The Srilankan Airline Industry

Analysing Challenges and Critical Success Factors

Presented bySaatviga S.

Road Map

Vision & Mission

Introduction

Ten Year Review

Key Performance Indicators

The Business Turnaround Plan

Challenges Faced

World’s Successful Airlines and Strategies

Factors Influencing Success

Vision and Mission

Vision

“To be the most preferred airline in Asia ”

Mission

We are in the air transportation business. We provide our

customers with a reliable and pleasant travel experience. We

provide our business partners with a variety of innovative,

professional and mutually profitable services. We meet

Shareholder expectations of profitably marketing Sri Lanka

and contributing towards the well-being of Society. We are a

competent, proactive and diligent team. Our contribution is

recognized and rewarded.

Introduction

Srilankan Airlines began operations in 1979 as the

National Carrier of Sri Lanka

Serves 45 destinations in 25 countries in Europe,

the Middle East, South Asia, Southeast Asia, and

the Far East.

Codeshare partnerships with bmi (formerly British

Midland), Etihad Airways and Malaysian Airlines

Shareholders Government of Sri Lanka - 51.05% Emirates Airline - 43.63% Employees - 5.32%

Introduction

Subsidiary - SriLankan Catering (Pvt) Ltd. is a

fully owned subsidiary of SriLankan Airlines.

Workforce - More than 5000 employees in Sri

Lanka and overseas

In-flight comforts – Business and Economy Class

Seats

FlySmiles Flyer Program

Srilankan Cargo

Srilankan Engineering – Technical Arm

Ground Services

Ten Year Review (2000 – 2009)

2000 2001 2002 2003 2004 2005 2006 2007 2008 20090

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

Operating Expenditure Net Profit/Loss Revenue

Year 2008-2009 Under Review Challenges faced

Arising global fuel costs

Struggle of the national tourism industry to

survive in a wartime scenario

High interest rates

Major transition in management

Increased competition from subsidised

airlines

▪ Dropped prices fighting for market share

Total Loss in the Year

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter0

1000

2000

3000

4000

5000

6000

7000Estimated Loss Loss in Mil...

Business Turnaround

Plan & Restructurin

g

Global Economic

Crisis

Huge Challenges

Faced

Key Performance Indicators Fuel Surcharges by Competitors

Global Economy

Passenger Revenues (decreased by 5%)

Cargo Revenues (decreased by 8.5%)

Overall Passenger Capacity (decreased from

12,599 million to 11,731 million)

Unit Costs (increased from Rs. 46.48 - 50.71

per Tonne Kilometre)

Average Staff Strength (significant decrease)

The Business Turnaround Plan Key Aspects of the Plan - “Earn more, spend less and

waste not”.

Restructuring of passenger and cargo revenue generation

Restructuring of route network

Savings through increased fuel efficiency

Reducing company’s fixed costs

Renegotiating of contracts with service providers

Optimising of sales channels

Reduced IT and Communication costs

Increase Productivity by focusing on People, Process and

Technology

Challenges Faced

Optimising Revenue

Improving Service Delivery

Enhancing Srilankan Engineering

Increasing Fuel efficiency

Increasing Productivity

Technology Requirements

Optimising Revenue

New services to Rome utilizing the market opportunities

in Italy

Temporary Suspension of Loss-Making Sectors

Hyderabad, Calicut, Cochin, Coimbatore and Goa

Increasing operations to key destinations

Increased frequencies to Middle East and South East Asian destinations

Direct services to increase convenience of passengers and reduce flying

time (Karachi)

Expansion of route networks through increased Code share Partnerships

Increasing bookings through its Internet Booking Engine

Customer Loyalty Programme – FlySmiles

Optimising Revenue

“Srilankan Holidays” teamed up with Singapore ,

Thailand and Malaysia

Business Class range and Platinum Range of holiday packages

launched for the higher income market segment partnering with the

top hotels

Event-based packages

Introduction of new products – eg. HOTSEATS

To promote advance bookings on the Airline’s website

SkyChain Cargo Handling System for customer

convenience and operational efficiency

Increasing Cargo revenues that contributes to the 13% of the Airline

revenue

Improving Service Delivery

Emphasis on Inflight Service

Training of cabin crew and increasing the no of instructors from 4 to 20

Ensuring continuous on-site monitoring and evaluation of crew members

Improvement in Meal Services

Significant changes to inflight menus to suit a variety of customers

Reducing wastage and overall meal costs

▪ Renegotiation of contracts with overseas caterers resulting in

significant savings

Enhancement to inflight entertainment

Duty free sales on new range of 180 products including

world’s leading brands and Srilankan items

Heart-start machines for medical emergencies

Improving Service Delivery

Recruitment of new Chinese passenger assistants for

Beijing service

SMS alerts on flight service

Uplifting the service standards of ground handling services

for other airlines

Training of new airport staff and sky marshals

Innovation and cost control In-house production of specialised vehicles and equipment especially with

regard to airport airside activities Modification to air-sickness bags to enable rapid identification of unused

bags Closing of airport offices overseas

Enhancing Srilankan Engineering

Marketing programmes to increase awareness of SriLankan

Engineering’s capabilities as an MRO, in order to attract new

customers and enhance revenue

Major Contract with Indian Carrier IndiGoue to carry out

maintenance checks

Training more aircraft engineers for Airblue, and to carry out

maintenance checks for the Pakistani carrier

Continued emphasis on key areas like fuel efficiency and

punctuality

Structural modifications to the fleet in-house resulting in

cost-savings

Increasing Fuel Efficiency Use of diesel-operated Ground Power Units to power

internal systems and air-conditioning on aircraft parked

at BIA, instead of using Auxiliary Power Units of the

aircraft

Reduce fuel burn while landing

Flying shorter routes whenever possible.

Re-evaluation of the choice of alternate airports

Stopping of over-fuelling of aircraft, to reduce weight

Focusing on having ‘clean’ aircraft to reduce drag while in

flight

Tankering more fuel than required from cheaper points

Increasing Productivity

Continuing to review company structure for greater

effectiveness and productivity

Customising development intervention programmes to

the requirements of user departments and business

demands

No-Pay Schemes, to reduce staff costs

Continuous improvement of welfare facilities

Engaging employee unions in the decision-making

process

Enhancement of recruitment processes for the future

Technology Requirements

Consolidation of Data centers in Colombo and Katunayake

Maximizing the utilisation of existing systems to user

departments

Creating a common customer database to integrate

different sub business units which interacts with customer

profiles

Revamping the Corporate website

Increase penetration levels for internet bookings

Rich features for customers and content management tools for internal

users

Introduction of a CRM system

In-house developments of new systems for cost saving

Minimise IT risks through IT security audits

Some World’s Successful Airlines

Singapore Airlines

Cathay-Pacific Airways

Qatar Airways

Thai Airways

Asiana Airlines

Malaysian Airlines

Emirates Airways

Etihad Airways

Singapore Airlines- Strategies Used

Fully branded product/service differentiation strategy First to introduce hot meals, free alcoholic and non-alcoholic

beverages, personal entertainment systems, and video-on-

demand in all cabins.

Maintains the youngest fleet of aircraft among all major air

carriers

▪ Low maintenance or replacement costs

New aircrafts are sub-branded further to distinguish from

others

Invests heavily in R&D, innovation and technology as an

integrated part of the business strategy

Singapore Airlines- Strategies Used

The famous Singapore Girl

Rigorous training programs for the cabin

and flight crew

Strong Financial and cash position to

internally fund purchases and limit interest costs

Continuous price-premium strategy and satisfactory passenger

load factors

SIA carefully hedge up to 50 % of its fuel contracts

2 years in advance to avoid cyclical and often large

volatility in fuel prices

Emirates Airlines – Strategies Used Operates wide-body aircraft and flies mostly long haul

lowers its per-seat-mile costs so it can be competitive on pricing

Newer fleets resulting in low maintenance and replacement

costs

Attracts higher paying customers

latest in-flight amenities and entertainment systems

Distinctively uses Asian elements to create a premium product

that appeals not only in its home markets but also to a

Western audience.

High-level services provided especially for 1st class section

Latest technologies used to enable faster and more efficient

handling of functions such as ticketing, baggage and cargo

handling

Emirates Airlines – Strategies Used Sporting event sponsorships for promoting brand

awareness

major events in football, horse racing, yacht racing, rugby, golf,

cricket and tennis.

Recruitment from over 100 countries around the

world and provide training to them to the highest

standards

Invest millions of dollars to provide advanced

engineering support

Huge investments on promotion campaigns

Thai Airways – Strategies Used User-friendly website to book and confirm flight

reservations

Development of catering service

In the process of implementing e-ticketing to save

time and reduces the need for check-in personnel

Established a Tourism Alliance to promote Thailand

tourism and travel industry

Increased cooperation at the domestic and

regional levels as well as with other global alliances

to strengthen the airline’s competitive edge and

expand market share

Thai Airways - Strategies Used

Implementation of the Customer Relationship

Management system

Automated Self Service System for domestic travel only

to facilitate passengers’ demand in areas of reservations

and check-in

Frequent Flyer Programs

Promotions through media, co-marketing efforts with

hotel chains and credit card companies and travel agents

Maintaining high safety standards - Compliance with ISO

9000

Factors Influencing Success

People

Service Product/Promotions

Route System

Fleet Management

Revenue/Cost Control

Financial Management

References

Srilankan Airlines Annual Report 2008/2009

http://www.srilankan.aero/aboutus/

SriLankan_Airlines_Annual_Report_2008_2009.pdf

http://www.brandchannel.com/features_profile.asp?pr_id=209

http://goliath.ecnext.com/coms2/gi_0199-6720187/CASE-STUDY-EMIRATES-

Long-haul.html

http://www.hicbusiness.org/biz2003proceedings/Niti%20Dubey-Villinger.pdf

file:///C:/Users/Sudhahar/Desktop/Airlanka/facts_5242839_airline-industry-

key-success-factors.html

http://gbr.pepperdine.edu/064/airlines.html

http://www.ehow.com/facts_5242839_airline-industry-key-success-

factors.html

Thank You