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No longer king of the roost?

02 Oct 2022

  • Ousted SriLankan CEO Peter Hill makes stunning comeback into the island’s aerospace with FitsAir
  A former SriLankan Airlines Chief Executive Officer (CEO) whose work permit was revoked by the Sri Lankan Government back in 2008, has made a stunning comeback to the island nation, with the announcement of the launch of a new airline that is a fully privately funded Sri Lankan business.  Peter Murray Hill, the aviation industry veteran with decades of experience in the field gained around the globe, on Monday (26) announced the launch of FitsAir – an airline that is here to break the aviation monopoly enjoyed by the State-owned, loss-making National Carrier SriLankan Airlines since Mihin Lanka – another Sri Lankan Government-owned airline – ceased operations in October 2016.  While the launch of a new competitor for SriLankan is unexpected in itself, what is more surprising is the fact that Hill is the Vice President of Passenger Operations of the new airline.   Peter Hill and Sri Lanka   Hill is not a stranger to Sri Lanka as he was the Emirates-appointed SriLankan CEO when Emirates held a stake in the National Carrier from March 1998 to December 2007. It would not be incorrect to say that under Hill, SriLankan was rebranded, restructured, and rerouted to achieve profitability and he was indeed successful in his endeavours, with the airline achieving profitability in eight out of the 10 years under his watch, without any additional funding from Emirates or the Government of Sri Lanka.  The profitability of the National Carrier driven by Hill was short-lived, as a dispute with former Sri Lankan President Mahinda Rajapaksa resulted in Hill losing his work permit. The dispute reportedly arose due to a political entourage of 35 being refused boarding into an already-full London-Colombo SriLankan flight. This egoistic political fiasco brought Hill’s work permit, the Emirates partnership with SriLankan, and the National Carrier’s profitability, to an end.  Even though Hill has now made a comeback in style, a return to profitability by SriLankan still remains a mere pipedream – unless it is privatised, as economists suggest. And now, it has a competitor too.    FitsAir readies to fly high   FitsAir, the low-cost airline, is promoted by Fits Aviation, a member of Aberdeen Holdings and the newbie is entering the Sri Lankan airspace with many plans in mind. According to FitsAir, the initial routes will take passengers to Dubai, Male, and Trichy, with each destination served thrice a week, and the airline is hoping to increase them to daily frequencies very soon. Further, several more destinations in South India are set to be introduced in 2023 while eyeing other key cities within the South Asian Association of Regional Corporation (SAARC) and Southeast Asia. The Middle East and India are two of the key markets for SriLankan Airlines and these two are key markets for FitsAir as well. It should be noted that during Hill’s tenure at SriLankan, he developed Colombo into a hub for South Asia and in 2007 SriLankan became the first foreign airline to operate 100 flights into India per week. In this backdrop, Hill’s ability to do the same or more with FitsAir is indisputable.  Further, unlike SriLankan Airlines, FitsAir is hoping to make maximum use of three airports in Sri Lanka – the Bandaranaike International Airport (BIA), Ratmalana Airport, and Jaffna Airport. It plans to commence services between Colombo’s Ratmalana Airport and Jaffna and then develop a mini hub in Jaffna to serve a range of South Indian cities. Mattala International Airport (MIA) has been kept out of the focus for now, Hill noted during last week’s press conference.  Moreover, a range of domestic services are also in the pipeline, based around Ratmalana Airport and working with tour operators and hoteliers to provide swift transfers and short-duration sightseeing tours. So far, FitsAir has only three dry-leased aircraft, all operated by Sri Lankan pilots. Announcing these plans, Hill asserted that the Sri Lankan aviation market required “a second force”.   SriLankan Airlines   Even though SriLankan is not necessarily a low-cost carrier like FitsAir, given the current economic situation locally and the fact that Sri Lanka attracts mostly backpacker tourists, FitsAir could be considered a potential competitor to SriLankan.  However, SriLankan Airlines Chairman Ashok Pathirage does not view FitsAir as a competitor – at least for now. He told The Sunday Morning Business that it was yet to be seen whether FitsAir was a competitor and it depended on the new airline’s flight routes and schedules. Essentially, Pathirage is waiting until FitsAir takes flight to provide further comment on this matter. According to the SriLankan Airlines Annual Report 2020/2021, the Group recorded a net loss of Rs. 49 billion for the financial year 2020/’21 – 12.6% higher than the previous financial year. The increase in cargo revenue alone was not sufficient to offset the significant loss of passenger business and Group revenue decreased by 72% compared to the pre-Covid year of 2019/’20. The revenue losses incurred by the airline industry are ongoing. The Group spent Rs. 35.9 billion on finance costs and the unfavourable currency movement in the latter half resulted in an exchange loss of  Rs. 19.7 billion, mainly arising from the translation of foreign currency liabilities, including loans and leases, which adversely impacted the bottom line of the Group and comprising 40% of its net loss for the year. Despite these massive losses, the Government is yet to come up with a restructuring strategy and the Treasury keeps pumping money into the National Carrier turned ‘national downer’.  Speaking to The Sunday Morning Business on SriLankan Airlines’ performance, in his capacity as an industry veteran, Hill stated that the reason for the current state of SriLankan was the intervention of consecutive governments in the airline’s business. He noted that when a government was involved with its national airline, it was a “recipe for disaster”. Hill also pointed out that successful airline businesses such as Emirates never had its Government intervening in its business, asserting that this was why such airlines had been making profits.  Governments of developed and developing countries around the world are increasingly getting rid of their state-owned airline businesses, with India being a case in point. When airlines fail to make money under state control and even if state liquidation techniques do not work, the next resort is attempting to privatise the entity. Whether the entry of FitsAir into the Sri Lankan airspace will push SriLankan Airlines towards restructuring or privatisation is a question that is likely to be answered once FitsAir takes wing.  


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