The Sri Lankan government has proposed handing LKR20 billion rupees (USD67.5 million) to SriLankan Airlines (UL, Colombo International) to repay loans and make interest payments. President Anura Kumara Dissanayake outlined the plan while delivering his 2025 budget speech in Colombo on February 17.
"The government would sign an agreement with those banks and set aside LKR10 billion [USD33.7 million] for loan capital repayment in 2025 as well as LKR10 billion for interest payments," Dissanayake said. "The airline would be fully responsible for ensuring operating profitability once these legacy debt service costs are settled by the government."
Speaking at the Asia Aviation Festival in Singapore the following day, SriLankan Airlines CEO Richard Nuttall said the carrier had been paying as much as 17% of its revenues to service financing costs. While the airline has been operationally profitable for the past three years, "we have lot of legacy debt that needs to be cleaned up."
The airline's reasonably strong recent performance and Sri Lanka's recovery from near bankruptcy three years ago have opened up new financing avenues, Nuttall said. He added that SriLankan Airlines' business plan involves doubling the current 22-strong fleet within five years.
But he cautioned that the leasing space was intensely competitive and that the target fleet number may not be reached. Nuttall also highlighted that longer-term, SriLankan would need to start thinking about replacing its A330 fleet.
"Depending on where we get the financing, we may go back out to market and try and work out what the long-term fleet is and start morphing into that," he said. "But in the short term, it's all about leasing and what's available."
SriLankan Airlines is presently an all-Airbus operator with a fleet of seven A320-200s, two A320-200Ns, four A321-200Ns, two A330-200s, and seven A330-300s.
"You're not going to be wanting to fly A330s when you get to the end of the 2030s," Nuttall said. "So what's the new aircraft? Is it the A330-900N? Is it the A350? Is it the B787? That's when you really start talking to Airbus and Boeing, and the opportunity then is there for Boeing to say, well you can transition the whole fleet with our really good deal."
Frequencies first
Nuttall said the additional aircraft would not necessarily be used to grow the network but instead to increase frequencies on existing routes. "The capacity of flights into Sri Lanka has gone up something like 50% over the last 12 months," he said. You've got to grow with the competition. Our first challenge is frequency, then we'll worry about new destinations."
Nuttall commented that working for SriLankan Airlines was "incredibly" frustrating due to missed "massive" opportunities.
"If you look at the natural growth of Sri Lanka, of tourism, the diaspora, the growth of India next door, and you look at our geography and the traffic flows that we have the ability to feed, not many other carriers can compete with that," he said. "This airline could be in a really different place in a few years' time."
The SriLankan Airlines CEO says the new government places great importance on tourism as a driver of economic growth. The government believes it can better manage this, he added, by keeping the carrier in state ownership.
