SriLankan Airlines to ditch â€˜vanityâ€™ routes
ECONOMYNEXT – SriLankan Airlines will stop flying on ‘vanity’ routes and pull out of markets it can’t compete in to focus on ones with better yields as it restructures its network, aiming to regain profitability, its chief executive said.
“We’re looking at rationalizing all our routes under a strict time line,” said Suren Ratwatte, chief executive of SriLankan Airlines and the budget carrier Mihin Lanka. “We have vanity routes – some of them are going to go.
“It’s not going to be very popular but we can’t help it if there’s no business case. It’s in the works as we speak,” he told the annual conference of the Chartered Institute of Logistics and Transport Sri Lanka.
The national carrier was facing “irrational competition” from the three top airlines in the Middle East – Emirates, Qatar and Etihad – and finds it difficult to compete, Ratwatte said.
These carriers have “cannibalised the market completely” and are adding capacity regularly, he added.
“As you add capacity – it has an inverse relationship with price – as capacity goes up, prices go down,” Ratwatte said. “So how do you compete with that?”
SriLankan Airlines cannot compete with Middle Easter airlines offering “rock bottom” prices, he added.
“Today all the money is made on the front end of the aircraft. Economy class just covers your costs. If you can’t command a premium you cannot survive,” Ratwatte said.
To London the national carrier can command a premium as it is the only non-stop carrier with the biggest capacity.
But to Paris, Frankfurt and Rome, “our yields are a joke because we can’t command a premium – there’s not enough demand,” Ratwatte said. “We lose money on those routes.”
Emirates has the economies of scale and connectivity that SriLankan Airlines cannot match.
“When we try to sell tickets from Europe to Colombo and the Far East, we find Emirates offers better prices and flexibility than we can ,” Ratwatte said. “So it’s almost impossible to compete.”
The China market has been good for the national carrier till recently – until October which was a bad month – while the south East Asian market is also strong.
“We’re going to have to focus on strong points and pull out of markets where we can’t compete,” Ratwatte said. (Colombo/December 03 2015)