National carrier SriLankan Airlines will not focus on growth in terms of expanding destinations, as it does not have the capacity to do so, but will instead implement an action plan to reduce costs and manage revenue; this is the airline’s short term focus, Manoj Gunawardena, CEO, SriLankan Airlines, said in an interview with the Island Financial Review.
"We will try to increase the frequencies to more profitable destinations and if we are compelled to, with reluctance we may reduce frequencies to unprofitable destinations," he said.
For an industry that can no longer charge relatively exorbitant rates, to recover fuel costs, wherever in the world, Gunawardena said that an action plan was being formulated to reduce costs and manage revenue within the next six months, without having to pass the burden on to the flyer.
With the advent of budget airlines, people have begun to consider air transportation as a commodity and therefore, are unwilling to accept high airfares. So in order to be profitable other methods must be adopted.
"We will implement an action plan and the results will have to be in millions of dollars," he said.
Last year’s fuel budget was US$ 200 million and no airline would have envisaged that the price of oil would rocket to US$ 130 a barrel. Gunawardena said that if each and every aspect of IATA’s programme was followed a 5 percent savings can be made. Based on last year’s rates, it would amount to US$ 10 million.
He said the airline’s top ten cost items had been identified: They include fuel, ground handling, IT and logistical costs and an action plan would be set to reduce them and it would involve the entire 6,000 odd workforce to put the action plan into effect. Gunawardena said that targets would be finalised for each cost sector before the end of May.
Instead of increasing prices to such an extent that people cannot afford to fly, SriLankan has invested in a complex revenue management system which will create the right mix. 50 percent of flights on the airline’s network are beyond the country with half its flights touching down in Colombo. This system will monitor bookings across the airline’s network of flights so that appropriate decisions on pricing can be made.
"We will also have to engage the unions because while we acknowledge that they are highly skilled and specialised in each of their areas, because of which they are in high demand from other airlines, we want them to adopt a system where remuneration will be linked to productivity."
Giving wings to its core
business
"SriLankan Airlines’ core business has made marginal losses, but revenue from SriLankan Catering (Pvt) Ltd, ground handling and duty free sales have ensured that as a group, the airline is profitable. However this needs to change.
"We have talked about it as a team and we cannot go on making losses in our core business of transporting people and cargo. We should breakeven 18 months from now," Gunawardena said, "a goal the action plan is expected to achieve."
Moving to Katunayake
In a bid to cut down on costs and for better coordination, the headquarters of SriLankan will be relocated to Katunayake. At present, three floors of the World Trade Centre are used to house its offices.
Mihin Lanka
SriLankan will develop commercial co-operations with the country’s budget airline, Mihin Lanka.
"The government has given us a clear directive that we should work together. There is no necessity for us to compete. We will look at coordinating our schedules, so that different departure times to similar destinations can be worked out," he said.
"We have not had detailed discussions about Mihin Lanka and it is not likely that its ownership will change," Gunawardena said.
Losing pilots to other airlines
Commenting on the many pilots who had left SriLankan for greener pastures (or bluer skies?), Gunawardena said that it was a common problem the entire airline industry was facing.
"The number of pilots we have with us now is quite adequate," he said.
"We have lost many experienced pilots to other airlines in the region but this is nothing new. We continue to recruit new pilots and we have two batches of pilot cadets entering our International Aviation Academy each year."
Emirates
Gunawardena said that Emirates’ management of SriLankan had both positive and negative implications.
"The debate had been going on for sometime, and now the matter is settled. SriLankan is now managed by Sri Lankans. If anything goes wrong, we will only have ourselves to blame so it is important for us to do the simple, basic things the right way," he said.
No honeymoon
"I am in a special position. This is the first time that a CEO has been appointed from within the organisation. I have been with SriLankan for 26 long years. I started out as a cargo agent and have handled 15 different jobs since then.
"Expectations are high, my colleagues and I have grown with SriLankan and they will expect a lot from me, so will the stakeholders and the public," said Gunawardena.
"Unlike other CEOs I have no honeymoon period. I have been with SriLankan for a long time. I already know the organisation and I already know what’s happening. I am here to deliver," he said.
