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UNCLAS SECTION 01 OF 02 COLOMBO 001007 
 
SIPDIS 
 
DEPARTMENT FOR SCA/INSB 
 
E.O. 12958: N/A 
TAGS: CE ECON ETRD EINV EAIR ELTN
SUBJECT: SRI LANKA'S VERY AMBITIOUS PLANS TO EXPAND 
AIRPORTS TO LURE TOURISTS 
 
¶1.  (SBU) SUMMARY:  As part of Sri Lanka's overall plan to 
boost tourist arrivals from nearly 500,000 currently to 2.5 
million by 2016, Sri Lanka has embarked on a very ambitious 
plan to expand its airport facilities.  Sri Lanka's only 
international airport in Colombo, Bandaranaike International 
Airport (BIA), is at the heart of plans to reshape the 
airport landscape.  Sri Lanka plans to expand BIA by 
constructing a new international arrivals and departures 
terminal, widening its current runway to accommodate the 
Airbus A380, and building an additional runway to expand 
international arrivals and departures.  A number of 
additional foreign carriers are interested in establishing a 
presence in Sri Lanka.  Near-term impediments to success do 
exist.  Tenders for airport projects have not yet been 
floated despite a 2013 target date for overall project 
completion.  Another issue is travel within Sri Lanka, which 
was prohibited during the recently ended war against the 
Tamil Tigers.  If tourists could fly within the country it 
would greatly enhance Sri Lanka's attractiveness as a 
destination.  However, although several domestic airlines 
have applied for routes, they do not have planes.  End 
Summary. 
 
PLANS FOR AIRPORT EXPANSION 
 
¶2. (SBU) Bandaranaike International Airport (BIA), situated 
just north of Colombo, is poised to see significant expansion 
over the next 2-4 years.  Current airport capacity is 6 
million passengers per year, although BIA only received 4.8 
million passengers in 2008.  Aviation and Airport Services 
(Sri Lanka) Ltd. (AASL), the government owned developer and 
operator of airports in Sri Lanka, plans to increase capacity 
over the next several years to 12 million passengers per 
year.  This expansion will include constructing a new 
international arrivals and departures terminal, widening 
BIA's current runway to accommodate the Airbus A380 airliner, 
and building an additional runway to accommodate more 
international arrival and departure traffic.  The AASL 
intends to have all projects completed by early 2013. 
 
¶3.  (SBU) Despite ambitious plans for airport expansion and 
the delineation of target dates for completion, AASL admits 
its has not yet floated tenders for its new terminal or 
runway expansion/construction.  This apparent disconnect may 
make 2013 an unobtainable target.  BIA and AASL will need to 
identify, possibly with the assistance of the Government of 
Sri Lanka, ways to  attract significantly more travelers to 
meet existing and planned capacity levels.  However, with the 
end of the 26 year war, it seems a reasonable bet that Sri 
Lanka will have many more tourists. 
 
INCREASES IN AIRPORT CARGO BUSINESS 
 
¶4. (SBU) AASL would like to see BIA become an air cargo hub 
for South Asia.  According to AASL, the airport has seen a 
recent increase in cargo traffic; however, it remains to be 
seen whether the increases will be significant enough to 
position the airport as a cargo hub.  BIA currently handles 
about 150,000 tons of cargo per year.  All major airlines 
traveling to Sri Lanka contribute to this overall total. 
Currently, Sri Lankan Airlines (SLA) has a monopoly on cargo 
handling services, which allows it to set handling rates 
based on its own needs rather than based on competition in 
the market place.  Two secondary cargo handlers operate at 
BIA although they handle only cargo which has been designated 
for their handling by specific customers.  The two private 
operators account for a small percentage of BIA's overall 
cargo business.  With SLA's current monopoly over cargo 
handling services and associated ability to set rates at will 
with relative impunity, it may prove difficult to position 
BIA as a potential air cargo hub given a lack of both 
competition and transparency in pricing.  Additionally, BIA 
and SLA don't seem to have the existing facilities to support 
this plan. 
 
AASL ATTEMPTING TO ATTRACT ADDITIONAL AIR CARRIERS 
 
 
COLOMBO 00001007  002 OF 002 
 
 
¶5. (U) AASL has embarked on an aggressive marketing campaign 
to attract additional foreign carriers to BIA.  A number of 
major international brands including British Airways, China 
Eastern Airlines, Air China Airlines, Garuda Airlines, and 
Al-Etihad Airlines have expressed interest in establishing or 
expanding service to Sri Lanka.  Additionally, budget 
carriers Air Arabia and Air India Express are interested in 
joining Air Asia as a low cost option into and out of Sri 
Lanka.  AASL would like to attract U.S. flagship carriers to 
Sri Lanka and would be interested in a U.S. carrier making 
BIA a regional hub or connection hub.  If AASL is successful 
at wooing some of the interested carriers to the country, 
this would be a major public relations coup and validation of 
the positive economic atmosphere generated with the May 2009 
defeat of the LTTE.  The AASL is optimistic enough about 
adding additional carriers to Sri Lanka that it has begun 
exploring plans to turn its existing airport in Ratmalana, on 
the southern outskirts of Colombo, into a domestic hub. 
 
REFURBISHMENT OF DOMESTIC INFRASTRUCTURE 
 
¶6. (SBU) With 13 domestic airports scattered throughout the 
country, AASL plans to begin significant refurbishment and 
renovation of each over the next several years.  The domestic 
airport in Pallali, on the Jaffna peninsula, is currently 
AASL's highest priority.  AASL would like to see the Pallali 
airport reopened for regularly scheduled domestic travel in 
the near term.  This plan is in line with Sri Lankan efforts 
to expand options for business and pleasure travelers.  AASL 
hopes to tie refurbishment of domestic airports to the Sri 
Lanka's planned increase in tourism over the next several 
years.  A system of operational domestic airports will ensure 
tourists have a full range of travel options when visiting 
the country and will make intra-country travel faster and 
more convenient.  The AASL admits that while a number of 
private companies have requested permits from the Ministry of 
Aviation and Air Transport, none have existing staff or 
airplanes.  SLA, the most likely near-term player in the 
domestic market also does not have a fleet currently designed 
for short haul intra-island travel.  Sri Lankan aviation 
authorities will need to address the issue of planes and 
flights to accompany its domestic renovation plans. 
 
¶7. (SBU) Comment:  Plans for airport and airline carrier 
expansion make sense given the Sri Lankan desire to become 
the tourist hub of the region.  Should current airport 
terminal and runway expansion plans come to fruition along 
the timeline envisioned, Sri Lanka will have a first class 
flagship airport capable of handling a major influx of 
travelers to the country.  Likewise, if the AASL can complete 
refurbishment of its domestic network of airports and 
identify domestic carriers in which to shuttle passengers to 
their destinations, this will have a positive effect on the 
business and tourism markets.  Meeting the timeline for 
current plans will be problematic and will force the AASL and 
the government to rethink and possibly scale back its efforts 
in the near term.  However, the planned expansion of the 
aviation sector is emblematic of the GSL plans to expand 
their economy, with a heavy reliance on government planning 
and emphasis on the potential of tourism. 
BUTENIS