Captain Suren Ratwatte, SriLankan Airlines’ Chief Executive Officer, talks about the competitive threats and what he intends to do with the freer hand his government is giving his management team.
How do you see yourself in the global mix, a strong regional player, or a global player?
As the market is today we are a strong regional player. India and our Far Eastern routes are doing reasonably well. The Middle East is very challenging because the capacity deployed out of Colombo by the Gulf three is soaking up the traffic at very competitive prices. Head-to-head competition is completely out of the picture, so we are trying to see what we can do in the way of alliances and cooperation.
Qatar Airways—another oneworld member—would be a natural. But we are talking to all of the Gulf carriers. Fortunately, they are fighting each other as much as the rest of the competition. So we are hopeful that we will come up with a good deal—an alliance or joint venture of some sort.
For your strategy, will you slim down the group and focus on only the airline?
The group makes money. SriLankan catering is very profitable, ground handling is very profitable, engineering can be substantially profitable. Our shareholder—the government—is keen to unlock even more value separating the units. In doing so, the hope is to be able to place greater strategic focus on the core airline business. The process of separating has begun, but it is complicated with a lot of blurred lines.
Being an island Sri Lanka needs connectivity. We can’t rely on foreign airlines providing connectivity. We learned the hard way during the civil conflict. If not for SriLankan there would be no lift to Colombo. Now, everyone is coming into the market and the government understands the core connectivity has to be maintained. And SriLankan needs to be able to hold its own in competition.
Does the government put demands on you that limit commercial viability?
Previously, it wasn’t run strictly in the commercial sense, and unfortunately I am faced with the legacy of those decisions with aircraft and routes that really make no commercial sense. So, we’ll have to rationalize all that. It will be quite a difficult 18 months to two years before we manage to sort things out and get it back on the right flight path.
We have the support of our owner, the Government of Sri Lanka. They have asked us to develop a plan to generate a commercial profit while providing connectivity. This is aligned with the government’s overall policy. We will give them some options as part of our restructuring process. And they have committed to provide the resources that we will need to move forward.
Which routes and aircraft make no commercial sense?
For aircraft, it is the A350. It is a great aircraft, but the high acquisition costs are a big burden for European routes. They have been savaged by competition and the yields can barely support A330 operations.
For routes, we had big plans for Australia. But Malaysia Airlines’ alliance with Emirates has caused us to pause expansion for another year.
For now the A330 fleet suits us operationally and we have a good product on board. We would like to find a solution for the A350 order but that is proving to be a challenging task.
How is the Colombo Bandaranaike International Airport infrastructure for your needs?
The runway is running at about 60% capacity and a new runway is under construction. The choke point is terminal capacity. In the next month ground will be broken on a new terminal which will be a welcome relief.
Of course keeping utilization of a terminal building high is a challenge. As with any hub operation, the peaks are very busy, but there are also times when the building is empty. We are looking at options for more narrow-body capacity that would allow us to increase frequencies and spread traffic and connectivity across the day. That will make it more convenient for passengers and more manageable for us.
How would you rank your challenges?
The first is irrational competition which I see in my part of the world. And there is not lot that you can do about the root cause. Our strategy is to get the right fleet, focus regionally, and build a different market share. In real terms, it means that we must recognize that our classic European tourist traffic market is changing too rapidly for us to get a significant share of it. We need to accept that and move on.
The second big challenge is the long lead-time for aircraft acquisitions. The market changes so quickly that even with the best analysis you can find yourself being saddled with aircraft that are not what you need. The ability to move nimbly is very limited.
Looking regionally, where are your strengths?
South India. We are the biggest operator by far and offer the most connectivity to the Far East, and to a lesser extent the Middle East.
Doing business in India itself is challenging. We have some big hurdles to clear in India today. For example we have not been able to get approval for third party code shares. Other carriers from further afield have it but somewhere a decision was taken that is blocking our requests.
We could bring in more passengers which would be good for everyone. India has tremendous untapped potential that is not limited to passenger business. We see MRO, for example, as another growth area. Indigo is already a good customer.
Is China equally promising for you?
It is promising, but also a tough market to do business in. Travel habits are difficult to influence. Our experience of Chinese customers is that they arrive with pretty much everything decided and pre-booked. At the same time we are seeing the Chinese carriers enter the Sri Lanka market We have noted that both Chinese and Indian travelers are “tech-savvy”—especially with mobile devices. We are building skills to engage better with our customers including making our app available in multiple languages.
We are big supporters of IATA programs such as Smart Security and Fast Travel. Our customers are still getting used to the experience. Online check-in, for example, is available throughout our network. But the uptake varies greatly by region and also by demographic.
How do you feel about alliances?
They are powerful business tools, but we have not used their full potential. We would like to develop greater cooperation with Cathay Pacific, Qatar Airways, American Airlines or British Airways. Working with us would certainly give them much more access to South India—a lucrative market for all.
Even so, the oneworld alliance is creating value for us. To start, we get more alliance revenue than we pay out, so that works out OK. Could we use it better? Perhaps. SriLankan joined just about two years ago. We see the benefit, but are still trying to work out how best to do that.
What role does the airline play in Sri Lankan development?
We have a big role. And I personally believe that, in addition to the providing connectivity which is vital to development we must be a leader on corporate social responsibility. We are a pioneer airline in IATA’s IEnvA and are very proactive in offsetting our emissions through tree planting. We are also working to convert our fleet of ground vehicles to electrical power.
I also think that it is important to have CSR activities that extend even beyond our operations. We have been very involved in helping some of the victims of the long years of conflict in Sri Lanka with prosthetics. It’s a matter of national service that I feel very strongly about.
What’s it like to be a CEO?
My background is as a pilot. I have to say that it is a steep learning curve. You are pulled in a lot of different directions and it is not always easy to keep focused. Right now my focus is putting the team together who can help me to lead the changes. And having that team in place is critical to motivating the staff through change. In some ways the jobs are very different. A pilot makes decisions on repeated procedures. As CEO you need to call on your creativity and ability to prioritize with some flexibility.
But, there are some similarities. Both jobs face the challenge of inertia. Whether it is getting an enormous aircraft into the sky or changing an organization you need to be able to create momentum. Both require quick decision-making based on information immediately available. And those decisions need to be communicated crystal clear to the team.
I would say that the most important skill of the CEO is communication. Even if you have a vision and plan to achieve it nailed down. If you cannot communicate that in a motivating way to your team there is little chance of success. I spend most of my time communicating---up, down, sideways, formal and informal. It is so important.
What would your staff say about you?
I don’t think that they have figured me out yet. Having lived in the US for a while, I am quite informal. I like to be called by my first name—Suren—for example. But it is next to impossible to get my staff to call me that. They would probably say that they don’t know what makes me tick. But I am determined to help them figure it out as we move forward to building the future of SriLankan.