Should the Sri Lankan government be in the business of running an airline? – A complement
12 Oct 2015 - {{hitsCtrl.values.hits}}
Lee Kuan Yew in his autobiography wrote: “When I requested President J.R. Jayawardena how Singapore can help Sri Lanka, one of his requests was to release Capt. Rakhita Wickramanayake from Singapore Airlines to head Air Lanka (predecessor to SriLankan) operations. I was surprised that he was appointing an airline pilot to head a commercial enterprise.”
This question I am sure had popped into the heads of many Chairmen of the SriLankan Airlines boards, in the past, too. The question remains, how many of them had the discretion of firing and hiring competent CEOs?
The timely news feature in Mirror Business on October 6, 2015, under the caption ‘Should Sri Lankan government be in the business of running an airline?’ by Dr. Janaka Wijayasiri of the IPS, sheds light on the above dilemma and carries many useful pointers for airline operations as well as ground realities facing them in modern aviation.
The world economic climate for airlines is so hopeless he jokes that “If the Wright Brothers were alive today, Wilbur would have to fire Orville to reduce costs”.
The main reasons for the existence of national carriers then are to (1) Promote the country and secure its presence in the world travel map (2) Encourage trade and tourism from/into the country and (3) Ensure connectivity with the region/rest of the world.
There is also the question of egos of the nation and/or head of state, which prompts the government to continue to fund an ever losing international airline—to which category we and our neighbour India fall.
The planned merger of SriLankan and Mihin Lanka, in terms of code sharing and sharing aircraft fleet, is expected to improve efficiency, reduce operating costs per flight and improve product standards.
However, having lived my airline life, entirely in Human Resources (mostly recruitment) Operational (Ground Handling) and Planning areas, a pressured environment for over 10 years, I cannot answer that question (despite now being in the position to be called the Management Guru among, at least, my club mates).
However, let me share some anecdotal evidence with the readers of this piece that may enlighten them and which may prove useful in steering the national carrier through the immediate future.
One of my friends since school days, from the medical profession (an avid traveller to boot), recalls JR’s insistence in appointing Capt. Rakhita Wickramanayake as the first Chairman/MD of Air Lanka. In addition to his competencies as an aviator, many alleged Wickramanayake’s friendship with Ravi Jayawardena (JR’s son) secured him the job.
When things became sour much later between the two, Wickramanayake left the position while JR held a Presidential Inquiry and changed the board. This board was the best ever for the airline: T.L. Fernando (Senior Partner EY), Chandi Wijesekera (Chartered Accountant and Managing Director of a Consultancy), Shibly Aziz (after to become AG) and Daya Pelpola (a Lawyer who serves the board even at present). The star of the board of directors was D.S. Jayasundera (popularly known as Lal), the brilliant and very competent Managing Director of the Hayleys group.
Their dedication to their duties and responsibilities, particularly of Lal Jayasundera, was that it led to vociferous protest by the Hayleys board members, citing that Lal was neglecting his duties as MD of the Hayleys group as he devoted most of his time to running the airline! I also learnt much later the only protests to come through were about some appointments (unfavoured politically) someone who was to be appointed as the CEO. He was a true professional and Management Accountant too but did not find favour with the subject minister at that time Reginald Cooray.
Transition years
The transition years with this new board in the 80s, appointed John Fleming (former Vice President-North America of SAS--not the special air services of the British Army). Why? Because he had proven himself a competent “Corporate Steward” in a major European airline: Scandinavian Airline System! He had earlier served with distinction the man who invented the words “moments of truth” in Customer Service, Jan Carlzon, then head of SAS.
The interim period 2008 to 2011 saw Emirates Airlines (under Tim Clark) running the national carrier with some degree of efficiency. The airline was turning around, as indicated by Dr. Wijayasiri in his feature, from 2009 to 2011, after which it began a nose dive of losses to the present.
When Manoj Gunawardena (a young man whom I recruited and then came to promote as an officer from plain Cargo Agent to become an executive and manager, acquired the accountancy mantle of ACMA) was appointed the CEO, he was unable to question or steer the fate of the airline or that of Mihin, to which he confessed, when I queried at a Ceylon Chamber Forum. It was the high political powers who actually called the shots.
Then on to the last CEO Kapila Chandrasena (who was a CMO one time at SLT), who proved himself initially as a good marketer would, only to give way to greed and follow the precedence created by his boss, Chairman Nishantha Wickremasinghe.
The latest arrival to the CEO post of the national carrier is Capt. Suren Ratwatte.
Therefore, if you study the history of the airline you will find that the airline was never run profitably (except in that golden era of John Fleming though short lived). The joint venture (JV) with Emirates was good for the airline but could not be sustained (common knowledge to understand that two international carriers will find it difficult to sync commercial policies for long periods) over the long haul.
During the turnaround period under Manoj Gunwardena’s stewardship, the performance consultancy headed by Dinesh Weerakkody made a presentation to the board (which was made by me as Senior Consultant) to leverage variable pay plans (VPP) within the Performance Management Framework, to reduce losses and turnaround the airline. Despite the CEO and eminent members of the board (including Sunil Wijesinghe) buying-in and endorsing the plan, it was marginalised by a mere head of department who found such an efficient system, a threat to her corporate life. She did not survive the next tide within the airline either.
Cardinal factors to consider in any turnaround of airlines are:
Load factor both passenger and cargo
Route profitability based on above (choose destinations which have the highest yield) jettison those who are not
Seasonality for carriage of passenger and freight traffic
Choice of aircraft (if it is Airbus A300 or 380) based on economics, including fuel efficiency
On time departures/arrivals and consistent A/B/C checks for the class of fleet maintained
Tech crew/cabin crew training coupled with cabin catering excellence
Also useful to evaluate whether freighters (whole cargo carriers) could be operated for air cargo on profitable routes with appropriate frequencies depending on load. These aircraft could be leased for specific periods, thus avoiding the weighing down of the balance sheet while utilising profit – windows
Whether the state runs the national carrier or it is to be privately operated (South West Airlines of USA comes to mind, among the successful ones), it is freedom to make the above decisions by the top management and a fully engaged/rightsized workforce (through a prudent PMS) that will ensure the airline’s survival on the long haul.
(Rauff Reffai was one time Coordinator of the Committees on ‘Regaining Sri Lanka’ Programme (PM’s Office). He is Senior Consultant at HR Cornucopia and was an Executive/Manager in Passenger/Cargo/and Human Resources of UL in the past. He can be reached on [email protected])
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