programs going on around the world, that we will have much better situation. That's the hope that we are living on now.
With good winter weather and lots of remote destinations, could there actually be an opportunity for Sri Lanka to bounce back stronger after COVID?
If the rules in the UK, Europe and other places change then Sri Lanka has a huge opportunity, not only in winter. For example, Indian tourists are ready to travel, they are travelling to the Maldives which is a much more expensive destination. Sri Lanka has much to offer and comparatively we are much cheaper. It all depends on how is the COVID situation is going to play out in other parts of the world.
Do you plan to expand to more destinations as you reconfigure your network for future opportunities?
Yes, as I mentioned we are very aggressive on the cargo side. Today, although we may not take too many passengers, we are flying into most of our destinations. We are flying into India, China and Japan. We are flying mostly cargo into the UK. We are flying into many destinations, so we are ready.
Before COVID we were looking at flying into some destinations that we had to rule out. We want to fly into our second destination in Australia, to Sydney. Today we are doing cargo flights, but we want to have regular service.
We also want to have regular service to Rome and Frankfurt. Those were our plans and they have not changed much. We are just waiting for these countries to open up, so hopefully during the winter we will start flying into these destinations.
Then we are looking at destinations such as Seoul to have regular flights. We are flexible because the situation is so dynamic and volatile today, it's very difficult to have fixed plans. We will watch how things are going to move, then we will create strategies and routes.
When do you think you can recover fully from the impact of COVID?
In March we are at about 35% of our pre-COVID number, but of course that has a larger component of cargo so 40% is really achievable at this moment.
But we are optimistic that if things recover, we can come back very fast because people are waiting. They haven’t traveled for the last one and a half years, so if things improve people would be on the first available flight.
Do you plan for cargo to remain a higher proportion of revenue post-COVID?
SriLankan doesn't have any freighters at the moment. So we’re carrying cargo on our passenger aircraft in the belly. We have converted one A330-200 into a freighter, but it's not a true freighter.
So we are also looking at procuring a freighter aircraft; at the moment we are part an of RFP to take it on a lease.
We also need to compete with the airlines like Emirates and Qatar flying their freighters to Sri Lanka, so there is a large opportunity for us, and we are expecting if everything goes well by November we will have one or two aircraft. So those numbers are good in our business plan and hopefully we can achieve those timelines.
Finally, how do you foresee getting SriLankan Airlines back into profit?
SriLankan Airlines was in bad shape. We lost about $100 million in the year before COVID. So from our perspective this is almost like a blessing in disguise. We have done a lot of restructuring within the organization; we have reduced our staff and we have negotiated with the lessors. We have actually saved about $100 million with these plans.
We believe that if we can get back to pre-COVID kind of revenue, maybe not this year, but hopefully the following, we can start making profit and there can be a big turning point for SriLankan Airlines.
Hear directly from SriLankan Airlines CEO at Routes Reconnected
Vipula Gunatilleka will join airline CEOs and industry heavyweights to outline steps that must be taken to kickstart the recovery during the Routes Reconnected conference programme. Over 10 hours of CEO interviews, panel discussions and briefings will provide actionable insights for the global route development community. View the conference programme
Photo credits: SriLankan Airlines
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