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Wed, 22 May 2013 08:53:54
Sri Lanka national airline hit by competition, needs protection: President
06 Apr, 2010 06:59:41
Apr 06, 2010 (LBO) - Sri Lanka's state-run SriLankan Airline has not been able to face the competition in a liberalized air services framework and it has to be saved, President Mahinda Rajapaksa has said.
He said Sri Lanka's opposition was now criticizing the government's economic strategy using false propaganda.

"During their time they made 'open skies' agreement with foreign governments," President Rajapaksa told a business forum at Sri Lanka's central bank Monday.

"Now saving SriLankan Airlines is a problem. Instead of protecting the institutions of our country they have helped outsiders.

"These agreements are a problem of us. We came to change this system."

Under a liberalized air services framework prices fall forcing higher levels of efficiency.

This allows lower income people who were previously not able to engage in air travel to fly. Protection cannot hurt the rich as they have the financial means to overcome price barriers.

Meanwhile Sri Lanka has also indicated that it wants to take Colombo forward as an air services hub.

SriLankan Airlines was privatized in the 1998 and management given to Dubai based Emirates with an equity stake on a 10-year deal which was terminated amid controversy in March 2008.

Emirates pulled out after relations between the key shareholders broke down over an incident involving seat allocations for a presidential entourage.

In the financial year ending March 2009 the airline lost 9.9 billion rupees amid a global economic slump and an intensifying war at home.

This year however losses are expected to be reduced.

The government which already owns 51 percent of SriLankan has had discussions with Emirates to buy up its 43 percent stake,

Sri Lanka also started another state-run budget airline Mihin Air which lost more than three billion rupees in the first year of operations. Now it is operating with some services shared with SriLankan airlines.

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READER COMMENT(S)
32. Rohan Samarajiva Apr 10
The President is losing sight of the objective that is sought to be achieved. The whole point of the aviation hub promise in his manifesto is lost if he tries to preserve an airline.

The aviation hub is intended to attract more transit passengers, more direct flights on economical and large aircraft to more destinations, more space on flights out of Colombo for air freight and so on.

Great number of landing and takeoffs, we sell more services to the airlines and their passengers and make more money. Direct benefits.

Better schedules, lower prices and more air cargo space, Sri Lankan industries and agriculture benefit as do people coming to and going from Sri Lanka. Indirect benefits to industry and agriculture. Direct benefits to passengers. Direct benefits to tourism industry.

All these require a focus on the airport, not on airlines. It does not matter who owns the airlines. What matters is that the airport is running at full capacity. For that we need more airlines to come here, not less. That is why the protection argument is fundamentally contrary to the promise of the aviation hub.

31. EconoCautious Apr 09
It appears that the comments have shifted away from the main issue, that is, whether an inefficient organisation should be given protection in the name of national interest at an unknown cost to the tax payers.

Economics says that people's reaction to this issue depends on the extent of the cost personally borne by them. The truth is that the total cost is not evenly distributed and some are able to avoid it or lessen it on themselves or in fact make a gain out of it. Those who stand to gain support it, while those who can avoid it or lessen its burden are indifferent to it. If you feel that your neighbour is called upon to bear a bigger burden, then, acting on a feeling of jealousy, you tend to support it, because your neighbours woes are greater than those of yours.

But eventually, the economy suffers and there is no one who will gain out of it. You don't have to go behind Krugman or Bernanke to learn this wisdom.

30. fb Apr 09
Ranil
I did not know until today that a human being had to a) win a nobel prize, b) be intellectually superior c) have any other special qualification to love freedom and and speak for it - or to speak against people that propose to take it way.

If that is the qualification I then I agree I have no voice to speak against suppression of human freedoms, by anyone, economists, nobel prize winners, lawyers or politicians and have to suffer in silence while either my rights or somebody else's freedom is taken away (by exchange controls or import duties or whatever).

I claim no intellectual superiority (indeed no superiority of any kind intellectual or otherwise) over any fellow human beings, including Nobel prize winners, or those that failed to win them. I claim the right to question their ideas or disagree with them as a person who is likely to be affected by the ideas they propagate. If 25% duty is charged on China, who will be next? Sri Lanka?

But I do admit that people who advocate controls over the lives of other people have to be extremely clever. You have to take away a person's freedom and make them like it. I would call it an extremely clever job or a even a con job.

If you want intellectual equals of Krugman, Bernanke & Co I will have to refer you to several rival universities in the opposite camp who advocate freedom.

I cheerfully reserve my right to cheer the camp I support, boo the opposition like any football or cricket fan without being cowed down by a need to have been a national player.

And I would urge any citizen, whatever their colour, level of education or race to speak for justice and freedom against anyone, however well qualified, educated, powerful or publicly acclaimed, without being cowed into silence by any feelings of inferiority.

As to the choices one makes in life - that is also the persons own. They do not have to justify it.

29. Lakshman dalpadado Apr 08
To NRMK
1. Please read my original post again. I have not made any reference to any racial group or religious groups in my original posting. Only reference was to people traveling to working the middle east- and they include all races. I have not singled out any particular group. You are trying to insinuate something that was not there.

2. Reference to Monarchy-- Only to point out the failure of democracy in the third world countries and the success of autocracies like China, Malaysia and Singapore. We need something in between the western style democracies and dictatorships.

3. That democracies are extremely inefficient. If you pit a democracy like India against and autocracy like China- China will win hands down.. and they are.

4. Democracy as a system of governance in the third world has serious flaws and deficiencies( Iraq is a good example). Democracy should evolve- not forced upon like what happened in British Colonies.

5. Chelvanayakem asked for 50:50 representation during British time- in 1947- before independence-- when British refused the request for a separate state in N-E. At the time Tamils were a dominant force.

6. Sinhala only act was repealed 2 years after introduction and Tamil was included as a national language. Sinhala act was brought in because the vast majority of sinhala farmers could not understand English thus were disenfranchised.

7. Sri lanka is one of the few countries in the world to publish important government documents in all three languages since 1940s-Birth certificates, Death certificates, stamps and envelopes ( Probably the only country do so- not mentioned in any BBC, CNN reports).

8. All sinhala government servants are required to pass spoken tamil exam to get increments. ( Not told to the outside world)

9. Only a minority of Tamils , mostly in the N-East. - about 4 % of total population- cannot or do not speak/understand Sinhala. Tamil Muslims, Christian Tamils Malays, Burgers, Gujaratis, Sindhis and Boras -- all speak fluent Sinhala. So why can't the 4% in N-East learn??

10. We have no major Ethnic problem: and the Tamil discrimination thing is overblown. Ask the owners of Cargills or the Gall Face Hotel.

11. I have not seen any Sinhala person spitting on a Tamil, or hear of any physical sexual or assault or refused service in a shop, restaurant,etc in COLOMBO for being Tamil-- all common incidents in Australia, USA, UK and the EU. Half the Sri Lankan youth in London have been victims of assault.

12. I am only trying to counteract the false propaganda against the Sinhala by a section of Tamils... and some ignorant sinhalese.

13. Tamils have all the rights- there is nothing discriminatory in the constitution.

14. Racial attacks are common in all countries. At least 50 immigrants are killed across EU every year because of racial attacks. In 2004/05 more than hundred died in Paris following fire attacks on immigrant buildings. Last year Italians went on the rampage and assaulted immigrant shopkeepers in Milan and Rome.

15. If you watch BBC you will get the impression that all Tamils live in the N-East and all are poor!!

16. Racial attacks happen in most western countries- but its NOT government policy in EU, UK or USA--and its not a sign of systematic discrimination. Same thing applies here.

17. And as you may know I am an ardent AGNOSTIC and ATHEIST ...and a British National to boot.

18. Just look through the pages of HELLO Magazine and see who throws the biggest parties in Colombo-- yes the downtrodden people. Fact are Facts.

28. Ranil Apr 08
Fb,
Since you’re more knowledgeable than even a nobel prize winning economist, how many nobel prizes have you won, just out of curiosity? Since a Yale/MIT educated economist (Princeton/LSE professor) is apparently your academic/intellectual inferior, perhaps you can enlighten us on your academic pedigree?

Krugman apparently charges USD 20k per hour for a speech. I’m sure there are people lining up to hire you for even LKR 20k an hour, although, maybe not, judging by the amount of time you spend commenting on LBO (a third world website).

How come education hasn’t given you enough mobility to be where Krugman and the likes are today? Africans no doubt will be heartened to learn that all they need to do is introduce private practice (if they don’t already have it) to solve their healthcare issues.

27. fb Apr 08
Lakshman,
Krugman is a mercantilist. His credentials were proved when he advocated exchange controls for Malaysia a long time ago. He comes from the same school as Bernanke. Bernanke almost destroyed the world. Princeton seems to be a mercantilist hotspot. Need we say more?

Given a chance anyone will be a control freak (i.e thug as was referred to earlier). The desire to exercise control over the freedom of others seems to be a powerful one in most human beings. The worst is the coercive power of the state.

If doctors migrate to developed nations that means they are being underpaid in their country of learning. Third world governments create high levels of inflation, depreciate their currency, mis-use people's taxes and blame educated people when they move.

Education gives mobility. You have to accept that. Sri Lanka has tackled the problem by allowing private practice. That is a very market based liberating move.

It has benefited everyone. For 500 rupees any person can consult a specialist. How many countries can boast of such a system? The patient and accompanying family members can consult the doctor after work without putting leave and imposing additional costs on themselves. The doctor is happy, the patient is happy, his carers are happy.

The doctor may be working 15 to 18 hours a day, but if he is willing to put up with that and stay in this country he must be getting some value.

26. NMRK Apr 08
Dear Mr.Dalpadado
You seem to have a complex that people acquiring wealth thr' legal gains shuold be looked down upon.Remeber your comment on fat ladies walking in shopping malls.You definitely are a miiddle class hater and praising the royals if i recall with your comments before this.

Chelvanayakam demand the 50% representation due to the fact that the tamils were been sidelined.You know how bandaranayake brought in Sinhala only and where we end up today.The tension is still on.We should adopt to been Sri lankans instead havin people like you who think lowly of people who fight to make a livin or being a tamil,muslim can be looked down upon.Mind you both races have their origins tracing back to INDIA.Northerners and southerners to be exact.BUDDHA is from INDIA.

We as people need to grow up to facts like MR.LD says a spade is spade.So we srilankans be it Tamil or Sinhala the main two races are from INDIA.(SPADE)

As for the Airlines i do agree Mihin Should be halted or merged with Sri lankan.We are charged taxes not to run loss making institutions.Silk started after Singopore attained it's 1st world status and not before that.We should encourage competetion and and not protecting the institutions making losses.It's a business and if it cannot make profits there is no use.The foreign workers(Over 1.5Miliion) in our country remit RS.3 BILLION to the country annaualy to run the economy.They have no social security when they return.No health insurance or for that matter even the dutyfree material is restricted. We have to come out of being frogs and grow up to the world.Specially people like MR LD

Evryone have a Good Holiday TC.
NMRK

25. TrulySriLankan Apr 08
The problem of Mihin Air was that it was started without a proper economic or financial analysis, just as a whim of a person in power. Public investments using tax payers' money need careful evaluation to avoid misuse and waste.

Mihin was started at a time when the global aviation industry was at the lowest, all main airlines were making losses and facing bankruptcy and budget airlines were folding up everywhere except the Air Asia which could just weather the storms.

Subsequently, when the criticism was mounting against Mihin, instead of cutting losses by liquidating it, the burden was transferred onto tax payers by government's assuming its debts amounting to Rs 3 bn by issuing debentures to BOC and Lankaputra.

This experience should be a lesson for SL for its future investment decisions.

24. Lakshman Dalpadado Apr 08
Fb- I beg to disagree with you on several points. Although this is not related to the published article it an important one. Current system of labour migration has benefitted developed countries at the expense of developing countries. On this issue the WHO and the UN agree.

There are no doctors in some parts of Africa because all have migrated to rich countries. Poor countries cannot compete with rich countries on pay. This is where nationalism comes in. The Chinese, Japanese and the South Koreans were able to develop fast because of their inherent nationalism. To them pride and dignity is more important than money.

The US championed Free Market theories when they were benefitting. Now that the tables have turned, some economists , Paul Krugman, Nobel prize winner for one, are even suggesting that US should impose 25% tariff on Chinese goods!

23. Henry Apr 08
Oh this is interesting... so the Mihin Air that is losing billions while using Sri Lankan Airlines planes, staff and facilities is not a problem but some agreement is the problem?

Some logic they use; I like some of that Coolaid they drink too.

22. Lakshman Dalpadado Apr 07
Dear Prasad
I do not think I have mentioned anything offensive. Just stating some problems people have experienced when flying with Sri Lankan airlines on Mi-east routes: passengers arriving late, baggage way over limits, holding up check in, no money to pay for extra weight, falling asleep in the departure lounge, running up and down the isles, talking loud, sitting in the first class with a economy ticket, screaming children, talking on mobile phones in flight, coughing and clearing the throat, BO, etc.- just ask any hostess. Facts are facts. I like to call a Spade a spade.

In Japan, travelers are given extensive instructions as to how to behave on board and use facilities such as on board toilets. But thats the Japanese for you- always thorough and detailed to minutiae.

About the ethnic issue If I am not mistaken, the ethnic issue raised its ugly head in early 1940s( before independence) -- when Chelvanayakem demanded 50:50 representation on the basis that more than 50% of top civil service posts were held by Tamils-long before I was born!

If any of my postings are offensive- LBO has the right not to publish them.

21. prasad Apr 07
Dear Lakshman Dalpadado
Don't forget your so called maids and the middle eastern travellers are the people who send most of the forex to sri lanka.

Mind your language else don't comment on sites. People with your mindset are the people who created the ethnic issue in the first place.

20. Sha Apr 07
Bottomline: Ideologies aside,does this mean that the prices are going to increase? And what efficient purpose does that serve?
19. fb Apr 07
Lakshman,
Certainly they should. For thousands of years mankind survived very well without visas. The US itself is a good example. It was racial bigotry perhaps that gave rise to the 1790 naturalization act in the US.

Migration - particularly for purposes of employment or what is called economic migration - should certainly be permitted.

Some American employer groups (like IT) have fortunately managed keep nationalistic forces in check to some extent. It is the educated sections of society - like freedom loving economists - who manage to temper the narrow dehumanizing forces of nationalism.

Outsourcing has also become a force of liberation breaking the barriers to labour markets. Human smuggling is another example.

If we had the current visa regime (and the current politically correct racial superiority attitudes) I wonder whether Mohideen Baig would ever have come here and sung songs in praise of the Lord Bhuddha tickling the cockles of 'indigenous' Sri Lankans.

18. shantha panapitiya Apr 06
In SL there is no accountability. when did someone resigned from a post for responsibility.
airlanka had to be privatised. who privatised ? who signed the open skies policies ?
analyze history and find out facts, before castigating the opposition.

when will we accept globalization and market economy ? can we escape competition ?
is protectionism the answer ?
it will not be long before we become the next mayanmar ! airlanka / emirates agreement was not the best...without emirates where would have we been today ? in sheer wilderness !

without renegotiating the contract we chased them away due to nothing but ego. we had no business sense in that saga. do we have it at least now ?

now srilankan keep loosing money. are we managing it right ? who is accountable. when will be brave, innovative and restructure ?
why keep mihin ? ego !
started it against srilankan. now srilankan also ours. can we afford 2 airlines. merge them or close down mihin ! do our people have a voice ?

now the island srilanka is a private property. May God Bless us....if one is looking at us.

17. Lakshman Dalpadado Apr 06
Senerath- Look on the brighter side. If not for Mihin Air, these maids would have broken all the toilets seats in Sri Lankan as well.

I now for sure a lot of people avoid Sri Lankan airlines because of the mid-east crowd. In that context it's good to have a second budget airline (viz. Silk Air run by Singapore airlines) even if its a loss making airline as long as Sri Lankan can make up for the losses.

Trulysrilankan- If your friend was on a low price restricted ticket the airline has the right to charge for change of flight. All airlines do that.

16. lakshman Dalpadado Apr 06
Fb- Visas are the last frontier in protectionism. Do you think we(and all other countries) should get rid of immigration visas as well?
15. fb Apr 06
Some food for thought from Donald J. Boudreaux (an economist at George Mason University)

"But let’s never forget that protectionism is also immoral. It is immoral for anyone or any collective forcibly to obstruct peaceful exchanges between two parties merely because a political border separates these parties from each other.

If it is legal and proper for me to buy widgets, my choice of which widget supplier to patronize should be mine and mine alone.

"Likewise, the terms on which we deal are no one’s business but my own and that supplier’s.

"Protectionists, at root, are thugs."

14. EconoCautious Apr 06
Many blame Emirates for ruining the Sri Lankan national flag carrier. But, in 2001 when the Katunayaka Airport was attacked by Tamil Tigers, Sri Lankan Airline wars the biggest victim with 6 of its running condition aircraft being fully destroyed and Colombo's image as a safe destination badly shattered.

The management of Sri Lankan, run by Emirates, came out of this catastrophe beautifully. It should be an eye - opener to both the President and his team of advisors.

Instead of asking for government protection and hand - outs, it went into a restructuring plan under which all the loss making routes were cancelled, staff was reduced through a voluntary retirement scheme, compensation from the insurers was used for building a positive cash flow, aircraft were leased instead of buying outright and a cost cutting operation was introduced.

All these helped the Airline to make a comeback within a matter of two years and in private circles, it was even joked that the Tiger attack was a blessing in disguise. I pen this to educate those in ignorance and utter non - sensible nationalistic remarks.

13. Laksumana Apr 06
Simple Solution. Make Mihin Lanka the National Carrier and let everybody in the family get careers there like in everywhere else!
12. Senarath Apr 06
Scrap Mihin.SriLankan service is very poor, toilets overflowing seats broken ,entertainment systems do not work. Open skys has nothing to do with bad service
11. Desapriya Apr 06
These people do not have enough knowledge to run the economy of the country. Since 2005 top positions of the country and economy has been filled with stooges who had no experiences whatsoever. The only right choice was General Sarath Fonseka who ended the 30 year civil war and now in illegal custody as he opposed the postwar policies .
10. TrulySriLankan Apr 06
One of my friends had a nasty experience with the Sri Lankan airline office in Singapore recently. While Sri Lankan Airline has been listed in an obscure manner in the Yellow Pages, its office has been located in a more obscure place in a high rise building on the Cecil Road.

My friend had wanted to have his travel date advanced, but not until he had to pay a fee of S$ 25 for the service.

None of the other airlines on which my friend had travelled had charged him like that for a normal service of having a travel date advanced.

Who says that my friend will patronise Sri Lankan Airline again?

9. thalapathpitiye hemanada Apr 06
LBO promotes only anti national economic policies it was not surprising as LBO as a web site was against the war so the freedom of expression will be gauged by their willingness to publish my comment
8. Ajith Apr 06
If Govt wish to 'help' Sri Lankan in terms of financial support, that would be a different issue. But if it attempts to scrap "open Skys' policy and does not continue with it, true to the word, overall growth of the industry- including the Airport, Tourism- is going to have a serious blow.

UL's monopoly will kill the government's dream of making LK an Aviation Hub, definitely

7. MFZ Apr 06
IT's the problem with the mismanagement of funds and institutions...politicization of not only airlines but also finance sector going to happen..we can soon see some polititians sitting in the director board of prominent banks in Sri Lanka...
6. Rohan Samarajiva Apr 06
This sounds like the death knell of the aviation hub plan (http://lbo.lk/fullstory.php?nid=633092278).

The first thing to do to restore SriLankan is to shut down Mihin. Everyone makes mistakes. Only the wise admit them and correct themselves.

5. mp Apr 06
One problem with Sri Lankan they (maybe staff) target foreigners than Sri Lankans. Sri Lankans travel to Sri Lanka with their national carrier while foreigners buy cheap ticket with holiday package and even some goes to Maldives. While Sri Lankans feel they not treated as well as foreigners in their national carrier and many of them start to travel with other air lines.

Doesn't matter how many foreigners in the aircraft all the announcements must come in local language as English which is same with other national carriers least all the air crafts I flew so far.

I think above is one problem on top of the political interference and incompetent management

4. Nishantha Dias Apr 06
Airline industry is a very competitive industry if you’re not able to keep up with the flow you end up losing money like Sri Lankan. There is lot of things that needs to be looked at the Sri Lankan airlines process of selling tickets as most of the time when other airlines are selling high fares Sri Lankan airlines have filled up the flights with the lowest fare paying passengers. This is where the fundamentals of revenue management is wrong.

Trying to protect the airline we should not harm the image that we have in the world as a country that is peaceful and beautiful. For example who ever that travels in other airlines are not 100% passengers who travel from destinations that Sri Lankan airlines flies, so if we restrict other competition to enter the Sri Lankan market would Sri Lankan be able to carry all this passengers into Sri Lanka? This would start a chain reaction in effecting the Sri Lankan economy.

Even with so much of capacity coming into Sri Lanka the demand is higher than the supply for most of the airlines even at this off peak periods. So if we limit this air services the limitation of seats would be more limited visitors would come into Sri Lanka, this would mean we would have a limited demand for our hotel industry and this goes down the line by effecting the entire economy of travel trade service industries that would be tag. (This would be around 30-40% of industries that is included in the country).

So I will never disagree that we should protect Sri Lankan, as a Sri Lankan who will not like to see Sri Lankan airlines doing well and flying the flag around the world with pride. But at this time, as a country when we are trying to grow we should try not to forget the fundamentals of our future. One country one family let’s build Sri Lanka to be strong and make Sri Lanka an Hub that nobody else could challenge.

3. FairPlayer Apr 06
I think it may be time to objectively, but yet diplomatically, assess Sri Lanka's position in these liberalised agreements. As has been seen when negotiating numerous free trade agreements, both bilateral and also WTO-related, Sri Lanka does not have the technical capacity to negotiate terms on an equal footing with most other countries.

As a result, decisions are taken and agreements are reached, which have far reaching consequences for the economy, but yet often with many 'side-affects' that we did not guard against. Even in WTO frameworks there are a myriad of safeguard mechanisms that Sri Lanka has at its disposal, but owing to weak capacity and evidence-based decision making by policy makers, we lose out.

While other countries are able to go into a liberalised system, while still maintaining adequate provisions to safeguard and further their own interests.

As a top international trade law expert, Tony Anghie, said at a forum in SL a couple of years ago:

"Developing countries like Sri Lanka face a severe dearth in technical expertise and capacity needed to play the world trade game, and until that deficit is bridged these countries will continue to get the sour end of the deal..."

2. Hewa Apr 06
Government protection will not restore their fast fading reputation as a passenger friendly airline. A recent flight from Heathrow to Colombo which was delayed by thtree hours for whatever reason is a classic example.

The cabin crew was giving favoured treatment to the passengers with a "western" origin to the utter disgust of Sri Lankans who took pride in flying their national carrier. Some of them may not fly Sri Lankan again. The government protection will not bring back the lost glory....The improvement of service levels will

1. EconoCautious Apr 06
This is a dangerous sign. Going backward to an era where enterprising assets are basically held by the state will frighten any investor who has to put his money at risk. This type of policy is attractive to a few 'nationalistic minded 'people, but it will thwart the government's attempt at reaching an 'Asian miracle' for Sri Lanka.

Lee Kuan Yew's address to trade unions and management of Singapore Airlines when it was set up in 1972 may be carefully studies by SL.

This is what he said in From Third World to First (pp 229-30):
'I spelt out the need for a Singapore Airline to be competitive and self-supporting; it would close down if it incurred losses. We could not afford to run an airline just to show the flag like other countries did. Right from the beginning, management and unions clearly understood that their survival depended on being profitable'.

It is worth to consider why many who travelled Sri Lankan Airline in the past do not make a repeat call on them today.