The Turnaround of Srilankan Airlines

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Case Details:

Case Code : BSTR196
Case Length : 17 Pages
Pages Period : 1980-2005
Organization : SriLankan Airlines
Pub Date : 2006
Teaching Note : Available
Countries : Sri Lanka
Themes: Corporate Turnaround
Industry : Aviation

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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SLA Turns Around

As a first step after the LTTE attack, SLA cut down on its long distance flights and operated on routes that could be sustained with its remaining aircraft. SLA focused on the Far East, the Middle East, and three specific regions in Europe (France, Switzerland, and the United Kingdom).

The airline had to drop six of its profitable destinations. In order to cut costs, the company had to restructure itself, leading to a 20% reduction in its workforce; almost 1500 staff were laid off. The airline also had extensive discussions with the trade union and the Airline Pilots Guild in an effort to maintain cordial relations. K. J. L. Perera, President of the Jathika Sevaka Sangamaya Employees Union of SriLankan Airlines, said, "Given the turmoil that existed in the global aviation industry with the events of September 11, 2001 and particularly the damage caused to our airline in July 2001, our union decided to accede to the request of the management to extend the existing Collective Agreement..."

Bouncing Back From A Tidal Wave

December 26, 2004 would go down as the day of one of the worst natural disasters in Sri Lanka's history. An earthquake (measuring 9.3 on the Richter scale) off the coast of northwest Sumatra unleashed a tsunami that caused massive destruction and death across coastlines of Thailand, Indonesia, Sri Lanka, India, Maldives, and even distant Somalia.

Gigantic waves hit Sri Lanka's coastline without warning; this resulted in massive loss of lives and property. Coastal cities like Galle were destroyed and local businesses that thrived solely on tourism were devastated. The Sri Lankan economy that was on the mend was severely impacted as roughly 4.6% of the country's GDP came from the tourism sector.

In its Travel and Tourism forecasts for 2005, the World Tourism and Travel Council (WTTC) estimated that visitor exports to Sri Lanka were expected to be 21.4% below pre-tsunami expectations. Sri Lanka's tourism industry was expected to face a loss of US$201 million and 66,840 jobs...

A Bumpy Ride Ahead?

A few private airlines that operated domestic flights in Sri Lanka - Expo Aviation, Lion Air, Holiday Air, and Serendib Airlines - were keen to expand to international passenger routes like India and Europe. Sri Lanka's private airlines had sought permission from the Sri Lankan Government and were awaiting approval. However the Civil Aviation Authority of Sri Lanka had yet to allocate international routes to these private carriers...


Exhibit I: Emirates Airlines
Exhibit II: Old and New Logos of Srilankan Airlines
Exhibit III: Awards Won by Srilankan Airlines
Exhibit IV: The Tsunami and its Impact on Asia
Exhibit V: Network of Srilankan Airlines
Exhibit VI A: Hurricanes Katrina and Rita - Their Impact on Fuel Prices
Exhibit VI B: Hurricanes Katrina and Rita - Their Impact on Fuel Prices
Exhibit VII: Operating Revenues of SLA
Financial Years Ending March 2004 and March 2005


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