|
Manoj’s
route to make UL fly high
SriLankan
Airlines’ newly-appointed CEO, Manoj Gunawardena, is
no stranger to the airline industry. He has been with the
national carrier for over 25 years, including 17 years in
direct sales and commercial experience with the airline. Gunawardena
was appointed as Head of Worldwide Sales in May 2006 and was
responsible for the airline’s global sales activities.
Prior to being appointed Head of Worldwide Sales, he was Regional
Manager UK, Europe and Americas, a position that he held from
2005.
A Chartered Management Accountant and holding a Post Graduate
Diploma in Marketing from the Chartered Institute of Marketing,
UK, Manoj’s appointment has been welcomed by the travel
and tourism industry groups.
A firm believer of credible leadership and that too, by example,
Gunawardena faces a daunting task of steering the airline
and the SriLankan team sans the expertise and influence of
global giant Emirates. However, having seen many phases of
the national carrier, Gunawardena knows SriLankan, in and
out, hence he has understandably prioritised several key measures
– firstly, to break even within the next 18 months, and
then to aspire to be Asia’s greatest airline.
The Bottom Line caught up with him, when fine-tuning his turnaround
plan for SriLankan Airlines. Following are excerpts of the
interview:
- New
CEO lists priorities and change of mindsets to make national
carrier profitable and Asia’s greatest
-
Announces revenue enhancing and better cost managing business
turnaround plan
-
Revamped business class, re-fleeting of aging A320s, 10%
fuel saving via full implementation of IATA audit in the
offing
-
Says no formal discussions yet but will explore commercial
synergies such as schedule coordination and interline relationship
with Mihin; Reaffirms SriLankan routes will not be compromised
to Mihini; Will make a case for continuity in ground handling
and catering concessions
Q:
What challenges do you foresee in the role of CEO at the current
juncture of SriLankan Airlines?
A: The challenge, not only as the CEO but also as a
business, is to create a mindset that the core activity must
make money rather than losses or being subsidised by other
non-core operations. In the case of SriLankan Airlines, the
core business is transportation of passengers, while the non-core
businesses are ground-handling and catering. Whilst setting
sights to make our core business profitable, we are also making
a case for concessions on the rights for ground-handling and
catering.
The other challenge is better management of the two variables
the business is faced with – revenue and cost. Chances
of charging a premium from customers are limited. In the airline
industry, customer mindset is being increasingly conditioned
to get value for money. The concept of budget carriers has
further reinforced this condition. On the cost side, it is
no secret that fuel prices have sent budgets of not only SriLankan
but all airlines out the window.
Q: What are the immediate
priorities of the national carrier? How do you plan to address
them?
A: In this challenging environment, success lies in
revenue optimisation whilst managing costs better. SriLankan
Airlines, especially during the management period of Emirates,
has developed a good knowledge base of revenue or yield management
in a business model as an airline being positioned and operated
as a network carrier as opposed to end-to-end carrier.
In this context, better and more creative and innovative ways
of revenue management is the key to profits. This will also
ensure flexibility for the airline to pass on some of the
benefits from such measures to customers with better value
for money. We will also focus on protecting, controlling –
if not eliminating – revenue leakages through better
practices, improved productivity, regular audits, etc.
There is also great scope to better harness the true potential.
In this connection, one of the measures planned is to roll
out our new look and improved Business Class in the wide-bodied
aircraft. We will be spending around US$ 2 to US$ 3 million
per aircraft in refurbishing and reconfiguring the Business
Class as well as doubling the capacity. For example, the A340
will see Business Class seats increased from the present 18
to 30 and A330 from 12 to 24. At present SriLankan’s
fleet includes five A340s and four A330s.
There is a loyal customer base for Business Class but we see
scope to further enhance its potential. Whilst we maintain
a relatively high 80% cabin factor, Business Class lags behind
Economy Class cabin factor by about 15% to 20%. However, in
certain sectors, for example London-Male, Business Class achieves
higher cabin factor.
In the ageing, narrow-bodied A320s, the new look Business
Class will be introduced once the proposed re-fleeting is
firmed up and delivered. SriLankan has five A320s deployed
on short haul routes. Also on the cards is adding value to
our Economy Class passengers with improved choice of entertainment
and food.
Q: What challenges do
you foresee for the airline in the next 12 to 24 months? What
would the management’s response be to overcome these
challenges?
A: We will endeavour to break even within the next
18 months. A business turnaround plan is being put in place.
This will be pursued through maximising revenue with better
yield management and other measures as well as better management
of costs.
We will constantly review the revenue optimisiation of our
routes. SriLankan isn’t known as an airline that pulls
out a service haphazardly but only after we have tried everything
possible.
The airline has taken note of the dramatic increase in the
frequencies of direct services by Middle Eastern carriers
to popular Indian points. SriLankan, however, is in a commanding
position in India now, being the biggest operator into India,
making 100 flights per week to over 10 destinations.
Nevertheless, competition has intensified in India with the
onslaught of more direct flights, checkmating the previously
highly-rewarding SriLankan strategy of hubbing India to Middle
East traffic via Colombo and vice versa (in the absence of
greater choice). Whilst SriLankan will not pull out from any
of the existing destinations, it will review use of aircraft
or the timing of services and the frequencies.
We also hope to cash in more on the boom in the outbound travel
from the oil-rich Middle East, especially to South East Asian
nations such as Malaysia and Thailand via Colombo, as well
as step up the strategy of connecting visitors from Europe
to South East Asia via Colombo in tandem with the demand.
Q: Due to rising aviation
fuel prices, despite there being no dramatic increase in your
revenue, your base cost is rising. How do you intend to manage
it better?
A: Yes, as I said, fuel prices have sent budgets of
airlines out the window. We will deal with this issue in several
ways. As of now, we have forecast our fuel bill to be over
US$ 300 million and we are planning a saving of 10% by implementing
the IATA audit. There are dedicated teams within Flight Operations
and Cabin Crew which will roll out the fuel saving initiatives
as per IATA recommendations.
We will also re-look at all processes and work practices.
We are not sparing any effort. For example, even the in-flight
Serendib magazine has been re-sized to reduce weight because
more weight means more burning of fuel. SriLankan Airlines
will commence a new round of hedging oil and we are talking
to several parties.
We are also addressing the non-fuel components in our cost
and the emphasis is better productivity at all levels. It
will be a bottom-up approach with the participation of all
stakeholders and effectively championed by the trade unions.
We have decided to shift our offices from the World Trade
Centre, Fort, to Katunayake. This, while being a cost-saving
measure, also lets be within the heart of our operations.
The shift to Katunayake will be completed within six months.
However, we will continue to maintain a Sales and Ticketing
Office in Colombo.
We will also look at distribution cost and several measures
are underway. I have shared our revenue measures, out of which
better yield management is a key priority, especially during
peak periods, because a 1% improvement can make a big difference.
Q: In your opinion, what
difference did Emirates make in the overall development of
SriLankan Airlines?
A: Whilst Air Lanka had excellent communication infrastructure
and expertise, it lacked the strength of IT. Emirates’
entry transformed work practices with a key focus on introducing
and strengthening the IT infrastructure. Transfer of knowledge
and expertise on revenue management was also a key difference
that Emirates made.
Emirates also introduced variable, performance-based pay.
Emirates also empowered managers to take decisions by delegating
whilst holding them accountable. Being fully managed and part
owned by Emirates and coming under its network improved the
profile of SriLankan Airlines globally and gave it prestige
and credibility.
Q: There were a host of
benefits from Emirates such as transfer of best practices,
knowledge and technology to SriLankan. There were also training
opportunities and cost savings from procurement, especially
preferential cost. For example, thanks to Emirates, SriLankan
could hedge on aviation fuel and cushion itself to a certain
degree. What impact would the airline will face without these
since March 31, 2008?
A: As I said, we are embarking on a new program to
hedge aviation fuel. We are drawing lessons from Ceylon Petroleum
Corporation (CPC), which is conducting its own hedging with
the help of the banking sector. The national carrier has a
strong management structure, developed both during the Air
Lanka days and Emirates-managed phase, to move on. Even Emirates
Airlines President Tim Clark, who was previously the Managing
Director of SriLankan, told the staff that they were good
and capable enough to run the airline on their own. This is
the level of confidence Emirates had in the SriLankan team
before the management agreement was not renewed.
Q: You are taking over
as CEO at a time when the carrier doesn’t have a strong
international partner. Do you see it as challenging? If yes,
how would you not only manage the new status quo but also
drive growth?
A: The airline industry is dynamic and equally challenging
and we are confident, drawing strength from our past successes
and lessons learnt, along with the plans we have with the
full backing of the Government.
Q: How would you manage
to service your customers’ requirements in the absence
of a code-sharing arrangement with Emirates? Due to the Emirates
link, SriLankan enjoyed a higher perception, co-brand value
and visibility internationally. This was partly because of
code-share, piggybacking on its route network where necessary.
How would you sustain or lift SriLankan’s global profile?
A: In comparison to 54 destinations served (including
those via code-shares) with Emirates, we now operate to 41
points in 22 countries in Europe, the Middle East, South Asia,
South East Asia and the Far East. It is not difficult to replace
code-shares enjoyed with Emirates as we are currently talking
to several highly keen parties. Etihad is a very likely candidate,
with whom greater synergies would be explored and we have
concluded the first code review meeting. At present we continue
with our code-share arrangements with Malaysian Airlines and
bmi (British Midland) while there are similar arrangements
with Indian Airlines, Etihad and Saudi Arabian Airlines on
some of SriLankan routes.
We have launched our own frequent flyer programme, SriLankan
Smiles, and both airline and non-airline partner bases are
being expanded. Recently we undertook our own ground-handling,
initially at four busy Indian airports (see related story
elsewhere on this page) as well.
For the time being since the focus is to improve our operations
and break even within the next 18 months, we will not expand
our network.
Q: How is the management
dealing with the issue of a large number of pilots leaving
the airline for better prospects?
A: No airline will encourage good pilots to leave but
we understand there are certainly better prospects outside.
Improved remuneration for pilots is being looked at. At present
we have enough pilots to sustain our scheduled operations.
We are also buttressing the supply as we have decided to make
two intakes per year for new pilots as opposed to a single
exercise previously.
Q: During the controversy
over the way President Rajapaksa’s request for seats
was responded to, you, as Head of Passenger Sales, in writing
said the management (at that time fully influenced by Emirates)
did its best. That statement was presented as part of the
official explanation from the airline. Now, as CEO, do you
still stand by that statement?
A: I still stand by my statement. We did our best with
the options available given the timeframe. There was certainly
no intention to displace or refuse the Presidential delegation.
Q: Mihin was conceived
as a budget carrier and also because it was felt that SriLankan
was being too commercial-oriented, hence certain governmental
objectives weren’t effectively met. Since the government
taking over the management, how would these concerns be addressed?
There has been reference to cooperation between SriLankan
and Mihin and harnessing of synergies. Can you detail? A case
Mihin made was that to achieve its business and social objective,
it must be given greater opportunities to fly to popular destinations
(even at the expense of SriLankan withdrawing from such routes).
How true is this?
A: Earlier on I emphasised a change in mindset and
that will remain a key focus. The airline’s core business
must make a profit and we will not compromise on that objective.
Such a stategy is beneficial for all stakeholders of the national
carrier. However, we hope to work together with Mihin Lanka
rather than compete. No formal discussions have taken place
yet. We will explore commercial synergies such as schedule
coordination and a possible interline relationship. We will
not give up any of our points that we have established over
the years. This is not an option.
Q: What specific or greater
role will SriLankan play in tourism/destination marketing?
If there was an allegation that Emirates failed to do this
effectively, how aggressive will the new management be, especially
in the context of regular spikes in the security situation
in and around Colombo?
A: SriLankan has always been proactive with regard
to destination marketing. I admit that the initial pull out
from European hub Zurich was a key concern and remained a
legacy. That was due to commercial reasons but I don’t
think the industry can now complain about lack of support
from SriLankan. We are nothing but SriLankan and the very
name itself does a certain degree of destination marketing
and there is an immediate spin-off.
We have found greater dynamism in the entire tourism industry
today and of late there have been more collaborative and concerted
approach in marketing Sri Lanka as a destination. If there
were cases in the past where SriLankan was excluded in certain
promotions, now we don’t see that at all.
Today SriLankan is an integral part or a critical component
of destination marketing. All key travel and tourism bodies
have recognised SriLankan’s role and contribution. We
have also found that working with tourism promotion authorities
in India and the Maldives have paid off to woo more tourists
into Sri Lanka.
As we are the largest operator, we will continue to promote
the destination. We addressed the issue of the security situation
and its impact a long time ago. Certainly, we, as the national
carrier, is most keen that the ground situation is favourable
for more tourists to visit Sri Lanka since our business will
boom as well. However, we have also styled our operations
as a network carrier to better manage the impact of the situation.
Q: Where would you like
SriLankan to be in five years time and also if and when you
leave at a much later date? How would you like people to remember
you when you end your career at SriLankan one day?
A: I believe in leadership and making a difference
while on the job. Once you have moved on, you have moved over.
This is my 15th job in the national carrier. I believe in
leadership by example, since that is the most credible leadership.
Credibility is all about meaning and doing what we say. Only
then will people believe in you or that one did certain things
for the right reason and with good intentions. As a CEO I
believe in walking the talk, giving strategic direction and
leadership rather than putting out fires anywhere and everywhere.
Instead of taking populist decisions, I will critically analyse
practices and processes that do not contribute to the bottom
line and equally explore those which will, so that the benefit
can be passed on to the customer. I am not averse to objective
criticism. I believe criticism is not to put anyone down but
to jolt a person into the desired action. When I was in Commercial,
we had a motto “Be a Proud Team, Make Profits and Satisfy
Our Customers.”
We are in a service industry which revolves around and depends
on people and I will harness them to the fullest and give
incentives to those who excel. President Mahinda Rajapaksa
at the launch of the new management asked the staff to dedicate
themselves to making SriLankan the greatest airline in Asia.
The Asian region is most dynamic and competitive and the home
for the many of the world’s best, apart from having the
best people. Whilst striving to be the greatest airline, to
be on par is not impossible. We will also extensively promote
the service philosophy of SriLankan Airlines, providing a
service level that matches top industry standards.
|
