Sri Lankan Airlines believes it can turn the island into a regional air hub to tap a growing Asian market, its chief executive said on Monday, but any return to civil war could dent the carrier, already hurt by last year's tsunami.
Chief Executive Peter Hill said Sri Lankan - 51 percent owned by the government, 44 percent by Emirates and the remainder by its staff - was already tapping a growing Indian market but still had some way to go.
"We're the biggest foreign carrier into India bar no one," he said. "We've made sure our flights from the Middle East arrive so they feed into connections to India. We need to get back into Australia and South Africa before long. Otherwise we will miss the boat."
Hill, brought in by Emirates after a joint deal with the Sri Lankan government in 1998, said Colombo's airport had the capacity to become a regional hub, but that the national carrier had been hit by some high-profile setbacks.
A devastating attack by Tamil Tiger rebels on the airport in 2001, a year before a cease fire halted two decades of war, destroyed half the Sri Lankan fleet. As the airline clawed its way back, the 2004 tsunami severely reduced tourist arrivals.
"The low point was losing half the fleet," Hill said. "Shortly after came 9/11 and the whole world stopped flying. We looked and said, if the world is going to stop long-haul flying, then India is on our doorstep. Now, in the last three years, India has overtaken Europe as our largest inbound market."
While Indian traffic grew, the tsunami, coming just after Christmas at a time when many book their annual break, delivered a major setback for tourism.
Nearly a year on, tourist bookings from Japan and Europe were still 10 to 15 percent lower than last year.
"We had our best year ever in 2004," Hill said. "If we didn't have the problems, the perceptions of an ongoing conflict, and if the memory of tsunami wasn't in everyone's minds, we could have quickly developed into a hub after 2004."
In an ideal world, Hill said he would like to expand his current fleet of 14 long-haul jets - currently all Airbuses - to 20 or 25, possibly including Boeing aircraft, and create a true regional hub in seven or eight years.
Given high fuel and aircraft costs, however, he said that this would take time.
With Sri Lanka's peace process looking increasingly rocky and violence increasing in the minority Tamil north and east, some analysts fear a return to war, with a devastating impact on the economy, tourism and Sri Lankan's ground services to other airlines at Colombo Airport.
"It would impact on everything," Hill said. "Carriers wonder whether they should continue their operations or put it on hold. That has an impact on arrivals, ground handling and catering, plus our own operations, if no one wanted to come here. We've seen it all before."
Before making any long-term commitments such as aircraft purchases, Emirates would also want to know in the next four to six months if its joint agreement with the government would be extended beyond its current end date in March 2008.
"If the government wants to enter into a new agreement with Emirates, I'm sure they'd be delighted to talk," he said. "We've told them we've got to make decisions like this fairly quickly."
