The Fall and Fall of SriLankan Airlines

The woeful saga of the benighted SriLankan Airlines continues to drag on. Recently, International Trade Minister Sujeewa Senasinghe told the media that the Sri Lankan Government was seeking foreign assistance to rescue its loss-making national carrier. This news invites a number of questions: how did the woebegone airline reach such a parlous situation? How did an accumulated profit of Rs. 9.288 billion in the financial year of 2008 turn into a loss of Rs. 128.238 billion by 2016? Does Sri Lanka need a national carrier? Can it afford a national carrier like this? Why would any self-respecting foreign airline want to get involved with this basket case?

Perhaps these questions can be answered if we look at the timeline of the national carrier ‒ or should that be “national albatross”?

1947

Foreign involvement has been vital to the national carrier’s existence right from its inception. The Department of Civil Aviation launched Air Ceylon in December 1947. Two Douglas DC-3 Dakotas were operated by World War II veterans with ground services provided by local staff. Initially, the airline’s regional flights were to Madras and Trichinopoly.

1948

An agreement was signed with Australian National Airways (ANA) to provide Air Ceylon with technical assistance to operate the larger four-engine transoceanic Douglas DC-4 Skymaster. 

1949

ANA acquired a 49% stake in Air Ceylon, which extended its domestic and regional DC-3 services to Bombay and Karachi with two DC-4 aircraft. On 21 December of this year, an Air Ceylon Douglas C-47 Dakota was damaged beyond repair in a crash landing at Tiruchirapalli Airport following a scheduled passenger flight from Jaffna. The 21 passengers and three crew members survived the accident.

1950

Air Ceylon began London–Sydney flights with stops in Rome, Tel Aviv, Karachi, Bombay, Colombo, Singapore, and Jakarta, flying from Ratmalana.

1951

Air Ceylon became a Corporation, with the Government of Ceylon owning 51% of the shares while ANA owned the remaining 49%. No local flyers were cleared to operate the DC-4s, so Australian pilots flew Air Ceylon planes on international routes while local pilots were confined to internal and regional services.

1953

Air Ceylon’s international DC-4 operations stopped in the face of competition from British Overseas Airways Corporation (BOAC) and Trans World Airlines (TWA). Air Ceylon discontinued all long-haul flights and gave up its partnership with ANA in September, after BOAC had introduced its de Havilland Comet between London and Colombo.

1955

The 49% stake held by ANA was taken over by Dutch carrier KLM.

1956

Air Ceylon resumed international flights (to Bombay, Karachi, Bahrain, Cairo, Rome, and London to the West; and Bangkok and Singapore to the East) this time with a Lockheed 749 Constellation leased from KLM. Some Ceylonese captains, first officers, flight engineers, and radio officers were trained on the Constellation. Cabin crew were mostly Ceylonese. The ground engineers and other Air Ceylon staff were trained to KLM standards.

1960

KLM supplied a modern Lockheed 188 Electra four-engine turboprop for Air Ceylon services and planned to upgrade to the McDonnell Douglas DC-8 four-engine jetliner. However, the runways at Ratmalana and Katunayake could not cope with these heavy modern aircraft. Policy-makers, not for the last time, lacked foresight. By this time, KLM’s shareholding in Air Ceylon had been reduced to 24%.

1961

India’s policy makers had shown more foresight and had extended the runways at its major airports. Air India started using Boeing 707 jetliners and became the world’s first all-jet airline. Air Ceylon gave up on international flights again. BOAC was the only international airline operating scheduled flights into Colombo. The de Havilland Comet 4 was an uneconomical aircraft, designed to operate from short runways. Air Ceylon management had no option but to go into partnership with BOAC to conduct Air Ceylon flights to London. The Comet 4s merely had an ‘Air Ceylon’ sticker placed over the door each time they operated an Air Ceylon service.

1965

BOAC upgraded its Colombo aircraft to the Vickers (BAC) VC10, again using Air Ceylon stickers. On all BOAC/Air Ceylon services the flight deck crew members were all British, while some of the cabin attendants were Ceylonese (although first class was staffed by BOAC’s people).

1968

The new Bandaranaike International Airport at Katunayake was commissioned.

1969

Air Ceylon acquired a Hawker Siddeley D.H.121 Trident jetliner and started flights to Singapore, Bangkok, Bombay, Karachi, and Madras. Whenever this lone plane was unavoidably grounded, it disrupted all regional operations. The Commercial Department of Air Ceylon asked for larger aircraft like the Boeing 707 and the DC-8, but the Board of Directors declined.

1971

Air Ceylon negotiated a deal with the French company UTA Airlines to provide commercial and technical assistance. UTA needed to compete with Air France internationally, and the rights that Air Ceylon held to some attractive routes was an incentive. UTA trained Ceylonese cabin crew and promised to train a hundred pilots to fly the big jets. At the end of the deal, Air Ceylon would have a yearly guaranteed profit of Rs. 12 million, and would have owned one Douglas DC-8.

However, the UTA deal did not run smoothly. Air Ceylon trade unions were intransigent. Most senior Ceylonese pilots lacked experience in flying big jets and were slow to learn new techniques or cope with modern devices. Union rules about seniority prevented them being replaced by younger and more able pilots, and when UTA attempted to operate flights to Australia with the Air Ceylon DC-8, they were told that the flight deck crew must be all-Sri Lankan.

1976

When the general manager of Air Ceylon visited Paris, he was snubbed by UTA. He took his revenge by ending the deal. A Rajapaksa avant la lettre?

Fifteen years after Air India had all-Indian flight deck crews flying international routes, Air Ceylon was struggling to recruit DC-8 pilots from all over the world. Some pilots were seconded from the Air Force. Most of the world’s airlines were using wide-bodied planes like the Boeing 747, Douglas DC-10, and the Lockheed L-1011 TriStar, while Air Ceylon was still using a first-generation, narrow-body, intercontinental big jet, the DC-8.

1977

When J.R. Jayewardene became President of Sri Lanka, it was decided that Air Ceylon was beyond repair and a new airline would be formed with the help of Singapore Airlines (SIA).

1978

On 7 September 1978, one of Air Ceylon’s two HS 748 aircraft was destroyed by a terrorist bomb on the parking apron at Ratmalana Airport. Two pilots had been carrying out pre-departure check-ups, when the fire started following the explosion of a bomb in the aircraft cargo hold.

By then the government flying school had also closed down. The open economy encouraged competition among many private training schools for pilots but standards fell, and the regulator, the Director of Civil Aviation (DCA), proved inadequate. Most trainee pilots went abroad to qualify.

1980

Although it was formed under the private company’s ordinance, Air Lanka was government-owned. Two Boeing 707 aircraft were obtained (and later bought) from Singapore Airlines, who provided training for the crew and all executives selected. No new pilots above the age of 44 were recruited, thus providing career opportunities for younger pilots. However, experience was also important, and most of the 707 captains were expatriate pilots who had retired from SIA at the age of 60 and flew with Air Lanka for another two years, under special provision. The Chairman of Air Lanka was a Sri Lankan airline pilot who had worked for SIA and knew the requirements of a world class airline.

SIA’s 747s could not fly nonstop to Europe. The advantage of the partnership for SIA was the right to operate eastwards and westwards through Colombo. Air Lanka at this point had a wide regional and international network, and even made a modest operational profit. Also, Indian passengers could come to Sri Lanka to buy luxury goods rather than going to Singapore.

Air Lanka’s initial fleet consisted of two Boeing 707s, leased from SIA. A Boeing 737 was later leased from Royal Brunei. On 28 March 1980, Air Lanka signed a purchase agreement for two brand new Lockheed L1011-500 TriStars, the most advanced wide-body aircraft in the world at that time.

On 1 November, Air Lanka began wide-body operations with a leased Lockheed L1011-1 TriStar from Air Canada.

However, by the time Air Lanka acquired two Boeing 747 aircraft from Qantas in Australia, the security situation had deteriorated, and dwindling tourist numbers meant uneconomical empty seats.

1982

On 15 April 1982, Air Lanka bought its own L1011 from All Nippon Airways. With the introduction of TriStar aircraft, the Boeing 707s were phased out and sold. Then another L1011 was leased from Air Canada, and the third L1011 was bought from All Nippon.

1984

On 8 June 1984, the airline received its first Boeing 747-200B “King Vijaya” and the second joined later. The aircraft were used on flights to Europe and a few flights to Southeast Asia.

1986

An Air Lanka TriStar was blown up on the parking apron at Katunayake International Airport in May, killing twenty one and injuring over forty people.

There was discord in the organisation. The Pilots’ Guild turned against the chairman, even though they had helped him get the job. The Board of Directors was replaced by a Board of hard-headed businessmen led by Lakshman de Mel, who had been Director of Civil Aviation before. They decided to return the two 747s to Qantas.

1989

President Premadasa returned to the bad old ways of making appointments to the Board of Directors as political pay-offs. Nevertheless, Air Lanka was the first airline to fly the Airbus A340 in Southeast Asia. Air Lanka introduced two Airbus A320 and three Airbus A340 aircraft to its fleet. The airline was making an operational profit, but was hobbled by debt servicing resulting from commercial borrowings.

1998

Air Lanka was re-branded as SriLankan Airlines. The state-owned airline was partially privatised. The Dubai-based Emirates Group and the Sri Lankan Government signed an agreement for a ten-year strategic partnership. This agreement included exclusive rights for all aircraft ground handling and airline catering at Colombo-Bandaranaike airport for a ten-year period. Emirates bought a 40% stake worth US$70 million (which it later increased to 43.6%), and sought to refurbish the airline’s image and fleet. The Government retained a majority stake in the airline, but gave full control to Emirates for investment and management decisions.

October 1999 to July 2000

SriLankan acquired six Airbus A330-200s to complement its fleet of Airbus A340-300 and A320-200 aircraft. The company’s fourth A340-300 arrived at Colombo painted in the airline’s new corporate livery. SriLankan upgraded its existing A340 fleet to a two-class configuration (business and economy class) whilst overhauling the interior to reflect the new corporate image.

The airline gradually increased its destinations with more additions for regional markets, such as India and the Middle East. SriLankan started flights to Jeddah, the airline’s 51st destination overall, and its third destination in Saudi Arabia, thus increasing the number of destinations in the Middle East to nine.

2006

The complex fate of the national carrier was further entangled by the arrival on the scene of Mihin Lanka. Mihin codeshared with its partner SriLankan Airlines on several routes, as part of a consolidation exercise between the two airlines. The association has been toxic to SriLankan. Mihin  has been plagued by financial losses, debt, waste, corruption, and safety concerns since its inception.

As later revealed in media reports, Mihin Lanka was launched without the approval of the Cabinet or the Civil Aviation Authority. Furthermore, its three aircraft were leased without a tender process. Its three directors were Sajin Vass Gunawardena (CEO), Gotabhaya Rajapaksa (Chairman), and Roshan Goonetileke (Commander of the Sri Lanka Air Force).

2007

Mihin was forced to ground its A320 serving India after the aircraft’s Bulgarian owners had instructed its pilots not to fly the aircraft as Mihin had not made its payments. SriLankan Airlines withdrew its ground handling facilities because of non-payment, forcing Mihin to manually push back its aircraft before takeoff.

2008

On 6 January 2008, a Mihin Lanka flight from Colombo to Dubai was forced to issue a Mayday call and perform an emergency landing in Mumbai after one engine developed a severe oil leak and stopped working. Passengers were informed that the incident was due to the plane leaving Bandaranaike International Airport without a vital component in one engine. Fortunately, there were no casualties.

In February of this year, Mihin lost an A321 after its Turkish owners (BestAir) took it back for non-payment. The Sri Lankan Government gave Mihin Rs. 500 million to strengthen its financial position

In April, Mihin lost its other aircraft after its Bulgarian owners took it back for non-payment. Having lost both its aircraft, the company was forced to suspend all operations. Around this time, it was announced that Gunawardena would resign as CEO but remain on the board. Gunawardena didn’t resign but in June he was dismissed and replaced by Anura Bandara. Gunawardena went on to become a Member of Parliament for President Rajapaksa’s party.

Kapila Chandrasena replaced Anura Bandara as CEO in November.

Emirates notified the Sri Lankan Government that it would not renew its management contract with SriLankan Airlines, which expired on 31 March 2008. Emirates claimed that the Sri Lankan Government was seeking greater control over the day-to-day management of the airline.

Peter Hill, the then Country Manager of Emirates in Colombo, had refused a request from Sajin de Vass Gunawardena, then Monitoring MP of the Ministry of External Affairs, to accommodate a presidential entourage on a flight from London to Colombo. The president was returning from a private visit to Britain to attend the passing out of his son Yoshitha from the Naval Academy in Dartmouth. Emirates chose not to inconvenience fare-paying passengers. Hill was asked to leave Sri Lanka. When Emirates broke away, the accumulated profit of SriLankan was Rs. 9.288 billion in that financial year. From 2008 to 2015, when the Rajapaksa administration ran it, the loss for the seven years was Rs. 128.238 billion. The government appointed multi-billionaire business tycoon Harry Jayawardena as Executive Chairman of SriLankan Airlines three months ahead of the expiry of the management agreement with Emirates. Despite Mr. Jayawardena’s appointment as Executive Chairman, sources said some of the unions also raised their misgivings about having any involvement with Mihin Air.

2009

The Government gave Mihin a further grant of Rs. 3 billion. The Government also guaranteed two bank loans taken out by Mihin: a three-year (2006–09) Rs. 250 million loan from the Bank of Ceylon and a three-year (2009–12) Rs. 1,553 million loan from the Bank of Ceylon to lease an aircraft.[Mihin resumed operations on 1 January 2009 with a flight to Dubai. In November 2009 Mihin took over an ex Air Deccan Airbus A320. Construction of phase one of Mattala Airport began on 27 November.

2010

In 2010 the Government made a further equity investment of Rs. 2.754 billion, taking its total equity in Mihin to Rs. 3.004 billion as at 31 December 2010.

Emirates sold its 43.63% stake in SriLankan to the Government of Sri Lanka in a deal that was finalised in 2010, thus ending any affiliations the two airlines had with each other.

In December, Mihin Lanka purchased an Airbus A321 .

2011

In September 2011, Mihin Lanka announced that it planned to serve Bangkok, Chittagong, Kozhikode, Manila and Singapore.

The airline also won the Bangladesh Monitor ‘Best Budget Carrier’ award in this year.

A later Board of Inquiry termed SriLankan’s re-fleeting programme as “irrational” and completely untenable since the decisions were taken in 2011, when the airline was facing a dire financial crisis. It added “The BOI also scrutinised the role played by Seabury, which acted as a consultant to SriLankan. Seabury is a global advisory and merchant banking firm based in Connecticut in the United States. The BoI noted a conflict of interest since Seabury, which participated in the re-fleeting recommendations, was actively involved in the aircraft negotiations with Airbus and Boeing and was responsible for the final selection of Airbus as the supplier.”

2012

In a memorandum dated March 14, 2012, the then Civil Aviation Minister Priyankara Jayaratne obtained approval for raising US$ 175 million from the Mashreq Bank in Dubai on the strength of an “anticipated Government guarantee.” He said the loan would be utilised to pay creditors (mainly the Ceylon Petroleum Corporation), short term bank loans and to meet capital expenditure, including investment required for Hambantota (Mattala) International Airport to provide ground and air cargo handling services. By the end of February 2012, the construction of the runway, apron and taxiways at Mattala Airport was completed ahead of schedule.

On 9 April, a Mihin Lanka flight from Colombo to Jakarta called an emergency landing back to Bandaranaike International Airport about an hour after take-off. Although initial reports suggested that a fire had broken out, the airline later denied these reports and investigated into a “technical fault.” No casualties were reported.

In August, Mihin took delivery of its third aircraft, an Airbus A321, and on 16 October, a Hawker Beechcraft B200 King Air of the Pakistan Civil Aviation Authority became the first aircraft to land at the new airport in Mattala (MRIA).

2013

It was announced that Mihin Lanka would lease two Boeing 737-800 from 2015. However, the airline revised the lease agreement and leased two Airbus A320s and one A319-100 instead, due to the cost of introducing Boeing aircraft into Mihin’s all-Airbus Industrial fleet.

A SriLankan Airlines Airbus A330-200 landed at Mattala airport on 29 January. This was the second plane to land, shortly followed by an Airbus A320, which carried 125 orphan children from  Colombo. In March 2013, the Civil Aviation Authority awarded MRIA international airport certification, allowing it to receive international flights.

On 14 March, a SriLankan Airlines aircraft operating a test flight between Colombo and Mattala collided with a flock of birds shortly before landing. Although the aircraft was able to land safely, many of the birds were killed, and not for the last time.

The MRIA was opened for flight operations on 18 March, and the first commercial flight to land at Mattala was SriLankan Airlines Flight 226 from Dubai, followed by an Air Arabia flight from Sharjah and a Flydubai flight from Dubai. Several airlines served Mattala in the beginning, but the majority soon ended service. Air Arabia ended its flights from Sharjah only six weeks after beginning service, because of low demand.

On 25 March, another SriLankan Airlines flight was involved in a bird collision. This time, it was a flight from Malé to Colombo via Mattala, which collided with birds upon take-off from MRIA. A crack formed in the cockpit windscreen, but the aircraft was able to continue to Colombo

On 11 January, a  Flydubai  plane flying from Colombo to Dubai via Mattala, hit a flock of peacocks during take-off from MRIA. The aircraft was forced to return to MRIA.2014

On 13 May, a Mihin Lanka flight from Dhaka to Colombo made an emergency landing at Dhaka airport a few minutes after take-off, due to a navigation system failure. Passengers expressed extreme displeasure over the actions taken by Mihin Lanka ground staff in Dhaka as well as in Colombo.

2015

SriLankan Airlines operated a hub at Mattala airport until 2015. In triangle routings through Colombo, the airline flew to Bangkok, Beijing, Chennai, Jeddah, Malé, Riyadh, Shanghai, and Tiruchirappalli from Mattala. The hub was closed on 17 January 2015, as the airline was accruing great losses on the routes. Mihin Lanka flew from Mattala to Gaya in India and Medan in Indonesia, but later ended flights.

In 2015 employee strength at SriLankan stood at 6,987. If the staff per aircraft was 365.21 in 2008, it was 332.71 in 2015. This is when there was no SriLankan aircraft which had even 300 seats. This ratio is said to be above the global average of other airlines.

The Government in June approved a plan to restructure SriLankan, but it was not implemented. The Cabinet decided to cancel the lease of four A350-900 aircraft and called for route “rationalisation by shifting the European sectors to a more optimised Asian centric model.” Other measures included transfer of ownership of Mihin Lanka was transferred to SriLankan to reduce losses and increase productivity. The Government decided to make an equity contribution of US$ 25 million to Mihin Lanka.

In February, the Minister of Ports, Shipping and Aviation, Arjuna Ranatunga, appointed a Board of Inquiry (BoI) to report on any abuse of power by the former Chairman and Board of SriLankan, as well as violations of rules and regulations, between 2006 and 2014. The panel, headed by anti-corruption advocate and senior lawyer J. C. Weliamuna, said it found instances of gross abuse of power, including sexual misconduct, by former chairman Nishantha Wickramasinghe, Mahinda Rajapaksa’s brother-in-law.

2016

Over 300 soldiers, police officers, and volunteers were deployed to chase away wild animals from Mattala airport. Fire crackers were used to scare away the animals, but the operation was unsuccessful, and a bigger operation was being planned.

Only two airlines were using Mattala in early 2016. Flydubai and Rotana Jet operate triangle routings through Colombo to Dubai and Abu Dhabi, respectively. Cinnamon Air will begin direct flights to Colombo in May 2016.

A second stage of expansion was planned to increase the number of jetways to 15; a new hangar and cargo apron was planned. Stage 2 would have  raised MRIA’s capacity to 5–6 million passengers per year ‒ but the expansion has been suspended.

International Trade Minister Sujeewa Senasinghe told reporters that the Sri Lankan Government was seeking foreign assistance for SriLankan Airlines.

The Burden of Our National Carrier

Looking back to 1947, we can ask with the wisdom of hindsight: “Why did a Ceylon becoming newly independent, need a national carrier?” It may have been to add prestige to the fledgling state. It may have been to attract tourists to the country and thereby boost the economy. How does that look today? Whether SriLankan Airlines brought prestige to anyone can be questioned ‒ it has, however, helped facilitate corruption. Today, it is draining the Sri Lankan economy rather than boosting it. Over the decades, it has changed strategy many times to no good purpose. In the latest “restructuring”, it is switching from wide-bodied to narrow-bodied aircraft and pulling out of Europe. Hiran Cooray warns that this will be disastrous for tourism. Has the time come to abandon ship? The downside of that would be loss of jobs. Can we believe the Minister of Finance when he promises that our national carrier can be transformed into a profitable concern with the input of “professional management inclusive of local and foreign experts”? We have all heard that before.