SriLankan postpones plans for Sydney as Australian visitor numbers to Sri Lanka drop

SriLankan Airlines is postponing plans to launch flights to  Sydney due to the Easter bombings in Colombo, which has significantly impacted inbound demand. However, the airline is maintaining its daily service to Melbourne by relying more on Melbourne-India traffic as local Melbourne-Colombo traffic has also been impacted by the bombings.

Australian visitor numbers to Sri Lanka dropped by 49% in May-2019, the first full month after the 21-Apr-2019 bombings, and by 56% in Jun-2019. Total visitor numbers to Sri Lanka dropped by 71% in May-2019 and 57% in Jun-2019.

Australia is Sri Lanka’s fifth largest source market and accounted for 5% of total visitors in 2018. Australia visitor numbers to Sri Lanka surged by 37% in 2018 to 110,000 – outpacing 11% overall growth in visitor numbers – as SriLankan’s new service to Melbourne stimulated demand.

SriLankan had launched a daily service from Colombo to Melbourne in late Oct-2017 using A330-200s. After one year the route was up-gauged to larger A330-300s, highlighting its initial success. It carried 158,000 passengers to/from Melbourne in 2018, the first full year of the service, according to BITRE data. The average load factor was 79%, a strong showing for a new route.

Encouraged by the performance on Melbourne, SriLankan unveiled plans to launch Sydney as part of a new five-year business plan that was announced in early Apr-2019. However, the bombings 17 days later prompted it to adjust several milestones in the new business plan, including the resumption of Frankfurt, Paris and Sydney services. SriLankan suspended Frankfurt and Pairs as part of a 2016 restructuring while it dropped Sydney in 2001.

“We were looking at Frankfurt and Paris and also Sydney in the new business plan in the next two to three years. Those will get readjusted accordingly,” SriLankan Airlines CEO Vipula Gunatilleka told CAPA TV on the sidelines of IATA AGM in early June. “But some of the other destinations like Nairobi or other African cities and also Vietnam will happen. Even Nepal – Kathmandu – is on the cards.”

Mr Gunatilleka said India and Middle East routes have held up since the bombings, which most impacted its Chinese routes, London and Tokyo. While Indian visitor numbers have dropped significantly SriLankan has filled the void by carrying more sixth freedom traffic from India, including to Melbourne.

As The Blue Swan Daily highlighted in 2017, connections to India were a major component of SriLankan’s strategy for the Melbourne market from the beginning.

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SriLankan has quickly become one of the largest competitors in the Melbourne-India market and is now carrying almost as many Australia-South Asia passengers as Air India, which carried 170,000 passengers to/from Australia in 2018.

The Indian flag carrier upgraded Sydney to five weekly flights in Mar-2018, resulting in a total of eight weekly flights to Australia when also including its three weekly flights to Melbourne. The decision to keep Melbourne at three frequencies while boosting Sydney likely reflects the impact SriLankan has had on the Melbourne-India market.

CHART – There are currently around 4,000 one-way nonstop seats from Australia to South Asia, with Air India and SriLankan Airlines capturing a similar share of the marketSource: CAPA – Centre for Aviation & OAG

SriLankan would have a similar impact on Air India if it launched Sydney as it would have to rely heavily on India connections – even more so than Melbourne, which has a much larger Sri Lankan community.

However, SriLankan would still need decent local traffic to make Colombo-Sydney viable. As it would have to focus on attracting Sydney residents to holiday in Sri Lanka given the smaller ethnic market in Sydney it is sensible to wait for Sri Lanka’s tourism industry to recovery before launching the service.

HEAR MORE.. SriLankan Airlines CEO Vipula Gunatilleka discusses the impact of the 21-Apr-2019 Easter bombings, adjustments to its five-year business plan, fleet renewal and the planned launch of several new routes in this exclusive interview filed on the sidelines of the IATA AGM in Seoul in early Jun-2019.