High Fuel Prices force Capacity Reductions at SriLankan Airlines

The price of a barrel of crude oil has surged 85% during the last 12 months, and is now averaging US$ 143 from last year’s US$ 75. SriLankan Airlines is projecting a fuel bill of US$ 500 million for the current year at present prices, which accounts for approximately 50% of its overall costs.

The airline has put into action several measures to mitigate the impact of the fuel price increases and is expected to do more in the coming months.

The airline has slashed budgets across the board, and is reducing expenses and minimising wastage. Its management is working on reducing the impact of its top ten cost items, and most of the company’s Colombo offices are being moved to Katunayake, to save on high levels of rent.

The airline recently introduced a fuel surcharge, as many other international carriers have done, and will soon be temporarily reducing capacity on some routes in its network of 41 destinations in 22 countries in Europe, the Middle East and Asia.

Every one of SriLankan's destinations will continue to be served by a number of flights, and those where flights are being reduced flights will for the most part have just one flight less per week.

At the same time, the airline is moving ahead with its plans for the future, which include acquiring four more Airbus A320 aircraft to replace four ageing aircraft in the fleet by the end of 2008, which is likely to be followed by the refurbishment of passenger cabins on its widebody fleet of A330’s and A340’s.

Many believe,  that the price of fuel will not come down in the short term, and the entire global air transport industry is preparing for even tougher times ahead. Pricing in the air travel industry reacts slowly and it is not possible to immediately pass on the increased costs to the travelling public, hence the necessity for capacity reduction to bring about an immediate reduction in costs.

Recently Austrian Airlines, Cathay Pacific, Northwest Airlines, United Airlines, SriLankan Airlines, Air New Zealand, Qantas, Continental Airlines, Virgin Blue, American Airlines and Air Canada have announced significant reductions to their international operations. British Airways is also expected to make an announcement about a similar move in the coming weeks.

See other recent news regarding: Travel News Asia, Promotions, New Hotels, Sri Lanka, Sri Lankan Airlines, Reductions