Having seen half of its aircraft destroyed on the ground by the Tamil Tigers one terrible night in July 2001, SriLankan Airways knows all too well about coping with terrorists attacks. But recently there have been a few brief years when it thought all thatbehind it.

Following the 2001 attacks, the carrier managed to rebuild its fl eet, and though it didn’t return to all its former longhaul routes, it was looking forward to a profi table and stable future. But with the truce between the Tigers and the Sri Lankan government now over, violent action once again indirectly affectedthe airline earlier this year.

On 26 March the Tigers bombed the military air fi eld adjacent to Colombo’s Bandaranaike International Airport using a light aircraft, and in later April they repeated the attack. Sri Lanka’s civil aviation authority responded by imposing a night time curfew at Bandaranaike, banning allfl ights between 10pm and 5am.

That was a major headache for SriLankan, since all of its European fl ights and around half of its Asian fl ights were timed to depart at midnight, in order to make early morningconnections at their destinations.

The schedule had to be completely re-jigged, and while all frequencies were maintained, it damaged the passenger business, for example making same-day connections with the US via European airports impossible. For cargo, there was good news and bad news, with Nalin Rodrigo, head of cargo for SriLankan saying connection times between regional and longhaul fl ights were reduced from six or sevenhours to three or four.

“That was good for the customers in a way, because they got a quicker transit time, but as you can imagine it put major strains on our handling operation,” he says. “We are managing as best we can, but it has not been easy.”

The curfew was fi nally lifted by the CAA on 1 July, following a review of the capital’s air defences, but it will be a while before the cargo handling team can relax, as the normal fl ight schedule will not resume until 15 September. This is to allow the passenger peak of July and September to pass. “We cannot change the schedule sooner, because it is the busiest season and passengers will already have booked onward connections,” Rodrigoexplains.

Dramatic though the curfew was, however, it has not had such a big impact on the cargo department as a more ordinary occurence – the burgeoning of both foreign and locallonghaul carriers fl ying out of India.

This extra competition has led to a “serious dip” in cargo yields in that market, according to Rodrigo, with returns down by more than a quarter. That strikes at the heart of SriLankan Cargo’s ‘Hub in the Ocean’ strategy, which aims to pitch Colombo as theperfect gateway to the Indian market.

The strategy was based on Sri- Lankan’s status as the biggest foreign operator of fl ights into India: it has 94 weekly fl ights, serving ten destinations, including double daily fl ights to Mumbai and Chennai, and daily fl ights to Delhi, Bangalore, Hyderabad, Trichy, Trivandrum, Calicut, Kochi. Goa is also served three times a week, and Coimbatore may be added later inthe year.

Since the competition from direct flights into India is not going to disappear, and indeed will probably intensify, SriLankan Cargo has been forced to look at ways of improving its returns in the Indian market. Rodrigo says that express and unaccompanied courier products are being looked at, and the carrier is also focusing on the growing range of higher value manufactured goods being exported from India, rather than traditionaltextile traffic.

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The latter, he admits, produces very low returns, being both volumetric and attracting poor rates. By contrast, he points to surprisingly large export volumes of mobile phones out of India as one example of the kind of dense, high-rate cargo that Sri Lankan is looking to carry more of. Given the fall in yields out of India, it is perhaps not such a tragedy that SriLankan’s remaining AN-12 freighter has had to be withdrawn from service.

The problem is that the aircraft’s owner is Air Sofi a, a Bulgarian carrier that is now subject to European safety regulations since that country joined the European Union in January: the EU has decided Bulgarian-owned AN- 12s are no longer safe, and grounded them.

SriLankan has instead fallen back on using local charter capacity in Colombo for its feeder freighter routes to Bangalore, Trivandrum and Male in the Maldives, but Rodrigo says that is only a stop-gap solution. His goal instead is to lease a western freighter with a longer range, and use it to fl y perhaps to Guangzhou in China, as well as the UAE and Northern India, as well as to the existing threedestinations.

“There are a lot of exports from China to Sri Lanka that are now coming through Hong Kong and other intermediate places and we would like to capture some of that traffi c for ourselves,” he says.

SriLankan Cargo has in fact been here before when it was close to wetleasing an A310 freighter two years ago, but was vetoed by the airline’s board due to soaring fuel prices. Rodrigo says that is now all ancient history, and is relatively confi dent of fi nding a 757 to lease in the near future, andgetting board approval to do so.

That partly rests on whether the current management of SriLankan Airlines remains in place, however. For the past nine years, the carrier’s managers have been appointed by Emirates, which holds a 42 percent stake in the airline and has a managementcontract to run it.

That contract is now up for review, and at time of writing, a 9 August board meeting had failed to reach agreement on the topic. Reports said that Emirates was reasonably confi dent of retaining the contract and the carrier’s global connections and powerful brand has generally been considered to be benefi cial to SriLankan. But there is a possibility that the government might now feel the carrier is ready to stand on its own two feet as a fully independent entity, without foreign assistance.

Rodrigo can’t say much on the topic, but he suggests that the decision about any new freighter depends on Emirates retaining the contract, as do decisions about upgrades to the passenger fl eet and possible newlonghaul routes.

The fleet currently consists of fi ve A340-300s, four A330-200s and five A320-200s, and current reports say the carrier is looking at adding further A340s or A330s rather than going for new aircraft types such as the 787 or A350. But if a new management team is put in place, all that could obviouslychange.

The events of July 2001 left SriLankan with a slimmed down longhaul network. It serves three cities in Europe – London, Paris and Frankfurt (routes to Berlin and Stockholm were cut after the 2001 attacks), and to the east has more than daily frequencies to Bangkok, Kuala Lumpur and Singapore, as well as serving Hong Kong,Beijing and Tokyo.

In the Middle East, SriLankan added its third Saudi Arabian destination– Jeddah – in March, the othertwo being Riyadh and Damman, andserves Abu Dhabi, Dubai, Bahrain,Doha, Muscat and Kuwait. As well asthe Indian routes, the carrier also fl iesto Karachi and Male.

New routes being considered if the fl eet is expanded include Sydney– another route cut in 2001 – as wellas South Africa, more Gulf and Indiandestinations, and possibly more citiesin China (SriLankan has the rights tofl y to fi ve Chinese airports).Flights to the UK, with its USconnections, would also bestrengthened. All of these decisionsdepend on the renewalof the Emirates managementcontract, however.

Back in the cargo department, despite the fall in yields out of India, Rodrigo and his team managed to increase revenue by 11 percent in the year to March 2007, on a 16 percentincrease in volumes.

Compensation for the fall in Indian returns came from a stronger domestic market, with a signifi cant increase in perishables traffi c being one key trend. The winter season could see even better returns out of the home market, with Cathay Pacifi c and Etihad both pulling their passenger fl ights to Colombo.“It depends on whetherthey replace that capacity withfreighters, but if they don’t,there could be a capacity shortage,”Rodrigo says.

Introducing AMF containers also helped SriLankan make better use of its bellyhold capacity, and Rodrigo says traffi c from Asia to the Gulf and Africa saw strong growth. “These were the main factors contributing to our revenue growth,” he says. However, he is a bit more cautious about 2007, saying he expects fi ve to six percent growth, but hopes for seven to ninepercent.

He also hopes to soon be able to move into a new cargo terminal at Bandaranaike airport, which was in fact completed two years ago, but has stood idle since then due to a dispute between the airport authority, which built it, and SriLankan. Rodrigo declines to comment on this in detail, beyond saying that it has nothing to do with the cargo department as such, butconcerns the main parent airline.

In the meantime, he is stuck in an extremely frustrating position. “We are stalled and it is a bizarre situation,” he says. “We are really squeezed in our current cargo facilities, and there is a brand new terminal ready to be used, and we can’t access it. We are managing,but it is not ideal.”

SriLankan in fact handled 167,289 tonnes of cargo at Colombo, just over half of it on its own account and the rest for other carriers, in a facility designed to handle 130,000 tonnes. Rodrigo was due to meet with offi cials on 10 August to try and resolve thedispute.

As he points out, it was perhaps just as well in the circumstances that the carrier did not go for the A310 freighter in 2005, but that remark also suggests that any 757 freighter could not be deployed until the terminaldispute is resolved.

One other decision that awaits the decision about the Emirates management contract concerns Sri- Lankan Cargo’s IT system. At present it is using the Emirates’ SkyChain system, but Rodrigo says it is keen to upgrade a new generation system.

“If we want to change processes, the current system is too rigid, and so is not giving us the benefi ts that we want,” he says. He declines to mention which systems are being considered – though it would be surprising if the Emiratesbacked next generation system from Mercator was not one of them – but he insists: “Our next system will be the best available in the market.”