SriLankan Airlines improves cost structure with fleet renewal strategy
SriLankan Airlines here provides further clarification and context regarding media reports of the issuance of a Request for Proposals (RFP) for aircraft leasing:
Reviewing the airline’s aircraft fleet in terms of leasing costs and operational efficiency is a key pillar of a broader cost restructuring plan undertaken by the airline since the start of the pandemic in 2020. Other restructuring initiatives have so far led the airline to cease relying on public funding since the second quarter of 2021 and has been generating profits since December 2021 – the most profitable month on record.
The launch of the tender for the renewal of the fleet is mainly motivated by the imminent expiry of the aircraft leases for more than 50% of the current fleet. The airline recognizes that the current global aircraft leasing market presents an attractive pricing environment that would maximize the cost savings that can be achieved through the timely execution of a fleet renewal strategy. Combining replacement aircraft (expiring leases) with growth needs in the next period into a single tender captures the benefits of scale. A single procurement exercise also provides an option in terms of selecting the optimal fleet structure in terms of operational efficiency, aircraft type and aircraft age.
All aircraft leases will be funded from the airline’s existing cash flow, and fleet renewal is expected to significantly reduce the airline’s cost structure going forward. The fleet renewal exercise, alongside other strategic initiatives, will help the airline increase its operating margins and further increase its operating cash flow, which will support the timely reimbursement of the long-term debt to the Government of Sri Lanka and other lenders.
The promising turnaround in the airline’s finances is driven by both cost restructuring and selective growth initiatives in terms of expanding the route network to include new destinations and exploiting growth opportunities in the freight sector. The airline’s forward plans will be closely aligned with the growth aspirations of Sri Lanka’s tourism sector, which is one of the country’s biggest foreign exchange earners.
SriLankan Airlines is currently a net source of foreign exchange for the country. Mindful of the broader macroeconomic environment locally and globally, the airline will continue to take a measured and calibrated approach to growth, with a primary focus on maintaining self-funding, profitable and sustainable operations.