Sri Lankan or Mihin Lanka?

Dec 24, 2007 (LBO) – The big news is that the CEO of the airline with the highest number of flights out of Colombo and a major investor has been stripped of his residency permit by the government body established to encourage foreign investment.

Like the Appos of yore, the VIPs have to keep up appearances even if the Walawwa is bankrupt. Even if keeping up appearances is driving the Walawwa into bankruptcy.

His crime? The refusal to offload over 30 confirmed passengers to make room for the Presidential party.

Was the President travelling on official business? Not exactly. He had gone to the UK to attend the graduation ceremony of his son who had jumped the queue for naval-officer training. But let us concede that the trip had the color of an official or at lease semi-official visit because he took the salute at Dartmouth.

Pre-privatization blues

Those who flew SriLankan (or Air Lanka as it was then called) prior to 1998 knew what it meant to fly a fully government-owned airline: you were Usually Late (the official code for the airline was UL); sometimes offloaded; and when actually in the air, very nicely treated.

There were many causes for being usually late. The main reasons were the lack of airplanes to support the ambitious timetable and route configuration and the age of the fleet. Even when a plane was ready to fly, it could be held back for a VIP. And we had a chronically late VIP those days.

Offloading was caused by routine overbooking as well as the demands of VIPs to fly on full flights. One could never be sure of one’s seat on this misbegotten airline. You could confirm, reconfirm and triple confirm and still be offloaded or delayed. No reason would be given officially, of course.

I was compelled to fly UL while working for government during this period, but when I had a choice, my instructions were clear: anything but Air Lanka. I did not relish the uncertainty and the missed connections.

Post-privatization joys

Service improved dramatically. The airline acquired new planes and pulled back from the vanity routes (I still recall the milk run around 2-3 European airports); focused on paying routes (becoming the largest international carrier into India as a result); filled seats; and started making money. Decisions to enter into leases were no longer the subject of Parliamentary debate.

Frequent travellers started to fly UL from choice, not compulsion. The airline cut back on some services (e.g., less newspapers per flight) and the quality of the food declined, but it did the main thing right: got the passengers to their destinations on time and with no offloading. Reconfirmations were no longer needed. Now there was no need to go a day early to be sure to make a meeting.

Even the airport attack of 2001 which resulted in the airline losing half its fleet and tourist arrival taking a crash dive, failed to stop SriLankan. It arose from the ashes and started making money again. Not only making money, but contributing profits to the treasury: Rs 1,000 million in 2007.

And now the clear signal from the government shareholder that the customer is no longer king. The President is king. The airline must go back to the days of offloading and delays and cannot operate as a commercial entity in a competitive world.

Options

The pity is that the government has an alternative. It has Mihin Lanka, the fully government-owned airline, to play with. Currently the tax payer is paying the full bill of the new airline including the Rs. 50 million unpaid credit from the Ceylon Petroleum Corporation.

Instead of running two airlines to the ground, why not just concentrate on one?

Offer a deal to Emirates, the minority shareholder of SriLankan: buy our shares too; but give up the monopolies for ground handling, catering, etc. that came as part of the package worked out at the time of privatization.

These services can be auctioned off as concessions to airport operators who are not directly connected to any airline operating at Katunayake. Let the dormant Public Utility Commission regulate the airport to ensure fair play.

Both transactions will yield significant amounts of money. The government can say that these funds will be used to pay off high-interest debt (what was done with the proceeds of partially privatizing Sri Lanka Telecom); that it will be dedicated to rebuilding the Eastern Province; or even used as seed capital to run down Mihin Lanka.

Saying anything will do. Given short memories, anything can be done.

Does not matter. The solution is win-win. People who pay good money to buy tickets from SriLankan will be sure they will not be bumped from flights by bloated VIP delegations.

The VIPs will know that they can count on Mihin Lanka to make room for them, under all conditions. Those flying Mihin Lanka will know what they pay for: standby.

If the VIPs do not want the plane, the lower castes get to fly; and they get to fly for cheap. No different from our tradition of getting into the ditch when the Appo is using the road. Mihin Lanka, the truly national airline, will preserve hallowed traditions and adapt them to modern aviation.

A Boeing for the Prez

The Peter Hill saga has one important lesson. Government in this country is fundamentally incapable of running any business in a commercially sensible manner. Feudals can only exploit, but not grow, a business.

Travellers with options have already read the signals and are reverting to the “anything but SriLankan” mode. It is a matter of time before a bumped passenger moves the Supreme Court for relief, and possibly gets it.

The winning days of SriLankan are over, despite Peter Hill’s courageous stand. It can recover from an LTTE attack but not from a raid by the Board of Disinvestment.

It has nixed the Rs 500 million expected to be contributed to government revenue by SriLankan in 2008, but most of those projections were fantasies anyway. And no one remembers; and few care. What difference will another Rs 500 million in money printing make?

Partially privatized entities cannot function in this nether world. The government should take quick action to sell off minority (e.g., Sri Lanka Telecom PLC) and majority shares (e.g., SriLankan). The proceeds can be easily absorbed by any one of the government’s money-losing enterprises.

Or the President can use it all to buy himself a Boeing 747, or two. India under the BJP bought several for Prime Ministerial and Presidential travel. Why not Sri Lanka? We may not have USD 100 billion plus in foreign exchange reserves, but we’ve got traditions to maintain.

Like the Appos of yore, the VIPs have to keep up appearances even if the Walawwa is bankrupt. Even if keeping up appearances is driving the Walawwa into bankruptcy.