For Sri Lanka’s flag carrier SriLankan Airlines, India is a special market that accounts for a quarter of passenger revenue. The rapid growth in India’s aviation market and the growing heft of IndiGo and Tata group airlines, while presenting a few challenges for SriLankan, also provide massive opportunities for the Colombo-based airline, believes its Chief Executive Officer RICHARD NUTTALL. In a candid interaction with SUKALP SHARMA, Nuttall talks about SriLankan’s plans for the Indian market, the probable impact of development of large hub airports in India on the airline, and the challenges as well as advantages of being a small airline competing with much larger carriers. Edited Excerpts:
How significant is the Indian market for SriLankan Airlines? With Indian carriers now growing rapidly, how do you view the opportunities and challenges for your airline?
India is far and away the most important market to SriLankan. In terms of passenger revenue, the share from India is about 25 per cent (including transfer traffic). In terms of passengers, the number would be slightly higher…We fly to nine Indian cities at present. Indian tourism to Sri Lanka has grown three times in the last 12 months. And I think we are still scratching the surface. India’s GDP growth is over 6 per cent and air traffic usually grows at three times GDP growth, so that is 20 per cent growth. So, the opportunities are massive…growth of the Indian carriers is stimulating demand.
The challenge is that there are Indian carriers that are growing very fast…What it means is that if you are a competing carrier, you need to make sure that your growth on your markets is commensurate. As Indian carriers grow to Sri Lanka, we need to grow in the same way to India.
Going ahead, what can we expect in terms of network development from SriLankan for the India market?
From major airports like Delhi, Mumbai, and Chennai, it is going to be about having the right frequencies. Apart from point-to-point traffic, there is going to be connecting traffic from those cities to Sri Lanka and also the other way around. Those are the core markets and we have to have enough frequencies to stay relevant. But beyond those big markets, there are so many airports in India…As air travel expands in India, it should provide opportunities to us to connect with more Indian cities…But how fast we grow will depend on how quickly we can get aircraft. Our fleet has been reduced since COVID. Some aircraft went back to lessors, and it is challenging getting new aircraft in the current market. We currently have 21 aircraft, and we will add one next month. We had 27 pre-COVID. We are working with a couple of lessors and we hope to be at 25 (planes) by the end of 2024…We believe our sweet spot is around 35 aircraft. When we get to that size will depend on how quickly we can get aircraft.
The Indian government as well as airlines want to develop large Indian airports into international hubs. What kind of an impact do you expect that to have on SriLankan, as you also have sizable connecting traffic through Colombo?
What we are seeing is that traffic from Sri Lanka to Europe, which historically connected in the Gulf, is now beginning to connect in India. So, if you are an Indian carrier, your market from Sri Lanka will include traffic to India and connecting traffic, say towards Europe…Hubs are driven by geography. As tourism grows in India, we are very well placed to be a hub in the southeast. The opportunity from India is to Sri Lanka and beyond going east and south…We carry quite a lot to Australia, Singapore, and Thailand, and we still have some flows to the Gulf, particularly from southern India…From India, connecting traffic for us is more than 30 per cent, probably closer to 40 per cent, but it varies by month and market.
So, you don’t see any threat from development of international hubs in India when it comes to connecting traffic for SriLankan?
If India develops hubs in its southeastern region, then yes, they will compete with us…but we are probably more direct in line to many of our destinations than Mumbai, Delhi, and even Chennai in some cases…We need to grow fast enough on our main markets, so that our frequency is comparable with the Indian carriers. But equally, we are small enough that we can adjust where we fly to based on demand. If you have 500 aircraft, you have to grow a little bit everywhere. But if you are a small airline like us, if you have say 20 or 30 aircraft, you can be nimbler. Yes, there will be markets that get more challenging, but the opportunities will also be there, and it is up to us to make the most of those opportunities. Overall, the growth generated in India provides more opportunities for SriLankan as well.
Indian carriers are also increasing frequencies and launching more Southeast Asia services. Even Australia is likely to see more direct services from India over the next few years. Do you see space for you as well as Indian carriers in such markets?
The most important market for us is Sri Lanka, although we want to also grow as a hub. If you look at India…it is like a continent…we first want to increase frequencies to India and then expand to more cities in time. If we fly to more cities, we don’t need as much traffic from each city. Also, more point-to-point traffic for us means more connections out of Colombo.
And if you look at Australia, there will be markets that become served nonstop by Indian carriers or Australian carriers. There will be markets that get more connecting traffic and become more competitive for us while we carry a smaller share. There will be other markets where we may be the best-positioned carrier when you look at the geography. As the market grows, the opportunities grow for everyone.
Sri Lanka’s government is looking to privatise SriLankan. As the airline’s CEO, what is your view on the airline’s privatisation?
Interestingly, in SriLankan, most people see privatisation as a positive, and that includes most of the unions…When you want to grow, you need capital. In Sri Lanka, the government is going through an IMF process and while they (government) are supportive, they have their own challenges…If we privatise, it does two things: hopefully it will provide easier access to capital, and it will allow us to be much more nimble and opportunistic in our decisions, particularly on matters like fleet.
What is the current status of the privatisation process? When is it likely to conclude?
It is being run by the finance ministry (of Sri Lanka), not by the airline. So, all of our information is also secondhand. They had invited expressions of interest and six organisations showed interest. The list has been shortlisted to three—AirAsia Consulting, Hayleys, which is a Sri Lankan conglomerate, and the Supreme Global consortium (which includes Sri Lanka’s Supreme Global, Qatar’s MBS Investments, and India’s Sherisha Technologies).
I know they (Sri Lankan government) would have liked to privatise the airline yesterday…it is a complicated process…There is due diligence to do, negotiations to do, and airlines are not simple businesses. And we are not just an airline. We are also a ground handling company, a catering company, and an MRO. I think if we can get it done next year, that will be an achievement.