Will SriLankan Airline’s entry into oneworld force a change in the carrier’s network strategy?
|Image courtesy Wikimedia|
Early Monday, SriLankan Airlines, the flag carrier of India’s southernmost neighbor, is set to be announced as the newest member of the oneworld, the global alliance of airlines. The carrier, which serves 60 destinations on a fleet of 21 aircraft, will add Kochi, Tiruchirapalli and Thiruvananthapuram to oneworld’s network of 850 destinations in 150 countries.
Sri Lankan’s entry into oneworld is being sponsored by Cathay Pacific, which serves SriLankan’s hub in Colombo 7 times per week from its own hub in Hong Kong via Singapore and Bangkok onboard Boeing 777-300 aircraft. SriLankan Airlines also has a code-share agreement with oneworld member-elect Malaysian Airlines and plans to implement code-shares with oneworld members Royal Jordanian and S7 Airlines. The carrier will enter the alliance in 2013.
“With the world airline industry increasingly focused on alliances, SriLankan has carried out in-depth analysis of the options open to the airline as we enter this latest phase of our development. Oneworld is very clearly the best option for us. Joining the alliance will help put SriLankan more firmly on the global aviation map and vastly improve our connections with the rest of the world,” says airline chairman Nishantha Wickremasinghe.
For SriLankan, there is clear value added with entry into oneworld. The carrier already serves 3 Oneworld hubs; Tokyo, Moscow, and London and is rumored to be starting up service to 2 more; Sydney and Melbourne. Now, it will have access to the global alliance’s network and its marketing arm, which can help it win more passengers away from competitors, and add incremental sales revenue. Its frequent flyer base, limited as that may be, will also get expanded redemption opportunities around the globe.
From oneworld’s side, the value proposition is a little less clear. To a certain degree, simply adding an airline to the network, especially one in a region that can be considered a “hole” for that alliance, is always a good thing. And to the extent that South Asia is a hole for oneworld, that is true of SriLankan’s entry. But adding such a small airline doesn’t really do much for oneworld’s coverage of South Asia (really India). And Sri Lankan’s long haul network strategy, which consists of less than daily flights (in a lot of cases less than 3 per week) to a broad base of destinations scheduled for O&D purposes, isn’t exactly conducive to an alliance seeking to provide seamless global connectivity.
That’s not to say that Sri Lankan won’t have immediate benefits for oneworld. Oneworld frequent flyers will now have many more redemption options, especially to Colombo and Male (where Sri Lankan operate a whopping 38 flights per week). But I do think that entrance into oneworld will necessitate some changes in SriLankan’s network. For a long time now, oneworld has had substandard coverage of India. While its European connections are competitive, both SkyTeam, and especially Star Alliance have taken advantage of hubs located in regions with strong ethnic ties (Saudi Arabia and Singapore/Bangkok respectively) to strengthen their reach within India’s second and third tier cities.
The entrance of Kingfisher Airlines into the alliance was supposed to have solved this problem, but since Kingfisher’s entry was suspended indefinitely back in February, oneworld once again has problems here. SriLankan currently serves 7 Indian destinations; Bangalore, Chennai, Delhi, Mumbai, Kochi, Tiruchirapalli and Thiruvananthapuram. To add more value into oneWorld, look for SriLankan to also add (in some cases restore) flights to regional Indian destinations like Hyderabad, Coimbatore, Mangalore, Vijaywada, Kozhikode, and Pune. Doing so would substantially increase SriLankan and oneworld’s penetration into the Indian market.
However, to take full advantage of this would also necessitate a restructuring (moderate) of SriLankan’s longer haul operations. Currently, the carrier serves Tokyo 4 times per week, and London 7 times per week after cancelling 4 weekly service via Male, as well as twice weekly services to Moscow via Dubai on an Airbus A320. Reportedly, SriLankan is looking to add 9 further long-haul aircraft to the fleet by 2015; a mix of Airbus A330-300 and Boeing 777s. What this would allow is for SriLankan to enhance its long haul operation to better fit in with oneworld. London could be buffed up back to 12 flights per week (its level this summer), Tokyo could be made daily, and Moscow could be de-coupled from Dubai. The airline also has leeway in adding new sub-daily services to oneworld hubs like Berlin, Dusseldorf, Madrid, and the like. Thus in time, SriLankan Airlines’ network will likely shift to become a stronger asset for the oneworld alliance.