With peace finally a reality in Sri Lanka after more than 20 years of civil war, SriLankan Airlines is reporting a boom in business and is planning a major expansion after two years of rationalisation.

The carrier, 43%-owned by Emirates, recently leased another Airbus A320 and is closing on a deal to acquire up to six more Airbus A340-300s. It will represent a major turnaround for the national airline, which fell into serious trouble in July 2001 when a rebel attack at Colombo airport destroyed four of its 12 aircraft and damaged two others. For months after that business was sharply down but early in 2002 a surprise ceasefire agreement was signed between the government and Tamil separatists that raised new hopes.

To the surprise of many, the ceasefire has held firm and chief executive Peter Hill says business has picked up steadily as many Sri Lankan nationals living abroad return to their homeland for visits for the first time in two decades. The country is also seeing a revival as a tourist destination.

With demand for India services showing particularly strong growth, SriLankan agreed late last year to lease an A320 from Orix Aviation Systems to replace one that was destroyed in the 2001 rebel attack. It has now leased another from the same lessor, joining two A320s, four A330s and three A340s already in the fleet.

And the expansion is not expected to stop there. Under a deal currently being evaluated, SriLankan is looking to lease up to six former Singapore Airlines A340-300s for long-haul services.

There is even more positive news for the airline, says Hill, as Emirates and the Sri Lankan government have now reached agreement on changes to the 1998 deal under which the Dubai carrier acquired its stake. Emirates accepted a 10-year management contract at the time of the 1998 deal and secured certain guarantees, including that the national airline would hold exclusive rights to key air routes for a set period.

Hill will not say what concessions the new agreement includes, although many industry observers expect Emirates will allow competition in some areas such as ground handling services at Colombo International Airport.

Source: Airline Business