SriLankan Airlines targets network growth

SriLankan Airlines is looking to expand its network to parts of Asia-Pacific and Europe, as it makes progress on reducing financial losses under its turnaround plan.

The carrier says it will start flying to Sydney in 2020, along with Ho Chi Minh City, while growing its presence in India with a service to Ahmedabad. Plans to resume European points such as Frankfurt and Paris "continue to be under consideration."

Having appointed a new board and management team in 2018, the Oneworld member rolled out multiple initiatives to rein in cost.

Such measures saw operating losses shrink "by more than 50%" to $19 million for the six-month period to 30 September, versus an operating loss of $39 million last year. Net loss came in at $76 million, an improvement of $10 million from last year's $86 million figure.

The improvements are notable, especially since it reported a $43 million drop in income. It attributed 70% of the decline to reduced passenger and cargo revenue, and its ground handling and catering units were also affected after airlines reduced their flights following bombings in the Sri Lankan capital of Colombo in April.

Cost reductions amounting to $55 million helped to offset the drop in revenue, due to enhanced productivity, as well as reduced administrative cost and wastage, while the airline relocated its corporate office closer to the airport. Its commercial team also saved $2 million on distribution cost.

Other cost reduction measures came from its MRO unit, saving $8 million in fiscal year 2018/2019 with another $23 million identified for the current fiscal year. The MRO unit regained its Type 145 certification from European Aviation Safety Agency, adding another revenue stream.

Efforts to reduce financing costs are also underway, as the carrier negotiates with state-owned banks to reduce interest rates, while seeking an exemption on withholding tax.

SriLankan Airlines’ last full-year report shows an operating loss of SLR31.6 billion ($175 million) in the year ended 31 March 2019, compared to a SLR10.4 billion loss in the previous year. Revenue rose 11.8% year-on-year to SLR184 billion, while net loss more than doubled to SLR41.7 billion.

Despite the weaker first-half performance, SriLankan is expecting a better performance for the remaining half of the year.

"In the second half of the year, group revenue is projected to increase significantly with the enhancement in operations by SriLankan and customer airlines," it says.

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