Sri Lankan Airlines has revised its expected revenue forecast by $100 million USD. This is based on a massive drop in tourism to the island after the Easter bombings earlier this year that killed over 250 people.
This is bad news for an airline that has struggled since 2008 and will be relying on the holidaymaker trade to drive their new five-year business plan.
What are the details?
Sri Lankan Airlines is the national flag carrier of Sri Lanka, operating a fleet of 27 aircraft flying to 42 destinations. They are currently in $750 million of debt and have been in and out of financial trouble since 2008.
However, the situation has been made worse for the airline, due to the horrific terrorist attack in the Sri Lankan capacity of Colombo that killed 250 people. With tourism down by 50%, Sri Lankan Airlines is one of many companies to suffer and predicts a loss of up to $100 million in revenue.
As such, the airline is currently running a mega-deal, with fares for business class reduced by up to 40% for 35 destinations.
These attacks could not have come at a worse time, just after the airline revealed an ambitious five-year plan for new routes, fleet expansion, and profitability within three years.
What is their five-year plan?
Sri Lanka Airlines has an ambitious plan to return the airline to form as quickly as possible. The plan includes restoring previously profitable long-haul routes to Paris and Sydney, and onwards to Frankfurt in 2021 (the airline pulled out of these destinations back in 2016).
“Paris and Frankfurt we will start. But the board will make the call [about] when … because if we’re relying on tourists, we have to see if this has an impact on tourism to the country,” chief executive Vipula Gunatilleka said to Forbes magazine. “It’s very likely Sydney will get shifted now.”
The plan also calls to expand the widebody fleet from 27 aircraft to 34 (19 narrowbodies and 15 widebody aircraft specifically). An existing order for four Airbus A350s will be swapped out for eight A330-900neos, allowing their fleet of very old A330-200s to be phased out.
But that was before this drop of 50% in business. The leadership team has decided to revise this plan to better compensate for a lack of tourists from Asia, Europe, and Australia.
“The Japanese, Europeans and Chinese are very sensitive [to security concerns]. So are the Australians,” the CEO noted. “So it’s a question of gradually re-building the confidence.”
This lack of tourists has also affected the fleet expansion plans, delaying them for the foreseen future. The CEO commented saying,
“I wouldn’t see a major change. But it’s a fact that we are shifting some of the milestones. So we will see … The network plan comes before the fleet plan.”
What do you think? Will Sri Lanka be able to turn this $100 million USD revenue drop around? Let us know in the comments.