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By Sarath de Alwis, Former employee of SriLankan Airlines

The latest Annual Report of SriLankan Airlines carries an interview with its Managing Director Tim Clark, which according to him seeks to answer concerns that have reached the Airline from many quarters.

He should be congratulated for his efforts to mend fences, which implies a climb down from the initial intransigence displayed by the assertion that "an agreement is an agreement and further that it is one between two governments".

The purpose of this article is to highlight some further concerns that arise from the answers he had provided.

On the issue of open skies policy that the government would like to adapt Clark reassures that the management of SriLankan Airlines is not against an open skies policy. He proceeds to state that they would welcome such a policy provided that it is based upon reciprocity. He amplifies "we do not believe however that the introduction of an open skies regime in Sri Lanka alone will lead to a large increase in foreign Airlines operating to Colombo. In support of this claim he notes that while Sri Lanka has signed 57 bilateral Air services agreements only 15 of these are used by foreign Airlines.

Here it has to be stated unequivocally that Clark has chosen to skate on thin ice. Bilateral agreements are negotiated between sovereign countries or under very special circumstances with places such as Hong Kong, which was first a colony of the crown and now enjoying special status within the PRC.

The designated carrier can submit their observations to the respective government in the course of negotiations the governments concerned are not under any obligation to be bound by these observations. A revealing example can be cited to demonstrate this position. In the early 90's Emirates requested Air Lanka that they wanted its Dubai Colombo flights to be extended to Singapore and on to Jakarta. Air Lanka had serious reservations.

Very fortunately for Emirates the Dubai delegation was headed by the Chairmen of Emirate Airlines who was also the head of Dubai Civil Aviation. Emirates quite rightly pointed out that they had an open skies policy and Air Lanka was being permitted traffic rights between Dubai and specific points in Europe. However, the request from Emirates was in fact not reciprocal as it involved two points beyond Colombo with traffic rights. May be they would have granted Air Lanka the facility to fly Dubai/Zurich/London/Manchester. But Air Lanka did not have such combinations in its network. The government of Sri Lanka acceded to their request on a temporary operating permit, which later evolved into a permanent arrangement.

As regards the operation of 15 bilateral agreements out of 57, Clark would have surely taken note of this fact when the due diligence test was made prior to their commitment. Perhaps Emirates would have found that to be another attractive proposition. Determining the civil aviation policy and the negotiation of bilateral Air services agreements is the sole prerogative of the government of Sri Lanka. If the government decides to declare an open skies policy unilaterally seeking no reciprocity Sri Lanka is well within its rights to do so.

To claim otherwise will lead us to believe that Sri Lanka has ceded to you the right to determine the civil aviation policy of this country.

With the liabilities of the Airline exceeding its total assets by Rs. 2,445.62 million fleet expansion is an illusion if not a distant goal. In this context insisting on reciprocity reminds one of Alice in Wonderland. "If you do not know where you are going what difference does it make in which direction you proceed".

In answer to the question why there has been a deviation from the original business plan presented before privatisation

Clark rightly claims the plan it self was the starting point, and it was never meant to be "cast in stone". The vagaries of a turbulent industry has to recognise that the best of plans require revision forced by external factors that are beyond the control of the Airline. Why then do you insist that the management agreement between SriLankan and Emirates is cast in stone or rather a sand dune, which will remain still up to 2008? Is Emirates trying to make SriLankan a regional airline?

Clark responds "with our current route network from Tokyo in the east to London in the west and 27 destinations in between SriLankan is truly an international Airline. This network is what you inherited. On the contrary making SriLankan a regional carrier, which is lean and less exposed to unmanageable liabilities is not at all a bad idea. In that event an open skies policy gains added credibility and its success a distinct possibility.

Emirates and SriLankan compete on the same route network. Isn't this in conflict with the spirit of a partnership?

Clark replies that the benefits accruing to both Airlines are many. An eloquent reply but extremely economical with the ground realities.

They say that SriLankan is spending huge sums of money to purchase IT systems from Emirates what do you have to say?

Clark concedes that it is so. This is an area where we have to agree that Clark is absolutely right. But the cost incurred if excessive the responsibility falls on the collective shoulders of the board of directors, which included three government nominees.

Is it true that SriLankan was forced to absorb an Emirate placed order for Airbus A330s?

Clark says it is not true. It was a part of the business agreement with the government of Sri Lanka. We have to accept his reply with no reservations. It is extremely dangerous to speculate in the world of Aircraft financing unless one has total access to all relevant information. (To the curious it is suggested that they start with the fundamentals by reading "Birds of Prey" by Matthew Lynn published in 1995 by William Heinemann). There have been suggestions that the company has been indiscriminately selling off assets and re-leasing them back without a net advantage. How would you explain?

In this instance too we have to accept that exceptionally difficult trading conditions forced the Airline to resort to such financing. However Clark's claim that A 320s were sold at US $ 26 million each while today such Aircraft are valued at little more than US $ 16 million is debatable. In any event how did you manage to forfeit the technical performance bond furnished to the purchaser of the two Aircraft and what is the amount involved?

It is said that SriLankan is exploiting its position as the sole provider of ground handling services at BIA by charging exorbitant prices and thus discouraging other airlines from flying to Colombo. What do you have to say?

In your reply you state that volume discount are now offered to Airlines based upon frequency. Which foreign Airline gets the maximum discount? If Colombo is to be developed as an international hub the monopoly enjoyed by SriLankan should be removed and the Airports Authority should be given the opportunity to allow more than one agency to offer ground handling services thus making the Airport Authority a profit making institution which can attract foreign investors to develop the necessary infrastructure.

Former Prime Minister Lee Kuan Yew in his second volume of his memoirs says, "Central to SIA's growth was my decision to build Changi Airport. It helped Singapore become the hub Airport of the region. The challenge is in running it (Changi) so that a passenger has a smooth and swift passage through customs, immigration, baggage collection and transport into the city. If he has to make a connecting flight, then there must be facilities for rest, recreation and work," this process will take a few years in the case of Sri Lanka. But some where at some stage we need to take the first step. That first step is to remove the present monopoly.

Does the Airline enjoy government subsidies?

Clark replies that the company has neither asked for nor received any subsidies or funding from the government of Sri Lanka. Well done indeed. Did the Airline take a loan of US $ 5 million from the Bank of Ceylon and what collateral was offered. What has Emirates done for SriLankan?

This is the one question where a tribute can be paid to the management of SriLankan Airlines. Emirates promised fleet renewal, schedule expansion, product enhancement, improvement of information technology and human resource development. Of these they have a achieved product enhancement in the most tangible form. Information Technology is contemporary and in the field of human resource competence takes precedence in most instances. If there are lapses they are indeed few but glaring. There exists a partiality for expatriates.

Why did SriLankan link Male with other key destinations?

Clark claims that the security concerns compelled them to do so. Linking Europe with Male definitely makes sense if Male and Colombo were common rated. Linking Tokyo with Male is an aberration with the intermediate point placed beyond the final destination.

Is it correct that SriLankan role as the national carrier has been marginalised since the partnership with Emirates?

Clark reassures us that it is not so. As it is planned to review the review of the CEO published in the same annual report further comments on this aspect are with heldfor reasons of space.

What have you done to promote Sri Lanka as a tourist destination?

Clark informs us that over Rs. 500 million have been spent over the last two years in promoting the country and the Airline. This requires an indepth review. Any superficial comments would be unfair.

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