Evolution of Sri Lanka’s Flag Carrier

Air Ceylon, was established in 1947, as a state-owned national carrier. In 1978, it was shut down by the Sri Lankan government due to bankruptcy and Air Lanka was established as the new national carrier. Air Lanka, fully owned by the Sri Lankan Government, was part-privatized to the Dubai-based Emirates Group in 1998, for a ten-year period.

As a result, in 1998, Air Lanka rebranded as SriLankan Airlines.

Today, SriLankan Airlines is the national carrier of Sri Lanka, an award winning airline with a firm reputation as a leader in service, comfort, and safety in the South Asian region, connecting the nation to 65 destinations in 35 countries.

Brand Intent

Vision

Brand Promise

To be the most preferred airline in Asia

“Discover the warmth of a Sri Lankan smile! It is part of a proud

heritage that has warmed countless hearts throughout the ages.

We at SriLankan have combined this endearing trait with state-of-

the-art technology, to make every journey a memorable experience.”

Financial Performance 2012/2013

Source: SriLankan Airlines Annual Report 2012/13

Overview of Financial Performance for the fiscal year 2012/13

2012 2013 Variance

Income Statement

Revenue Rs. Millions 92,868 119,571 ↑ 26,703

Operating Expenditure Rs. Millions 111,776 143,972 ↑ 32,196

Net Loss Rs. Millions (19,778) (21,750) ↑ 1,972

Balance Sheet

Stated Capital Rs. Millions 19,433 32,033 ↑ 12,600

Non Current Assets Rs. Millions 43,735 34,542 ↓ 9,193

Current Assets Rs. Millions 22,073 54,905 ↑ 32,833

Total Assets Rs. Millions 65,808 89,447 ↑ 23,639

Current Liabilities Rs. Millions 58,499 68,685 ↑ 10,186

Ten-year Performance Review (2003-2013)

Source: SriLankan Airlines Annual Report 2012/13

Macro Environment Analysis Political Environment

Unnecessary government intervention and political influence

Government’s foreign relations and ties with other nations

Political unrest in countries served by the airline

Economic Environment

Rise in fuel price

Competition from low-cost carriers

Booming tourism in Sri Lanka post war

Global economic downturn

Social Environment

Increased popularity on overseas vacations

Increase in aging population

Technological Environment

Invention of fuel-efficient and energy saving aircrafts and engines

Emerge of E-Commerce and other digital delivery channels

Legal Environment

The EU’s legislations on carbon emission

Immigration rules and visa procedures to certain countries/regions

Natural Environment

Weather and climatic changes increase flight disruption cost

Sri Lanka’s unique positioning in the world map as a hub in Asia

Industry Analysis

Threat of New Entrants (Low)

• High cost of entry • Low profit margins • Low differentiation

Supplier Power (Very High)

• Only 2 aircraft manufacturers

• High fuel price sensitivity

Buyer’s Power (High)

• No switching cost • Many options to

choose from

Threat of Substitutes (Low)

• Limited modes of transportations to island nations

Industry Rivalry (High)

• Large airlines mainly compete on price, service and frequency

• Budget airlines solely compete on price

• Low profit and growth in the industry

Home Market Share

Source: CAPA Centre for Aviation & Innovata, 2013

Competitor Analysis

Source: CAPA Centre for Aviation & Innovata / SkyTrax Airline Rating

SWOT Analysis

Strengths

52% of local market share

An all Airbus fleet of 21 aircraft

Skilled and committed team of over 5,000 employees

Membership with Oneworld Global Airline Alliance

Government’s support in terms of capital infusion

Sophisticated IT Systems

Opportunities

Government’s foreign relations and ties with other nations

Booming tourism in Sri Lanka post war

Increasing popularity of Sri Lanka as a destination for MICE tourism

10 new fleet of energy saving luxury Airbus on order

Increased popularity on overseas vacations

Sri Lanka’s unique positioning in the world map as a hub in Asia

Weaknesses

Unnecessary government intervention and political influence

Employee Unions

Rising operational expenses

No First Class cabins

Heavy debts to local banks

3-Star rating

Threats

Rise in fuel price

Political unrest in countries served by the airline

Competition from low-cost carriers

Global economic downturn

Weather and climatic changes increase flight disruption cost

Competition from 5-Star airlines

STP Segmenting Strategy

Primary Segment Sri Lanka as the prime segment due to cultural and emotional bond the brand shares with the nation.

Secondary Segment Asia, Europe and Middle East where SriLankan has a significant presence through its route network.

Targeting Strategy

Primary Target Time rich and money rich customers who avail disposable time and disposable income to spend on foreign tours.

Secondary Target MICE (Meetings, Incentives, Conferences and Exhibitions) sector which is poised for vigorous growth post global economic recession.

Positioning Strategy

To position SriLankan Airlines as a carrier where its passengers feel like being at home at 30,000 feet, until they reach their destination.

Points of Difference

Understands Sri Lankans the best by sharing a cultural and emotional bond as the national carrier.

Serves the ‘guests’ with traditional hospitality warm smiles and gastronomic delights onboard to make them feel ‘at home’.

Point of Parity A full frill legacy carrier

Objectives

Key Success Factor Objective

Brand Upgrade SriLankan Airlines to a 5-Star rated airline by Q4-2015/2016 from its

present 3-Star rating offered by SkyTrax.

Performance Breakeven the balance sheet by reducing the operating loss by 100% through

the ‘Re-fleeting’ process by Q4-2015/2016.

Communication Launch a Facebook promotion to increase the existing fan base from

200,000 to 1,000,000 by Q4-2013/2014 backed by a digital advertising campaign.

Employees

Set Service Level Agreements (SLAs) by Q1-2013/2014 for the front line staff

to align them towards delivering a consistent and a 5-Star service to the

customers.

Customer Increase the number of passengers carried by a further 1 Mn during the fiscal

year 2013/2014 from 4.25Mn in 2012/2013.

Growth Strategies

Market Penetration Strategies Strategy Tactics

Increase Promotion

• Offer special discount coupons on Twitter and Facebook that could be utilized when purchasing tickets/ holiday packages through corporate website.

• Conduct a monthly draw on Facebook to offer buy-1-get-1 free ticket to the selected winner.

Product Improvement

• Carry-out continuous passenger surveys using advanced technology to obtain customer feedback on all aspects of products and services to provide a seamless customer experience.

• Improve onboard ambience through cabin refurbishment, installation of modern in-flight amenities and other comfort essentials.

Strategy Tactics

Increase Regional Presence

• Introduce services to un-tapped and un-served territories in North and

East Asian territories and re-launch services to abandoned European

territories.

Fleet Expansion

• Expand the fleet with new wide-bodied fuel efficient aircrafts to

accommodate new revenue generating destinations and increase seat

capacity.

Market Development Strategies

To create an emotional attachment to the brand in the customer’s

mind by making them convinced that the feel of ‘homeliness’ and

the sense of ‘belongingness’ they experience by flying SriLankan

will not be replicated by flying any other airline in the world.

Competitive Strategies

Differentiation

Marketing Mix Strategy

Product Monitor and ensure consistent improvements in service delivery of front line staff, cabin

ambience, technological advancement and on-time performance.

Price Use yield management techniques to capture more revenue by setting differentiated pricing based

on the time of booking. i.e (14 days advance, within 14 days and last minute bookings)

Place

Incorporate experiential elements in the cost effective e-commerce platform to effectively deliver

the flexibility, responsiveness, control when customers plan and book their flights through

corporate website.

Promotion

Launch an interactive social media (Facebook) campaign to increase the fan following and to

use this cost effective platform to increase the brand equity whilst strategically integrating other

media tools such as BTL advertising, Event/Sports sponsorships, Public Relations and Publicity to

communicate the brand message synergistically and consistently.

People

Align the front line staff with the brand’s values by providing adequate training on managing

customer interactions, improving service quality and ensure consistency to make the SriLankan a

5-Star rated airline.

Process Streamline the service delivery process (reservation, inventory and departure control system)

through the comprehensive passenger service system - Amadeus Altéa Suite.

Physical Evidence Continuously monitor the quality and maintain the standards of all ‘tangibles’ at every customer

touch point especially with the main focus on cabin staff attire, cabin cleanliness and ambience.

Marketing Mix Strategies

Brand Development Strategy

To introduce the premium first class cabin product with the upcoming

Airbus A330-300 and Airbus A350 XWB aircraft as a vertical line

extension to the existing two-class layout of economy and business.

The first class cabin will preliminary be limited to the selected business-

oriented long haul routes flown by SriLankan Airlines to offer the

premium passengers with sheer luxury.

Vertical line extension - Up-market Stretch

Budget

Marketing Budget - 2013/2014

Rs. Mn Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Advertising (BTL & Digital Media)

100 25 25 25 25

Social Media Promotions 30 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5

Sponsorships 90 2 1 1 30 1 1 10 2 1 1 10 30

PR and Publicity 10 2 2 2 2 2

Branding & Refurbishments 50 10 10 10 5 5 5 5

Merchandising 10 2 2 2 2 2

Research 10 2.5 2.5 2.5 2.5

Total 300 21 39 18 60 8.5 7.5 20 4.5 38 11 17 58

Evaluation & Control Key Success

Factors

Indicator of Achievement Time Frame Control Review

Frequency

Brand 5-Star rating from

SkyTrax Q4-2015/2016

Continuous tracking of

service delivery

improvements at all

customer touch points

Quarterly

Performance Break-even balance sheet

(Zero Loss) Q4-2015/2016

Track cost savings on

fuel due to the ‘Re-

fleeting’ process

Quarterly

Communication 1 Mn Facebook fan base Q4-2013/2014 Track campaign

effectiveness Monthly

Employees Satisfactory level of

front line service delivery Q1-2013/2014

Track improvements in

quality of service

delivery of front line

staff and customer

satisfaction

Monthly

Customer Carriage of 5.2Mn

passengers Q4-2013/2014

Measure effectiveness on

yield management & seat

capacity planning

Monthly

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