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SriLankan to be rebranded as long-haul LCC?
December 21st 2017
SriLankan Airlines could be rebranded as a long-haul low-cost carrier (LHLCC) if the Sri Lankan government – the airline’s main shareholder – accepts a proposal from Malaysian hospitality conglomerate, Super Group Holdings. Read More » The company has suggested SriLankan should operate long-haul budget flights and its Mihin Linka subsidiary service domestic and regional LCC services.
The proposal has been presented to the government’s Economic Committee, the report in Sri Lanka’s Daily Mirror continued, although it remained unclear when Colombo would make a decision on the proposal.
The oneworld member is notorious for its loss-making balance sheet, with the airline accumulating billions in US dollar debt in the last decade. The government has been seeking strategic investors, to no avail, for several years.
The carrier is under severe attack from Middle Eastern airlines, which have added capacity in the Colombo market at breakneck speed. Emirates Airlines and flydubai fly up to seven times a day from Colombo to Dubai. Qatar Airways operates five times daily to Doha, but a weakened Etihad Airways has reduced frequency to Abu Dhabi to double daily.
“They have six times as much capacity as we do in the same market. You can see where this is going. Where do all these passengers go? Only 32% of passengers on flights to the UAE actually disembark in the UAE. The remaining 68% go everywhere else. Given the fare structure of airlines today you know he who has the deeper pockets is going to win,” SriLankan CEO, Captain Suren Ratwatte told Orient Aviation in September.
The playing field is bound to get even tougher for SriLankan. In November, AirAsia Group pitched AirAsia Sri Lanka to the government and said it would fund the venture’s start-up costs.
The proposed LCC would base five aircraft in Sri Lanka during the first year of operations, a fleet which would grow to 25 aircraft by year five. Aircraft would be based in Colombo, Hambantota and Jaffna.
According to sources present at the pitch, the AirAsia Group would accept 49% ownership of the venture, relinquishing majority ownership to the Sri Lankan government.
AirAsia Sri Lanka could be the nail in the coffin for SriLankan. However, the government is unlikely to agree to the AirAsia venture without securing an exit and/or takeover plan for SriLankan.
Last week, SriLankan chairman, Ajit Dias, said the airline ought to be shut down “in the larger interest of the country’s economy” if a “tangible and sustainable restructuring” was not achieved.
