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SriLankan optimistic that restructuring will lead to profits

SriLankan Airlines is confident that once its restructuring efforts begin, it will start to enjoy profits.

Chief executive Suren Ratwatte says the carrier has recorded higher than expected revenue for each month of the current financial year and could be profitable by March 2018. He made the remarks in a television interview.

"We have beaten our revenue forecast in each month of the current financial year, but a big problem for us is our cost base. We need to reduce that and if we can do it, we will be profitable by the end of the financial year."

SriLankan recorded a net loss of SLR6.49 billion ($15.1 million) in the last financial year ended 31 March. The figure was "a significant improvement from the deficit that had been budgeted for the year", said the carrier.

Ratwatte says that while the Sri Lankan government is a major shareholder of the airline, Colombo does not share its plans openly but will oversee the restructuring efforts.

"We have already submitted a restructuring plan to them and are waiting approval. [The government] works in mysterious ways. It is not an easy task to find a partner who is not a competitor and has capital."

He adds that SriLankan's primary barrier to growth is a lack of funding, but that "significant" air services agreements can help it expand.

Ratwatte has also called on the government to "act quickly" to iron out the restructuring process within the next six months.

"We have had the the inability to cash in on what is essentially our captive market (in South Asia). If we don't act quickly, we're going to be left behind as more and more capacity is added onto the market from the Gulf and India, and we lose market share."

To that end, SriLankan has embarked on a programme to rejig its business and pivot to a more regional-focused network.

Ratwatte explains that the carrier's dropping of European services – whilst keeping just a direct London route – and its upcoming Colombo-Melbourne service on 29 October are some examples to meet that objective.

"If we a draw a 1,000 mile ring around Colombo, key destinations include Hyderabad and the Maldives. They are in our natural market with 300 million people. The South Asian market still offers plenty of room for growth."

He says a third of its passengers are classified as VFR (visiting friends and relatives). The balance are network traffic and leisure travelers into the country.

On its fleet plans, SriLankan could lease one or two aircraft in the near future and return another three older narrowbodies to lessors in 2018. Those will be replaced with another three Airbus A320neos by the end of 2017.

Flight Fleets Analyzer shows that SriLankan operates a fleet of 26 aircraft with an even split of A320-family aircraft and A330s.

Meanwhile, Ratwatte rejects the idea that Colombo could hive off SriLankan's various businesses including ground handling services, catering and engineering.

"If you look at the Gulf carriers, they operate on a group level and they cross-subsidise across their various businesses. It is difficult to make profits just on air transport alone, especially in our region."

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