SriLankan Airlines restructuring is underway as the government unveils plans to modernise the fleet, reduce costs and restore profitability.
SriLankan Airlines restructuring has entered a decisive phase as the government moves to reshape the national carrier through fleet expansion, lower operating costs and a comprehensive strategic review aimed at securing its long-term future.
Flying on a country’s national airline remains a matter of pride for its citizens. Yet SriLankan Airlines has spent years battling financial and operational challenges. More than sixteen months after its previous leadership changes, the airline still has no permanent Chief Executive Officer and has been unable to add aircraft to several profitable international routes because of fleet limitations.
Yasantha Dissanayake has served as Acting Chief Executive Officer since March last year, while Dimal Aranadara assumed duties as Chairman last month, inheriting an organisation facing mounting commercial and operational pressures.
Following the change of government, Sarath Ganegoda resigned as Chairman of both SriLankan Airlines and SriLankan Catering. Rohan Gunatilake also stepped down from the boards of both companies with effect from March 31, 2026. Both previously represented the Hayleys Group, in which businessman Dhammika Perera holds a controlling interest.
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SriLankan Airlines Restructuring Begins
The government has appointed an expert committee to examine the future of the state-owned carrier, which continues to face the financial burden of operating a relatively small and ageing leased fleet.
The committee is chaired by Dr Hans Wijayasuriya, Senior Advisor on Digital Economy to the President.
Its primary objective is to develop a commercially competitive, financially sustainable airline while reducing the long-term burden on taxpayers.
Founded in 1979, SriLankan Airlines operates from Bandaranaike International Airport and serves destinations across Asia, Europe, Australia and the Middle East.
However, competition has intensified dramatically. Major international airlines continue expanding with larger fleets and newer aircraft, while low-cost carriers increasingly dominate regional travel markets.
Against that backdrop, questions remain over whether SriLankan Airlines can continue competing internationally without modernising its fleet.
Financial Performance Shows Mixed Results
According to Chairman Dimal Aranadara, management has made progress in reducing operating costs.
“We have brought this to a point where it is covering its losses. If not for the Middle East crisis, we wouldn’t have faced such a financial crisis,” he said.
Since March 2, unrest in the Middle East has forced SriLankan Airlines to cancel 951 flights.
The airline recorded a first-quarter loss of US$45 million during the current financial year.
Fuel expenses alone almost doubled because of regional instability, rising from US$21 million during the first quarter of the previous year to US$41 million during the same period this year.
For the financial year ending March 31, 2026, total revenue reached Rs.337.7 billion.
After deducting operating expenses, the airline generated an operating profit of Rs.39 billion.
However, debt servicing costs, bond obligations and foreign exchange losses ultimately produced a total annual loss of Rs.13 billion.
Government intervention enabled SriLankan Airlines to settle several outstanding financial liabilities inherited from previous years.
While the airline itself reported a loss, SriLankan Catering delivered another strong performance.
The catering subsidiary recorded a pre-tax profit of US$24 million and a post-tax profit of US$20 million, representing a 24 per cent improvement over the previous financial year.
The airline employed 6,071 people during 2024/25, including 272 pilots, 615 engineers and technicians, 291 managers and 3,953 executive officers and trainees.
Ageing Fleet Limits Expansion
SriLankan Airlines currently operates a fleet of 23 Airbus aircraft.
Ten are wide-body aircraft used on long-haul services to Europe, Australia, Dubai and other major international destinations.
Three of those aircraft recently experienced technical problems, although one has already returned to service.
“The wide-body is our backbone. That’s where the revenue comes from,” the Chairman told the parliamentary committee.
The remaining 13 aircraft are narrow-body aircraft serving regional routes.
According to Planespotters.net, every aircraft in the SriLankan Airlines fleet operates under leasing agreements.
One of management’s biggest concerns is the average fleet age of approximately 12 years.
Older aircraft require higher maintenance spending and reduce operational flexibility.
Nevertheless, management intends to increase fleet size over the next five years by leasing additional aircraft to expand passenger capacity.
Global Network Still Provides Strong Reach
Although SriLankan Airlines directly serves 33 destinations across 21 countries, its extensive codeshare partnerships significantly expand its international network.
Through these agreements, passengers can connect to approximately 130 destinations across 63 countries.
Each year, the airline carries more than four million passengers.
According to the airline’s communications division:
- Daily services operate to London Heathrow.
- Three weekly services operate to Paris Charles de Gaulle and Frankfurt.
- Middle Eastern operations continue to Dubai, Doha, Riyadh, Jeddah and Dammam, subject to operational conditions.
- Kuwait services remain temporarily suspended.
- Around 90 weekly flights operate between Sri Lanka and India.
- Daily flights continue to the Maldives, Tokyo and Melbourne.
- Sydney receives approximately three weekly services.
Five-Year Strategy Targets Growth
Chairman Aranadara told legislators that expanding the fleet remains the single most important requirement for future growth.
“We can easily add another flight to London. We can also easily add another flight to Australia.”
Management plans to deploy an additional aircraft for Australian operations from November.
The airline also believes demand exists for daily services to South Korea while frequencies to China could also increase.
“The capacity isn’t there, but the market is there. We intend to find a new market in Africa. The shortest route from China to Africa is through Sri Lanka,” he explained.
Lower Lease Costs Offer New Opportunity
Current lease agreements covering the airline’s wide-body fleet expire on December 31, 2026.
Management has successfully negotiated significantly lower renewal costs.
“For example, if we were paying US$800,000 a month, from December we will pay US$430,000.”
Savings generated through those negotiations will help finance additional aircraft acquisitions.
However, management acknowledged that leased aircraft are rarely new.
“Even though we lease them, we don’t get new aircraft; we get ones that are older than seven or eight years.”
Ordering brand-new Airbus aircraft today would not provide an immediate solution.
“If the fleet is around 12 years old, and we order an Airbus today, it won’t arrive until 2031 or 2032. We can’t get it before then. There’s a queue.”
Consequently, the airline must determine its long-term fleet strategy quickly.
The Chairman confirmed that the restructuring committee will soon submit detailed recommendations to the government.
He also noted that operating around 60 daily flights with only about 18 serviceable aircraft leaves almost no spare capacity because nearly every aircraft remains airborne throughout the day.
Government Awaits Committee Recommendations
Ports, Civil Aviation and Energy Minister Anura Karunathilake told BBC Sinhala that no major structural changes would occur until the expert committee completed its work.
“We have appointed an expert committee for the restructuring process of SriLankan Airlines. We don’t actually intend to make major changes at this time.”
He confirmed government approval to extend lease agreements for six aircraft at significantly reduced rates.
“It is cheaper to extend the contract than return them. They are older now than when we signed the original agreements.”
The airline is also renewing its Rolls-Royce engine maintenance agreement, which should further reduce operating costs.
According to the Minister, the committee will submit comprehensive restructuring recommendations, including proposals covering the future fleet, within six months.
Until then, management intends to keep the airline operating without incurring further losses.
Search Continues for Permanent CEO
SriLankan Airlines remains without a permanent Chief Executive Officer.
The airline has conducted two recruitment rounds.
The first attracted 172 applications, while the second received more than 200, including many from overseas.
Although several candidates met basic qualifications, none satisfied the airline’s full requirements.
Management is therefore seeking to appoint a CEO initially on a one-year contract.
Committee Chairman MP S. M. Marikkar questioned the prolonged delay.
“This is a serious issue. If you calculate the total loss since the government took over management from Emirates, you can understand how serious this is. Officials come and go, boards come and go, but the loss falls on the taxpayer.”
Minister Karunathilake said appointments to the Chairman, CEO and Chief Operating Officer positions would follow the restructuring process.
Until then, interim appointments will continue.
He also stated that a new Chief Executive Officer is expected to be appointed within the next three weeks.
Ultimately, the success of SriLankan Airlines restructuring will depend on whether the government’s expert committee can deliver a practical roadmap that modernises the fleet, strengthens commercial performance and restores long-term confidence in Sri Lanka’s national carrier.
