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Mihin is a deadweight admits SriLankan boss

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Nishantha Wickremasinghe, Chairman SriLankan Talks to Maheen Senanayake of the Sunday Island during a candid interview on how he hopes to bring his brand of expertise to the national carrier.

I met him outside his office on the 22nd Floor on the East Tower at the World Trade Centre. From his handshake to his gait, here was a man who was very much a people’s person. Sans pretense, Nishantha Wickremasinghe generated warmth and made you feel at home.

I was circumspect and did not want to be taken off guard. However, it took him under a few minutes to penetrate my journalistic shield - his unmistakable signature being his ability to stay within the realms of his own understanding, avoidance of speculation and an innate ability to avoid being dragged into speculative debate. Sri Lankan had been in the news for some time, over and over again, with several accusations leveled at both the company and its chairman. I wasn’t one to give up on the lead - technical incompetence and suggested financial misappropriation being some of them. I had the benefit of a family who had always evaluated both sides of the coin, so it was no surprise that I allowed a tiny window for the Chairman to relate to me his own response to some of these questions;

Is it true Mr. Chairman that Sri Lankan’s engineering incompetence led to the dropping of the so-called tail of a company owned aircraft?

First of all I must tell you what really happened out there. The tail end of one of our aircraft had been hoisted for some maintenance work. Upon completion of the work, the tail had been lowered without the removal of a prop, thus causing damage to the skin of the fuselage. This has obviously occurred due to non–compliance with procedure. This should not have happened. I have appointed a team, a panel including our best safety experts and engineers to figure out why this happened and to ensure that it does not happen again. Airbus is overseeing the repairs. However, our planes are insured and therefore no additional costs will be incurred to Sri Lankan.

There have been claims that the recently commissioned simulator school did not possess lightning protection. Would you like to comment on this?

I personally visited the facility when this happened and discovered that an IT switch had given way. The building has complete lightning protection. The switch was replaced within days. This repair was carried out by our own team and there was no damage caused to the simulator.

Let’s talk about the oneWorld alliance. Why do you think this is good for Sri Lankan?

It gives us an opportunity for code sharing with 12 other airlines that are very strong in other parts of the world. On the other hand we bring our strengths to the same network. This alliance will enable us to compete with other major alliances around the world and in particular with the Middle Eastern brands that have been undercutting us for years. Yes! This is good for Sri Lankan, but the process is arduous. We will take about one year to gain complete membership and this is based solely on harmonization of systems and synchronization of operations.

Can you give me an example?

On the system’s side, if we are going to be code sharing then the systems must be fully integrated across the alliance. Secondly, operations have to be synchronized. If you were flying to New York via Dubai on SriLankan, the alliances flights on that route have to be synchronized to provide the customer a seamless journey. That means slight adjustments have to be made across the network to accommodate SriLankan flights. So there will be certain changes in timing and other operational aspects across the network. On the plus side, I have managed to set up a unit in our own office and man it with people from our own cadre to oversee, manage and ensure that we meet the targets we have set ourselves for full incorporation into the oneWorld alliance.

What other opportunities does the oneWorld alliance provide?

There are many benefits. This is a serious win-win for all concerned. But let me give you one clear cut example. Let’s take the case of arbitration. If there is any dispute between the alliance members whatever the case may be it provides a forum for arbitration. This has been one of the biggest issues in the airline industry. There are lots of bullies out there.

How much is it costing us to join the One World Alliance

Well there is a recurring membership fee. And I would like to thank Cathay for sponsoring us here. Apart from this, our team overlooking this process is from the existing cadre. We will incur travel and accommodation costs. The IT infrastructure enhancement and development is also coming from our internal team. So that is about all the cost line items that we will incur.

When was the last time that Sri Lankan made profits? What are you doing to plug these holes?

Well it was 2007/8 if I am not mistaken, he rattles off the cuff. Senior Manager communications Ranjit de Silva is quick and on his feet as he makes his way out of the room only to return in about 10 minutes to confirm the dates.

"May I tell you what I have done so far?" he asks.

"Of course, Mr. Wickremasinghe."

Route optimization

Well, the first thing that I wanted to look at is the routes that we are flying in. We need to fly on routes that have potential and provide a competitive environment. Finally each route has to be profitable. There is no point hauling someone from a far off destination if the profits are in the next leg and you are not there. This is where the one world alliance comes in. We not only code share but also share revenues. It gives us the advantage of reach without the burden of operating in markets we are not familiar with. We use the existing wheel as against re-inventing it. The alliance gives us immediate market penetration and hence a conduit to other markets.

Human Resource

Sri Lankan is currently preparing a master plan. We have to re-engineer ourselves and part and parcel of this re-engineering process involves optimizing our human resource base. One of the first things I did was ensure that our best are not systematically poached by other Mid-Eastern airlines. I personally called one of their CEOs and told him not to do this. Then I also told him that if he does want one of our people, he may approach them after we at Sri Lankan have been informed.

"You see, Maheen", he said, if it means betterment for our own staff we will do it for them too. However, I want to make sure we retain the best and they have the best with us.

Key Performance Indicators (KPIs)

I am focusing on individual and group performance. We are in the process of reviewing our existing KPI system. My aim is simple. Retain the best. Recognize and reward the best performers individually and in groups.

Mr Wickremasinghe, aircraft to aircraft Sri Lankan has more seats than any of the other airlines. Your flights on major routes are virtually fully booked and secondly on most routes, your prices are higher than most airlines, specially the Mideastern ones. So how is it that you are making losses?

Actually this is where the trick is. Most profitable airlines have slowly had the business section encroaching into the economy. There is a systematic trend to move aircrafts towards larger business sections where profitability is higher. And we cannot do that on point to point traffic. We need to fly the full route. That is where the one world alliance comes in. By extending reach and penetrating into further markets we move out of point to point trafficking. In parallel, we move into larger business classes, which really is the more profitable business. This is the first step.

Then we have to increase frequency. Today we fly to Narita only three times a week, but we need to increase flights to at least five or more. The bread and butter come from the economy but the profits have to come from business and first class.

This is yield management. I am a planter by profession and if I may share my experiences, I have resurrected some plantations on simple yield management. (In very succinct fashion Wickremasinghe shares a simple planting experience that has turned around an abandoned plantation to one of the most profitable plantations today.) He is never slow to adapt and apply his planter’s skills and experience on the airline. I have to agree even if reluctantly that he did have a plausible strategy on the board.

I almost forgot he shoots. "I have allowed Sri Lankan to re-employ anyone who had left the airline". There is absolutely no reason as to why we mustn’t employ the best simply because they have sought greener pastures at certain points in their lives.

Profit Centers

I have turned Sri Lankan Catering into a profit centre. I want to include Engineering as a separate profit centre. My idea is that Engineering should be set up as a Maintenance, Repair and Overhaul business and we could look at Mattala as a home for engineering perhaps as a joint venture with a better known global engineering brand. I also want to ensure that our training facility is also run as a separate profit centre.

I like your idea of profit centers and you say that Sri Lankan Catering is running profitably. Yet their accounts are never reported separately even within the airline’s own annual report. Would you have the courage to do that?

Yes I would.

Also remember we had a large stock of engineering materials worth almost a billion rupees. I have reduced that and am working towards adoption of the principle of ‘Power by the hour’.

Then there were also the duty free stocks. They were very high. Now we don’t stock anything and source from another party on need. We are now maintaining lean stocks on our duty free operation in the sky.

Now to the crucial point. Mihin is draining Sri Lankan. Do you have a solution for this?

Unfortunately I have inherited Mihin too. I have just been appointed Chairman of Mihin. I do not think that Mihin can run profitably even today as an airline with two aircrafts. The critical economies of scale are not present. The only way that I see Mihin performing well is as an extention of Sri Lankan operations. Bar this, one has to find a way to remove the liability from Mihin on the Sri Lankan balance sheet. I as the chairman of Sri Lankan need to remunerate my people. On the one hand they have performed at their best. We are working towards profitability in our own house. A single liability is also denying them the benefits of this effort. I am therefore currently in consultation with the Treasury to find a solution to this. I have suggested an equity based capital infusion for this.

On the other hand Mihin has to stay true to its proposition. For instance Mihin will stop flying to Trichy soon and will fly to Sharjah and Madurai. Sri Lankan will continue to fly to Dubai.

What about Sri Lankan Aero. I love those cute sea planes.

Well they are the future and my immediate task is to re-evaluate the leases. We have already trained the pilots that we need to fly the sea planes. I will also move the planes to amphibious capability and re-evaluate the lease agreements to immediately increase business viability of this operation.

Oil and the cost of operations?

Fuel is a very large component of our costs. We must find a way to mitigate its price fluctuations. And as we speak one of our best is being sent to study forward contracting and forward contracting negotiation of fuel agreements from source to a special training programme in Singapore. If done properly, a forward contract can and should mitigate against any unprecedented price movements.

Well it has been a very long and a very warm interview. May I ask you a final and personal question. Your watch has been in the news. Could you comment?

You see Maheen, this is the watch I have always been wearing. (He moves his sleeve and shows me an ordinary watch). What happened was that my children gifted me with a watch saying that now that I am Chairman of Sri Lankan I should dress accordingly. It is simply a gift and I lost it when I was burgled. I personally do not know how much it costs even to date. But as the police entry will reveal, it had a serial number which I had to obtain subsequently from my son in Australia. Now that you have asked me about my watch I think it is only fitting that I also say something about the foreign exchange. It was a small amount of money left for me and my wife by our children when they came to Sri Lanka. Some people have blown in out of proportion.

I thanked the chairman upon conclusion and walked out promising to keep in touch. I had 22 floors down the East Tower to evaluate what had happened to me. This man, heartwarming as he was, had penetrated the hard shell of an old campaigner. As I discovered, the former Sinha Regiment soldier, the planter and the chairman proved to be far more charismatic than I had first assumed him to be at the One World Alliance press conference. He had taken all my questions and penetrated my defences. He was either as I have penned him or played me like a die. Either way he qualifies for this position he holds at the helm of that great pride for us Lankans in the sky… and the words played last resonate in my mind.

A ray of hope is all we need

To give our lives a sense of peace

Through every test we’ ll do our best

Till we find an answer we’ll never rest

Heads held high we’ll carry on

with bright smiles we’ll be reborn

We have proved that we can win

So many hearts with just one grin

We are Sri Lankan… in full flight

We’ll be Sri Lankan …all through our lives…

And we will try …to make things right

For our land called …paradise…

~ www.island.lk ~ By Maheen Senanayake

 

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