Apr 28, 2013 (LBO) – State-run SriLankan Airlines will acquire seven Airbus A350-900 and six A330-300 aircraft to upgrade its product and cut costs starting from October 2014, chief executive Kapila Chandrasena said.
SriLankan will acquire 10 aircraft from Airbus through a mix of operating and finance leases in a deal which has a ‘present value’ of 1.2 billion US dollars and another three from an aircraft leasing firm, he said.
Cabinet approval has been given to sign a memorandum of understanding with Airbus for 10 purchase options and the first aircraft is expected to arrive starting from October 2014, he said.
The aircraft are to be delivered over 7 years.
In the first phase six Airbus A340 aircraft which are up to 18 to 16 years old will be replaced by A330-300 aircraft.
Seven A330-200 aircraft which are around 13 to 16 years old will be replaced starting from 2017 with A350-900 aircraft. Three will come from an aviation leasing firm as there were no manufacturing slots available at Airbus in that period.
The balance four A350s will be acquired from Airbus Industries starting from 2019.
SriLankan was aiming to maintain a fleet with an average age of about five years. SriLankan has already modernized its A320 narrow body fleet of eight aircraft.
With several very old aircraft in the fleet, the airline could not give the same level of service to all passengers and operating costs were also high.
“If you look at our configurations we could not standardize service,” Chandrasena said.
“With the new aircraft everyone will get the same experience.
“Fuel is 50 percent of our operating costs. With newer aircraft fuel is about 40 percent. That is a huge quantum of savings.”
Even after accounting for acquisition costs, a net gain of 7 to 10 percent could be made with new aircraft, he said.
The aircraft will be financed with a mixture of finance and operating leases. Industry practice was to have about 30 percent on finance leases, Chandrasena said.
Last year the airline made an operating loss of 20.5 billion rupees, according to published data.
The new aircraft would also be able to carry a full load of passengers without sacrificing cargo over long haul destinations, he said.
Airbus will also give 31 million US dollars worth tools, equipment and training to set up an aircraft maintenance and repair facility (MRO) for the new types.
“We are also targeting the regional airlines that will be an additional revenue stream for SriLankan as well.”
Sri Lankan Engineering is already servicing A320 aircraft for a number of regional airlines at its facility in Katunayake. A second facility is to be set up in Mattala.
Corrected – headline/lead – six A330s and seven A350s