Earn Money at any Cost – SriLankan's newest sale
While collecting information for a new article that I was writing ( which should be up soon ), I noticed something very sad and unfortunate.
SriLankan Airlines A330-200, 4R-ALD, MSN 313, selcal KQDP, is now available for ACMI or wet lease.
4R-ALD at Paris
An ACMI lease means the aircraft and crew, including aircraft maintenance, insurance and crew salaries, is provided by the lessor ( in this case, SriLankan ) for the aircraft to be operated for some other airline. Wet lease is essentially the same with lease periods from around one month to two years.
4R-ALD is currently the newest A330 in SriLankan’s fleet, although already over 9 years old. It is a fond memory to many, with its nickname “Asia’s Rising Star”. The aircraft is powered by Trent 772 engines and was originally delivered to SriLankan in year 2000. The aircraft is being used extensively throughout the network and dumping of this aircraft means AT LEAST 10 weekly flights will have to be cut.
I will not reveal information of the company doing the broker agreement since I do not want UL to lose further destinations.
Aircraft offered for ACMI lease by airlines is not uncommon, but an airline of SriLankan’s scale who has already sold half of its fleet and cut its network by more than 45%, cutting even more ?
Mr. Manoj, is this your so-called turnaround of SriLankan ?
Editors note – The demand at Colombo certainly is not so plump. The sole intention behind this sale is finding money. It is really saddening to notice what happening to once South Asia’s best airline.
UPDATE: Take a look at this article. He is saying he will never ever resign from the CEO post – is this the way a CEO is expected to behave ? Very disgraceful. But this certainly was inevitable and as you remember, we all saw this coming with the political push which led Mr. Peter Hill, an excellent CEO, being removed for a fault of the Sales Manager and that Sales Manager made CEO by government’s order. And Mr. Manoj accepts that the airline is in its worst ever financial crisis under his leadership, but can invest millions of rupees to change the airline’s uniforms to blue colour, which reflects the colour of current government. That really is shameless, dear executive. Revealing these facts certainly will arrest me, but I love my national airline and don’t want politics to ruin it.
Very interesting blog to read. I think yours is the first one to get constant updates. Keep up the good work.
However there are a few things which you need to learn about aviation. Selling/leasing an aircraft doesn’t mean the routes have to be cut. Srilankan is not utilizing the aircraft to the maximum. As far i know this schedule can be maintained with 3 A330s instead of 4 A330s. So its actually worth to lease it to get some extra cash by leasing an Aircraft at this difficult time. After all the A330 is for wet lease. So the everyone can keep their jobs.
Secondly about acquiring new aircraft. Although your blog is very very interesting to read some facts have to be taken into account when your write an article.
Srilankan being an all airbus company cannot afford to go Boeing due to the costs involved. There are so many hidden costs in getting a new type (even for an Airbus aircraft) . Training, Training materiel , Conversion costs , simulator etc… have to be taken into account. When you consider all this its actually cheaper to run the old 340s as the old ladies still have a lot of life in them. Its some times cheaper to run an A340 rather than an A330 on the same route. Although the A340 will burn more fuel , it will cost more $$ to maintain the ETOP certified A330.
So keep up the good work This is by no means a criticism. Its just some advice for you to consider when you write your next post.
Cheers,
John
Thank you so much for your comments. I understand your point and you’d be glad to notice that I’ve opted for the A350 in the following article – http://www.airlineindustryreview.com/a-fleet-renewal-plan-for-srilankan/ .
However, I know that UL’s aircraft are mostly underutilized, but are you sure that 3 A330s can maintain the operation ? If I am not mistaken, this is the aircraft type that is highest utilized in UL’s fleet. And I do not think ETOPS make a big difference to A330′s economics. After all UL doesn’t fly any ETOPS routes as well. Anyway, UL has now got a great opportunitity to expand, I really do not understand why should they still opt to cut.
The A350 is again a new aircraft which is going to attract a lot of new costs. As I said before there are lot of hidden costs involved with new aircraft (as well as in aviation). We can always suggest what to get but at the end of the day its a very big process and a very expensive one. I think its actually more economical to operate the current fleet for few more years. May be more second hand A330s.
The A330 fleet is ETOPs certified. Which means a lot more maintenance work and the fitting of ETOP certified parts. ETOPS certified parts are quite expensive than the normal parts. They also get replaced sooner than the normal parts, I don’t know which routes they utilize EOPS but, I know they do utilize it. So ETOPS do play a key part in the A330 economics.
A330s had the highest utilization sometime ago. Right now I don’t think it is utilized to the full extent. Its all about not keeping the aircraft on ground doing nothing. If they can lease and make money from a flying machine, by all means they should do it,
JS
I am afraid I have to disagree with you. If SriLankan does not order the new aircraft now, by the time the other airlines take delivery of them – SriLankan will be a lot behind the league. And even if UL orders them now, they are not going to get delivery till at least 2016. In an earlier article of mine, I had suggested that they should take delivery of more A330s till A350s are available. A330 spares might be expensive, but it’s other advantages easily make it a better choice than the older A340s. And, if I am not mistaken, there is not a single leg that they use ETOPS to full. The main question that I’ve tried to point out from this article is why they are still cutting flights and network when they’ve gotten an opportunity to expand. They should stop seeking to hide in a cave. They should either expand or get ready to become a regional airline. If the management was sound enough, they wouldn’t incur the single largest loss in its history this year. I am not criticising your opinion, but unfortunately what I’ve stated is the true state of misery at UL.
The answer to your question is in your own reply. How can an airline order new aircraft when its going to incur the biggest loss in its history ? Aircraft delivery slots don’t go off that easy (its a part of how Airbus & Boeing work).They always have some slot hidden away for special occasions. Read about how late British Airways ordered the A380 so late and how soon they were going to receive it .
On the A330. There is a lot more to it than calling the A340s old. They (A330/A340) are pretty much the same aircraft , one with more engines. There is a lot of benefits by using these two types. The biggest are the CCQ (Cross crew qualification) and the commonality in systems in terms of maintenance. ETOPS (Extended-range Twin-engine Operational Performance Standards) doesn’t mean you have to fly over water to use it. ETOPS allow the carrier to operate further away from a suitable alternate (which are quit far apart). There is no such thing as using ETOPS for the full extent. You need it to operate the A330 on some routes. So its always a careful balancing act. As an example some countries with suitable alternates, have ridiculous over fly charges or sometimes without ETOPS the aircraft cannot fly the optimum route (with regard to the cost). Sending a A340 or A330 depends alot more than whats new and whats old.
I don’t know about whats going on internally of this airline and I don’t think its any of my business. But right now every airline in the world ( BA,SQ,CX and others) is going through a rough patch. Sometimes its necessary to make hard choices inorder to prevent this sort of thing from happening in the future. Cutting capacity and reducing the fleet are some of the things that have happened all over the world. Even Singapore Airlines parked 747s and 777 this year. So SriLankan doing the same is not really a surprise.
Cheers,
JS
Please do not mind my saying, but
1. SriLankan is going through its biggest loss, but this happened because none other than the fault of current management.
2. A330 might incur SOME extra charges, but due to lower fuel usage and thanks to a better resale value, it becomes the best fit for SriLankan’s future acquisitions.
3. Cutting capacity is acceptable and inevitable, but a horrendous amount than you will ever need is not acceptable. Cutting Indian flights from 110 to 46 weekly is just one example. And the answer to losses is certainly not cutting. They should instead expand and operate more of profitable routes. If those losses caused them to cut flights, why introduce a new uniform that reflects the government’s political colour at a Rs.60 million cost ?
I understand worldwide demand has bottomed, but South Asia really is a less affected region and SriLankan also has a chance to expand following the newly dawned peace which has increased tourist arrivals. I am not bashing SriLankan, but I love my national airline, which is a pride that Emirates helped to grow. The answer to losses is in de-politicising the airline.
If the same route is losing money over and over again , do you think they should have maintained the 100 flights per week to India ? If they did the losses would have been much worse, isn’t it ?. Its not always about how many flights you operate. Its all about how many of the operated flights are making money and traffic for onward connections.
You your self told the current aviation market bottomed out. How can you say its fully because of the management. Does the management have control over the current world aviation market ? Do they have control over the world economy ? They don’t have control over H1N1 and they didn’t have control over the war in Sri Lanka. May be they can be blamed for a part of it (uniforms and other things) but not everything is their fault.
Do your research. South Asia is one of the worst effected. Too many new airlines operating into and inside India. The competition got tough. None of the airlines in India are making any money. In fact they were about to go on strike asking for money from the Indian government. Kingifisher has a few airbuses parked at Toulouse which they cant afford ( 2 A340-500s were sold to Air Arik even before they were delivered). KF even pulled out of BLR-CMB and BLR-LHR. At the same time they canceled about 50 orders. Your own article says Air India is losing money. Jet Airways is consistently in the red. How can you say South Asia is the least effected ?
When you write you should properly research on the subject. Some times its good to do some background work and look at how the others are doing. Your doing a good job but, need more facts than just rumors.
Be cool..
South Asia is not India alone. Aren’t airlines like EK, AK and even WY successful in India ? Now one might tell they’re subsidised and AK is an LCC, but if you want it to happen, you can make it happen. SriLankan has never been working to improve its yield, market share or branding ever since EK left. They should stop blaming it on others and instead work to come out and survive. If they expect cutting flights can save everything, they just won’t have a future left. What should have been done is making use of this situation and expanding.
I forgot to mention this. I agree with you on number 2 and the last bit.
Cheers,
JS
I thought we were talking just about South Asia.But ! AK is one of the reasons the competition got so tough.Their operations are different and they are also still relatively new. You cant compare operations of a LCC to a Legacy carrier. WY is still too new to judge (although they have been around for sometime. They only pumped in some new life into it recently). EK is an exemption because of their vast route network and centralized location. We cannot compare UL with EK because UL is still a tiny airline compared to the giants like EK.
Exactly, and WY is growing, but they are still tiny, in the same manner, with a sound management team UL can grow too. With the newly dawned peace they should spoil its maximum potential. Sitting while looking at the world go by doesn’t work. You’ve to be active . Routes have to be changed and they need to test new waters. I’m not meaning UL should go all the way to U.S. But there are quite a few places that they can begin, where there is already enough demand – MEL and SYD for example.
WYs success may also depend on the endless stream of cash flowing from the oil wells. Too bad we have really found an oil well yet. Agreed on the fact that they should try new things. MEL and SYD are not the place to go right now. Demand is only for a few months of the year. Getting new aircraft just for that is not worth it in my opinion.
Dear Mr. Unknown, if you do not mind my asking, may I please know who you are for real ? I can certainly tell that both G Smith and J Smith are the same and is from *****.
Anyway, SYD will not be a seasonally demanded route if you work to market it. There is a HUGE untapped demand from India to Australia which now transits at BKK and HKG. The attitude that “We are small so we can’t fight” appears to be the main fault of UL right now. There should be a clear roadmap and business strategy planned for a few years ahead and have a vision on where we should be, which must be ambitious and doable. But unfortunately it seems to be what that just doesn’t happen.
Whether its GSmith or JSmith, does it matter ? A blog is suppose to be anonymous.If you check now you will see that I’m no longer from the **** area. Your blog is good. But since you don’t offer any anonymity I’m afraid this will be the last. You should take the facts out of the conversation .
All I got to say is that , you can write. But with little or no research. Which is not a good thing. You keep blaming the management of an airline and suggesting quite impractical fleet / route plans. Read what the market is doing and whats actually happening in the market without simply going out there and blaming people. Its easy for someone to say this market is untapped and that market is untapped sitting in front of a computer. But your saying it with no real hard facts. There are people in airlines ( whole departments ) to see the viability of routes.Getting aircraft and putting money into a market just because someone think its untapped is stupid.
Ciao!
Note by Editor – Details conspiring privacy have been removed.
Sorry, Mr. Smith, your comment had been stuck in the spam filter.
I am fully aware that SriLankan has an excellent staff, for which they are renowned and which I respect, but I do not think that the management is sound enough. Wasn’t Mr. Peter Hill be able to expand the airline even in spite of some of the worst times such as post 9/11, SARS and the tsunami ? So do you still believe that this management is very good at it even when they have recorded a record loss ? What about trying to change the uniform colours at a cost of Rs.60 mn without any other rebranding process in progress and solely for the sake of politics ?
If we try to hide, without playing the game, by thinking our old aircraft are still good, we are small, we don’t have money – SriLankan for sure will never expand or succeed. Some of my facts might not be correct as I am not as experienced as you are. I can understand that you’re a veteran, but
let me challenge youI think – resumption of services to SYD and expanding under this economical situation will certainly pay off for UL in the future. The unfortune is that the management is not actively looking at pursuing these opportunities. It will only bring closer the day SriLankan is set to go down, because this style is never going to bring you a new investor.Please understand that I have no intention of personally attacking SriLankan’s management, but they could have done a lot better.
Your comment are really interesting, keep them coming in.
Mr. Smith, details conspiring your privacy have been removed.
It is an other excellent article from you, kflyer. Sadly we are going to see only Air Lanka Routes on Sri Lankan Airlines because of current aircraft dismissals.
Just look at the frequency of Air Lanka in 1998/1999 Flight Schedule.
NRT – 3
BKK-HKG – 3
KUL – SIN – 3 (1 of 3 flight SIN-KUL)
SIN – 2
DEL – 3
BOM – 2
MAA – 14
TRZ – 3
TRV – 6
MLE – 14
KHI – 2
MCT – AUH – 3 (1 of 3 flights AUH-MCT)
DXB – 4
DXB-KWI – 3
KWI – 1
DMM – 1
RUH – 2
BAH-DOH – 2 (1 of 2 flights DOH-BAH)
LHR – 5
CDG – FRA – 3
ZRH – FCO – 2 (1 of 2 flights FCO-ZRH)
Are you sure that CGK was not there ?
However, it is already not much different.
NRT – 3 ( I believe cannot be expanded, bilateral issues )
BKK/HKG – 3
KUL and SIN – 7
DEL – 7
BOM – 7
MAA – 14
TRZ – 7
TRV – 7
MLE – 14
KHI – 2
BKK/PEK – 3
BKK – 1
DXB/KWI – 7
BAH – 2 ( 1 via DOH )
DMM – 2
DOH – 4 ( 1 via BAH )
LHR – 8
( schedules are showing 6, I hope they are incorrect )
FRA – 4
CDG/FCO – 2
[...] believe 4R-ALD, the youngest A330, is not included in this list as the airline was in an attempt to lease it out sometime [...]