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Sri Lanka's Mattala open sky strategy success depends on costs, regional rules: policy expert

Apr 14, 2015 06:48 AM GMT+0530 | 0 Comment(s)

WAITING:  Mahinda Rajapaksa International Airport is a Chinese-built airport which has failed to draw business

COLOMBO (EconomyNext) - To persuade airlines to make use of Sri Lanka's planned full open skies regime over Mattala airport will require competitive costs and the ability to leverage the larger regulatory structure of the region, a policy specialist has said.

Airlines are usually drawn to airports which give fifth freedoms, or the right to pick up passengers on the way to a third destinations, which is restricted by many countries to give a privilege to – usually – a badly run state-run domestic carrier.

"Fifth freedom rights are valuable where there is are passengers to pick up," explains Rohan Samarajiva of LirneAsia, a regional think tank based in Colombo.

"Mattala is not near a population base."

Samarajiva who has been advocating the use of the airport as a regional base for freight says airlines could still be drawn to the airport if costs were attractive enough and there was a window to also open up fresh regional opportunities.

At the moment fuel is trucked to Mattala from Colombo, which automatically push costs up. To bring costs down costs, fuel has to be hauled from nearby Hambantota port where storage has already been built, preferably through a planned pipeline.

The showpiece Mattala airport was set up in the middle of nowhere, clearing elephant country, by ousted President Mahinda Rajapaksa with Chinese debt. The airport is now named after Mahinda Rajapaksa, is without traffic to repay its Chinese loan.

Sri Lanka's aviation regulator was reported in a weekend newspaper as saying that the current regime plans to give not only fifth freedoms but 'beyond freedoms' including the right o carry passengers to third countries or within the country, without even registering an airline in the country.

Presumably an ambitious foreign carrier could base a few aircraft in Mattala and target the Indian subcontinent, the Maldives, the Middle East, Africa or pioneer shorter international routes, provided the airline had traffic rights to those countries.

It could even operate a shuttle between Mattala and the main airport in Katunayake.

Other than the Maldives and some Middle Eastern countries however, regulations are still tight elsewhere.

Samarajiva who was instrumental in trade negotiations with India nearly 15 year ago, which ultimately led to Indian private carriers being allowed to fly abroad and India becoming Sri Lanka's largest tourist generating market says there are regulatory windows that can be exploited for specific time periods, until others catch up.

Removing state restrictions and giving freedoms to people – either in that country or in others – is not a one-way street but something that will bring gains to people and the broader economy in terms of more opportunities and cheaper prices, economic analysts say.

While state-run Air India may have lost profits from its unjust earlier Mercantilist monopoly, other airlines like Jet have now become international players in the more capitalist competitive regime, and more tourists are coming into India.

But even more important, more Indians are travelling in and out at a lower cost making air travel less of a luxury than it was when the sector was a tightly regulated state monopoly at the expense of the less affluent Indians.

Even greater benefits to the less affluent have been seen in Europe, where state-run full service carriers were forced to compete with people-owned budget carriers from many countries, making air travel like train or bus journeys.

Samarajiva says there may not be many benefits for an Indian private carrier to operate out of Mattala any longer.

But if Sri Lanka moves ahead with the stalled Comprehensive Economic Partnership Agreement it may be possible to negotiate broad landing rights to India at least for Sri Lanka based airlines, opening up more opportunities he says.


 

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