SriLankan Air Plans Asia Expansion as European Tourism Slows

SriLankan Airlines Ltd., seeking a return to profit in two years, plans to focus expansion on Asian routes as European travelers pare spending on vacations.

“We are taking a cautious approach in Europe and an aggressive one in Asia,” Chief Marketing Officer G.T. Jeyaseelan said in a Feb. 23 interview in Colombo. The strategy is driven by “economic reality,” he said.

The state-owned carrier plans to boost services to cities including Tokyo, Beijing and Shanghai as China’s economic growth helps spur travel demand across the region. By contrast, the airline may reduce its 12 weekly London flights in off-peak seasons as a sovereign debt crisis and slower growth deter Europeans from taking long-distance holidays.

“European tourism growth is slowing down,” Jeyaseelan said. Arrivals from the U.K., the biggest source of visitors to Sri Lanka (SLTRARR) after India, were little changed last year at 106,082, according to the Sri Lanka Tourism Development Authority. Visits from East Asia, including China and Japan, surged 41 percent to 96,194. Indian tourism numbers rose 35 percent to 171,374.

The airline intends to boost more of its Asian services to daily frequencies to make them more cost effective and to help support the government’s drive to turn Sri Lanka into an aviation hub, Jeyaseelan said. A step this year will be increasing Tokyo flights to five a week from four.

Global Alliances

SriLankan will also cooperate with other airlines to expand its international reach, possibly including joining a global alliance. The carrier is assessing the three groups and possibilities, Jeyaseelan said. There are no plans to invest in other carriers, he said.

Sri Lanka, a tear-shaped island off the coast of India, has benefited from a pickup in tourism following the end of a 26- year-long civil war in 2009. The growth has prompted hotel operators including Shangri-La Asia Ltd. (69) and Starwood Hotels & Resorts Worldwide Inc. to begin building properties on the island.

Infrastructure and tourism are the key drivers of Sri Lanka’s growth, according to the Asian Development Bank, which expects economic expansion of about 8 percent in the “medium term.”

SriLankan will add an Airbus SAS A320 and an A330 by mid- year, increasing its fleet to 21, Jeyaseelan said. The carrier has no plans to sell shares in itself or in any of its units, he said.

The carrier still expects to make a profit in the year ending March 2014, even as fuel prices rise, Jeyaseelan said. The airline has begun a turnaround plan including closing some overseas offices and working to reduce fuel usage in a bid to return to profit. It pared losses to 202.3 million rupees ($1.7 million) in the year ended March 31, from 6.03 billion rupees a year earlier, helped by rising tourism and one-time gains.

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net

To contact the editors responsible for this story: Hari Govind at hgovind@bloomberg.net; Neil Denslow at ndenslow@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.