The aviation sector in Sri Lanka is set for expansion after the cessation of the country’s long-running civil war. Foreign investment in the economy and inbound tourism had been seriously undermined by a lack of confidence in Sri Lanka’s security situation. However, the now-prevailing peace will provide a solid foundation for confidence both abroad and at home, for tourists and businesses alike. Sri Lankan Airlines, the government owned flag carrier, operates services to destinations in Asia and Europe from its main base and hub at Colombo Bandaranaike International Airport – the country’s only international airport. Mihin Lanka is Sri Lanka’s LCC and is a state owned enterprise offering flights to domestic destinations and to a number of cities in India and the Gulf States.
Airports in Sri Lanka
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Royal Brunei Airlines leaps forward with 787. Early A320neo or 737MAX slots to provide another boost
Royal Brunei Airlines (RBA) will make a big leap in improving efficiency and profitability on 1-Dec-2013 as the carrier introduces Boeing 787-8s on the Bandar Seri Begawan-Dubai-London Heathrow route. Another leap could occur in 2016 or 2017 as the carrier, somewhat surprisingly given its very small size, has received aggressive proposals and early delivery slots for new-generation narrowbody aircraft.
RBA became in Oct-2013 the first 787 operator in Southeast Asia. It has already taken delivery of two 787-8s, one of which is in static display this week at the 2013 Dubai AirShow. RBA will be the first carrier to operate the 787 between Dubai and London, one of the world’s largest routes, and in Mar-2014 will become the first carrier to have an all-787 long-haul operation.
RBA meanwhile is in the closing phases of a competition between Airbus and Boeing for its new-generation narrowbody requirement, which includes over 10 aircraft for delivery from end of 2015. Airbus and Boeing are offering early delivery slots for their A320neo and 737 MAX families, with support from leasing companies, and the campaign has become very competitive as Boeing is eager to switch RBA’s narrowbody fleet from Airbus. RBA has already ruled out Embraer and Bombardier, after earlier considering large regional jets.
The Kuala Namu International Airport outside Medan opened on 25-Jul-2013, becoming the least congested major airport in Indonesia. Medan currently only has six international routes and is served by only six foreign carriers, five of which come from nearby Malaysia and Singapore. But Kuala Namu has the potential of becoming a major international hub in response to growing demand from the local market, which has a catchment area of over 10 million people, and from transit traffic as infrastructure constraints at Indonesia’s other major airports worsen.
Garuda Indonesia, which opened a domestic hub in Medan earlier this year, has postponed international expansion from the airport. But Garuda will inevitably relook at opening international routes at Medan and using it as an alternative to Jakarta for domestic-to-international and even international-to-international connections.
Meanwhile, other Indonesian and foreign carriers will take advantage of a rarity in Indonesia – a spacious airport that is not operating above capacity. LCCs, which already account for over 70% of domestic and international capacity at the new airport, are particularly well positioned given that Medan does not have the business traffic profile of Jakarta.
Royal Brunei Airlines (RBA) is eager to move on to the last phase of its new business plan as it becomes the first airline in Southeast Asia to operate 787s. An initial fleet of four 787s, which will be placed into service in 4Q2013 and 1Q2014, will significantly improve efficiency and should lead to a further reduction in losses of RBA’s long-haul network.
One of Southeast Asia’s smallest flag carriers has come a long way since restructuring in 2011, when three medium/long-haul and two short-haul routes were cut. So far the results have been positive with RBA’s short-haul operation having already turned the corner and is now growing again in response to surging demand for travel within Asia.
RBA is now looking at also renewing its narrowbody fleet, which would result in further cost savings. But the carrier still has an uphill battle in reaching profitability given its small size and the prospect of increased competition with LCCs.
SriLankan Airlines is planning to focus expansion on existing and new markets in Asia ahead of the carrier’s ascension into the oneworld alliance. SriLankan is now on course to formally become oneworld’s smallest member in Nov-2013.
The government-owned carrier is currently focused heavily on South Asia, which accounts for 41% of its international seat capacity. SriLankan’s network in South Asia, particularly India and the Maldives, is its main draw to oneworld. But North Asia is SriLankan’s target growth market, with more capacity to greater China and the likely launch of flights to South Korea. SriLankan’s North Asia expansion could be boosted by a relationship with Cathay Pacific, which is sponsoring SriLankan’s membership into oneworld.
Malaysia Airlines (MAS) formally joined oneworld on 1-Feb-2013, giving the alliance 12 full members and its first member in Southeast Asia. For oneworld, MAS fills a white spot in one of the world’s fastest growing regions. For MAS, oneworld supports the carrier’s new focus on the premium end of the market.
MAS is in the latter stages of a restructuring which began at the end of 2011, when it unveiled a new business plan. Joining oneworld is a key component of the business plan. While only three oneworld members currently serve MAS’ Kuala Lumpur hub, joining the alliance expands its virtual network and increases its relevance in the premium market.
National carrier SriLankan Airlines is betting that joining the oneworld alliance in 2013 will further its revival as the carrier continues to expand following the end of Sri Lanka's civil war in 2009, which has permitted increases in tourism and GDP growth. It is this focus on Sri Lanka the carrier hopes to build, having served a decade ago as a de facto hub for India given the liberal access regime whereas India was more protective elsewhere. India's opening of its skies to the UAE and Qatar, home to powerful networks, had tremendous impact on SriLankan's network. While the carrier will grow to India, it sees its growth firmly planted in Asia and is planning a service to Seoul.
While oneworld discreetly acknowledges SriLankan is not its typical member, SriLankan does bring oneworld greater access to India, where oneworld lost out to earlier in the year with Kingfisher's prospective membership being suspended. The competitive landscape also works against oneworld's positioning in India, with Jet Airways likely to join Star Alliance in the near future.