Analysing Challenges and Critical Success Factors

The Srilankan Airline Industry

Presented by
Saatviga S.
Road Map

 Vision & Mission

 Introduction
 Ten Year Review
 Key Performance Indicators
 The Business Turnaround Plan
 Challenges Faced
 World’s Successful Airlines and Strategies
 Factors Influencing Success
Vision and Mission
 Vision
 “To be the most preferred airline in Asia ”

 Mission
 We are in the air transportation business. We provide our customers

with a reliable and pleasant travel experience. We provide our business

partners with a variety of innovative, professional and mutually
profitable services. We meet Shareholder expectations of profitably
marketing Sri Lanka and contributing towards the well-being of
Society. We are a competent, proactive and diligent team. Our
contribution is recognized and rewarded.
Introduction
 Srilankan Airlines began operations in 1979 as the National Carrier
of Sri Lanka
 Serves 45 destinations in 25 countries in Europe, the Middle East,
South Asia, Southeast Asia, and the Far East.
 Codeshare partnerships with bmi (formerly British Midland), Etihad
Airways and Malaysian Airlines
 Shareholders
 Government of Sri Lanka - 51.05%
 Emirates Airline - 43.63%
 Employees - 5.32%
Introduction
 Subsidiary - SriLankan Catering (Pvt) Ltd. is a fully owned
subsidiary of SriLankan Airlines.
 Workforce - More than 5000 employees in Sri Lanka and overseas
 In-flight comforts – Business and Economy Class Seats
 FlySmiles Flyer Program
 Srilankan Cargo
 Srilankan Engineering – Technical Arm
 Ground Services
Ten Year Review (2000 – 2009)
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Operating Expenditure Net Profit/Loss Revenue
Year 2008-2009 Under Review
 Challenges faced
 Arising global fuel costs

 Struggle of the national tourism industry to survive in a

wartime scenario
 High interest rates

 Major transition in management

 Increased competition from subsidised airlines

▪ Dropped prices fighting for market share

Total Loss in the Year

Estimated Loss
7000

6000
Huge
5000 Business
Challenges
Faced Turnaround Plan
4000 & Restructuring

3000

2000 Global
Economic
1000 Crisis

0
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Key Performance Indicators
 Fuel Surcharges by Competitors
 Global Economy
 Passenger Revenues (decreased by 5%)
 Cargo Revenues (decreased by 8.5%)
 Overall Passenger Capacity (decreased from 12,599 million to
11,731 million)
 Unit Costs (increased from Rs. 46.48 - 50.71 per Tonne
Kilometre)
 Average Staff Strength (significant decrease)
The Business Turnaround Plan
 Key Aspects of the Plan - “Earn more, spend less and waste not”.
 Restructuring of passenger and cargo revenue generation

 Restructuring of route network

 Savings through increased fuel efficiency

 Reducing company’s fixed costs

 Renegotiating of contracts with service providers

 Optimising of sales channels

 Reduced IT and Communication costs

 Increase Productivity by focusing on People, Process and Technology

Challenges Faced

 Optimising Revenue
 Improving Service Delivery
 Enhancing Srilankan Engineering
 Increasing Fuel efficiency
 Increasing Productivity
 Technology Requirements
Optimising Revenue

 New services to Rome utilizing the market opportunities in Italy

 Temporary Suspension of Loss-Making Sectors
 Hyderabad, Calicut, Cochin, Coimbatore and Goa

 Increasing operations to key destinations

 Increased frequencies to Middle East and South East Asian destinations

 Direct services to increase convenience of passengers and reduce flying time

(Karachi)
 Expansion of route networks through increased Code share Partnerships

 Increasing bookings through its Internet Booking Engine

 Customer Loyalty Programme – FlySmiles
Optimising Revenue
 “Srilankan Holidays” teamed up with Singapore , Thailand and Malaysia
 Business Class range and Platinum Range of holiday packages launched for the

higher income market segment partnering with the top hotels

 Event-based packages

 Introduction of new products – eg. HOTSEATS

 To promote advance bookings on the Airline’s website

 SkyChain Cargo Handling System for customer convenience and

operational efficiency
 Increasing Cargo revenues that contributes to the 13% of the Airline revenue
Improving Service Delivery
 Emphasis on Inflight Service
 Training of cabin crew and increasing the no of instructors from 4 to 20

 Ensuring continuous on-site monitoring and evaluation of crew members

 Improvement in Meal Services

 Significant changes to inflight menus to suit a variety of customers

 Reducing wastage and overall meal costs

▪ Renegotiation of contracts with overseas caterers resulting in significant savings

 Enhancement to inflight entertainment

 Duty free sales on new range of 180 products including world’s
leading brands and Srilankan items
 Heart-start machines for medical emergencies
Improving Service Delivery

 Recruitment of new Chinese passenger assistants for Beijing service

 SMS alerts on flight service
 Uplifting the service standards of ground handling services for other
airlines
 Training of new airport staff and sky marshals
 Innovation and cost control
 In-house production of specialised vehicles and equipment especially with regard to
airport airside activities
 Modification to air-sickness bags to enable rapid identification of unused bags
 Closing of airport offices overseas
Enhancing Srilankan Engineering

 Marketing programmes to increase awareness of SriLankan

Engineering’s capabilities as an MRO, in order to attract new
customers and enhance revenue
 Major Contract with Indian Carrier IndiGoue to carry out maintenance
checks
 Training more aircraft engineers for Airblue, and to carry out
maintenance checks for the Pakistani carrier
 Continued emphasis on key areas like fuel efficiency and punctuality
 Structural modifications to the fleet in-house resulting in cost-savings
Increasing Fuel Efficiency
 Use of diesel-operated Ground Power Units to power internal
systems and air-conditioning on aircraft parked at BIA, instead of
using Auxiliary Power Units of the aircraft
 Reduce fuel burn while landing
 Flying shorter routes whenever possible.
 Re-evaluation of the choice of alternate airports
 Stopping of over-fuelling of aircraft, to reduce weight
 Focusing on having ‘clean’ aircraft to reduce drag while in flight
 Tankering more fuel than required from cheaper points
Increasing Productivity
 Continuing to review company structure for greater effectiveness and
productivity
 Customising development intervention programmes to the
requirements of user departments and business demands
 No-Pay Schemes, to reduce staff costs
 Continuous improvement of welfare facilities
 Engaging employee unions in the decision-making process
 Enhancement of recruitment processes for the future
Technology Requirements
 Consolidation of Data centers in Colombo and Katunayake
 Maximizing the utilisation of existing systems to user departments
 Creating a common customer database to integrate different sub
business units which interacts with customer profiles
 Revamping the Corporate website
 Increase penetration levels for internet bookings

 Rich features for customers and content management tools for internal users

 Introduction of a CRM system

 In-house developments of new systems for cost saving
 Minimise IT risks through IT security audits
Some World’s Successful Airlines

 Singapore Airlines
 Cathay-Pacific Airways
 Qatar Airways
 Thai Airways
 Asiana Airlines
 Malaysian Airlines
 Emirates Airways
 Etihad Airways
Singapore Airlines- Strategies Used

 Fully branded product/service differentiation strategy

 First to introduce hot meals, free alcoholic and non-alcoholic

beverages, personal entertainment systems, and video-on-demand

in all cabins.
 Maintains the youngest fleet of aircraft among all major air carriers
▪ Low maintenance or replacement costs

 New aircrafts are sub-branded further to distinguish from others

 Invests heavily in R&D, innovation and technology as an integrated

part of the business strategy

Singapore Airlines- Strategies Used

 The famous Singapore Girl

 Rigorous training programs for the cabin
and flight crew
 Strong Financial and cash position to
internally fund purchases and limit interest costs
 Continuous price-premium strategy and satisfactory passenger load factors

 SIA carefully hedge up to 50 % of its fuel contracts 2 years in

advance to avoid cyclical and often large volatility in fuel prices
Emirates Airlines – Strategies Used
 Operates wide-body aircraft and flies mostly long haul
 lowers its per-seat-mile costs so it can be competitive on pricing

 Newer fleets resulting in low maintenance and replacement costs

 Attracts higher paying customers

 latest in-flight amenities and entertainment systems

 Distinctively uses Asian elements to create a premium product that

appeals not only in its home markets but also to a Western audience.
 High-level services provided especially for 1st class section
 Latest technologies used to enable faster and more efficient handling
of functions such as ticketing, baggage and cargo handling
Emirates Airlines – Strategies Used
 Sporting event sponsorships for promoting brand awareness
 major events in football, horse racing, yacht racing, rugby, golf, cricket and

tennis.
 Recruitment from over 100 countries around the world and provide
training to them to the highest standards
 Invest millions of dollars to provide advanced engineering support
 Huge investments on promotion campaigns
Thai Airways – Strategies Used
 User-friendly website to book and confirm flight reservations
 Development of catering service
 In the process of implementing e-ticketing to save time and
reduces the need for check-in personnel
 Established a Tourism Alliance to promote Thailand tourism and
travel industry
 Increased cooperation at the domestic and
regional levels as well as with other global alliances
to strengthen the airline’s competitive edge and
expand market share
Thai Airways - Strategies Used

 Implementation of the Customer Relationship Management

system
 Automated Self Service System for domestic travel only to
facilitate passengers’ demand in areas of reservations and check-in
 Frequent Flyer Programs
 Promotions through media, co-marketing efforts with hotel chains
and credit card companies and travel agents
 Maintaining high safety standards - Compliance with ISO 9000
Factors Influencing Success
 People
 Service Product/Promotions
 Route System
 Fleet Management
 Revenue/Cost Control
 Financial Management
References

 Srilankan Airlines Annual Report 2008/2009

http://www.srilankan.aero/aboutus/SriLankan_Airlines_Annual_Report_2008_2009.pdf
 http://www.brandchannel.com/features_profile.asp?pr_id=209
 http://goliath.ecnext.com/coms2/gi_0199-6720187/CASE-STUDY-EMIRATES-Long-
haul.html
 http://www.hicbusiness.org/biz2003proceedings/Niti%20Dubey-Villinger.pdf
 file:///C:/Users/Sudhahar/Desktop/Airlanka/facts_5242839_airline-industry-key-success-
factors.html
 http://gbr.pepperdine.edu/064/airlines.html
 http://www.ehow.com/facts_5242839_airline-industry-key-success-factors.html
Thank You