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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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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"SriLankan is the only privatized airline in South Asia, and other countries in the region are viewing us as a model because they are moving towards privatization themselves."

- K. J. L. Perera, President, Jathika Sevaka Sangamaya Employees Union, in May 2004. 1

"Although buffeted by nature's fury and industry challenges, SriLankan Airlines remained unbowed, and continued to seek opportunities to adapt and expand."

- Peter Hill, CEO, SriLankan Airlines, in September 2005. 2

Introduction

The Lonely Planet World Guide says, "For a small island, Sri Lanka has many nicknames: Serendib, Ceylon, Teardrop of India, Resplendent Isle, Island of Dharma, Pearl of the Orient."3

This tropical island has long been a popular tourist destination for international travelers due to its many scenic beaches, varied landscapes, and historical sites. However, the country's tourism industry and economy has suffered on account of two major problems - one, the two-decade-old ethnic conflict, and two, the tsunami disaster in December 2004. SriLankan Airlines (SLA), formerly known as Air Lanka, is the national carrier of Sri Lanka. The airline was government-owned until its privatization in 1998. Despite privatization, the airline had many problems to deal with. SLA had run up losses amounting to Rs 6.5 billion4 as on March 31, 2001. The LTTE5 attack on Colombo6 airport in July 2001 compounded SLA's losses as it lost almost half of its fleet.

Through a series of initiatives taken by the new management, SLA achieved a turnaround and posted a profit in 2003-04. The tsunami disaster in December 2004 and rising jet fuel prices affected the airline in the following year. SLA partnered with the government to revive the tourism industry, and managed to post a profit for the year 2004-05 as well.

A Troubled History

Aviation in Sri Lanka began with the establishment of Ceylon Airways in 1947. As the carrier expanded its services to various destinations across the world, its name was changed to Air Ceylon. However, the venture was not successful and it ceased operations in 1978. Air Lanka was set up by the Sri Lankan government in 1979.

It restarted operations along the routes that were once part of Air Ceylon's network. Two Boeing 707s were leased from Singapore Airlines and flown in Air Lanka's brand name and colors. During the 1980s, the airline steadily increased the number of destinations it serviced.

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1] "SriLankan Airlines becomes a model for airline privatization in South Asia," www.srilankan.aero/aboutus_news/ news91_south_asia.shtml, May 12, 2004.

2]http://www.lankabusinessonline.com/new_full_story.phpsubcatcode=7&subcatname=&newscode=852517330

3] http://www.lonelyplanet.com/worldguide/destinations/asia/sri-lanka

4] Rs stands for Sri Lankan Rupees. 1 US$ is approximately 100 Sri Lankan Rupees (October, 2005).

5] The Liberation Tigers of Tamil Eelam (LTTE), also known as the Tamil Tigers, have been seeking to establish a separate state for the Tamils in the northern and eastern regions of Sri Lanka, since 1983. LTTE was classified as a terrorist organization by the USA, Great Britain, India, etc.

6] Colombo is the capital city of Sri Lanka.

 

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