Sri Lankan crisis hands Indian airlines an opportunity on a platter, will they grab it?

Recent weeks have been turbulent for Sri Lanka. Sinking foreign currency reserves, raging inflation and political instability have had many casualties and among them are airline flights. A couple of weeks ago, news surfaced that the government may be looking at selling SriLankan Airlines to plug losses and pay for other necessities. While a deal for SriLankan may not be immediate, there is an opportunity on the platter for carriers in India that is immediate.

The fuel situation in Sri Lanka has meant that a lot of the airline’s flights are using Chennai as a fuelling stop for flights to Australia and Japan, among others.

The airline has been a popular choice for travellers to fly to islands in the Indian Ocean, Australia and cheaper options to Europe, the Middle East and South-East Asia. While traffic had come to a standstill during the pandemic, we are reaching another extreme now with almost all available options being sold out for travel.

Things came to the fore in Europe, where airlines are cutting frequencies or stopping the sale of tickets to cater to the burgeoning crowds. Against this backdrop, any capacity going away from or likely to go away from the market is a huge opportunity for the neighbourhood. But are Indian carriers well placed to capitalise on this?

SriLankan Airlines—A turbulent past 

SriLankan Airlines has its roots in Air Lanka, which itself was a replacement for Air Ceylon. In 1998, Emirates took a strategic stake in Air Lanka and was subsequently rebranded SriLankan Airlines. This led to fleet renewal and network expansion.

Emirates did not renew the agreement with SriLankan and sold its stake back to the government of Sri Lanka in 2010. The airline joined the Oneworld alliance and pursued international expansion although it was running up losses. The route network started shrinking again post-2016 as the financial strain started showing.

Also read: Explainer | Sri Lanka and Pakistan crisis: What can India do?

Sri Lankan diaspora and the need for newer routes for Indian airlines 

As the airline tried connecting traffic at cheaper fares and better service, it also targeted business from the Sri Lankan diaspora. The top five countries where they are settled are Saudi Arabia, the UAE, India, Canada and Australia. India has non-stop connections to all of them!

Over the last few years, as the country looked up in economic terms before the current slump, the business and VFR (Visiting Friends and Relatives) traffic was shooting up significantly. Air India, over the years, has shifted its hub to Delhi from Mumbai. Yet it continues to selectively operate flights from Mumbai or Amritsar. Airlines may need to evaluate routes from either Bengaluru or Chennai to Australia and add capacity to Saudi Arabia and the UAE from the southern ports, which will then be able to attract enough connecting traffic from Sri Lanka.

Needless to say, flights to Colombo and possibly an additional destination in Sri Lanka should also be on the cards.

Also read:  Crisis-hit Sri Lanka gets $55-million credit line from India for fertilisers

SriLankan Airlines has successfully implemented a small hub in Colombo carrying traffic from the Middle East and Europe to Indian Ocean Islands, which remain untapped by Indian airlines (beyond flights to Male). This presents an opportunity to fly to Seychelles, Mauritius and at other airports beyond Male in the Maldives. This will not only help take away significant traffic currently, but establish India as a long-term hub to fly to these places.

Who will buy SriLankan? 

The prevalent rules would mean that the government would look at diluting a 49 percent stake in the airline. Who will be the buyer? Will it be Emirates again? Will it be Etihad, which has burnt its hands with quite a few investments, or will it be Qatar Airways, which has been steadily looking to invest in other countries?

If not the Middle Eastern carriers, will it be the Singapore Airlines group, which has made public its ambitions of having a second hub beyond Singapore, or will the low-cost carrier groups of Lion Air or AirAsia look at this opportunity, which fits in perfectly with their plans for Australia, China and other parts of Asia?

 Tail Note 

Sri Lanka is in a deep economic crisis. While India does all it can to help its neighbour, Indian airlines can use this period to pull the rug from under the feet of the airline.

All that is needed to start and establish new routes is available on the platter except for cheap oil, and the time to expand could be now. The glitch? Aircraft! Many aircraft of Air India remain grounded for various reasons and IndiGo cannot operate to just about all the routes in SriLankan’s portfolio for a lack of wide-body aircraft!