Board of directors should be in charge of running airline - SriLankan CEO
September 21, 2017 06:04 pm
The Chief Executive Officer of Sri Lanka’s cash-strapped national carrier Capt. Suren Ratwatte says that addressing four major issues would help SriLankan Airlines return to financial health.
In an exclusive interview with Ada Derana 24X7, he said that the airline is actually profitable at an operating level.
“We have four major issues which need to be addressed. First and greatest issue has been the lack of capital to the airline.”
He stated that the majority shareholder, which is the Government of Sri Lanka, has never capitalized the airline at the levels it needs to be and that therefore it is dependent on short-term loans primarily from state banks and some foreign banks. “This consumes an enormous portion of our revenue.”
According to the SriLankan Airlines CEO, the second biggest problem is the high fuel price in Colombo. He stated that Colombo unfortunately does not price its fuel at market levels and this forces the airline to buy its fuel externally which is a loss of income to CPC and the country and also drives their cost up.
The third problem, he said, is a high cost of aircraft leases that were part of a very ambitious expansion program entered into in the last four to five years. “Unfortunately the markets have changed considerably since then and the revenues can’t support those high lease cost,” he said.
“And our fourth problem is that as a 38 year old company, like most middle aged institutions we have a certain amount of fat and we need to exercise, take out that fat and become a lean and strong airline again.”
“Once we address these four issues and we have submitted detailed plans on all of these to the shareholder, we can return the airline group to financial health. Of that I am completely convinced,” Ratwatte said.
Responding to a question regarding the national carrier’s move to stop flights to European destinations, the CEO said that it was done based on two reasons.
He stated that one reason is that these routes are actually almost entirely dependent on leisure traffic and the Middle East carriers have been aggressively pushing down the prices on those routes, which saw a halving of the ticket prices over the last four years.
He said that the routes are no longer financially viable for the airline to operate.
“And our second point is that they are so seasonal. In the peak season to Europe, yes we made money. But that was only four months for the year. The remaining eight months of the year we lost money.”
The SriLankan CEO said that if they were able to have a charter or seasonal type of operation, then the airline can continue to operate to Europe. “But in our present mainline scheduled service, Europe is not a viable destination at the moment.”
Capt. Suren Ratwatte also said that during the airline’s decade-long partnership with Emirates, the national carrier was able to turn a profit because management control was with the executives.
“I think both the airline and any external parties learnt a lot from the Emirates partnership and it really comes down to having an equity stake in the airline and having management control.”
He said that because management control was with the executives during the Emirates partnership, they were able to move fast and do what needed to be done to make the airline profitable. “Unfortunately since then that has eroded.”
“And before any partner comes in I’m sure the partners themselves are aware of this fact they would make absolutely sure that they had sufficient equity and sufficient levels of oversight where they could run the company as a private enterprise corporate governance demands,” he said.
Inquired regarding his opinion on making the whole processes efficient at the airline, the CEO said that he firmly believes that putting the board of directors in charge of decision making would help a long way.
“I believe the board of directors should be in charge of running the airline. At the end of the day we need to function in such a way.”
“If we have to seek higher approvals further up the tree because of our shareholding it changes the entire structure and it makes it very difficult to run a commercial company. Then we become something else,” Ratwatte said.