Network economics and regulation

Posted on April 14, 2015  /  2 Comments

Sri Lanka has decided to fully liberalize a white-elephant airport, an unusual act in this network industry which is riddled with protections for national flag carriers. Taking a respite from the Constitutional matters that preoccupy most Sri Lankans these days, I shared some ideas on the prospects for the fully liberalized airport with a journalist. These thoughts are more fully fleshed out in an op-ed that will appear shortly.

Airlines are usually drawn to airports which give fifth freedoms, or the right to pick up passengers on the way to a third destinations, which is restricted by many countries to give a privilege to – usually – a badly run state-run domestic carrier.

“Fifth freedom rights are valuable where there is are passengers to pick up,” explains Rohan Samarajiva of LirneAsia, a regional think tank based in Colombo.

“Mattala is not near a population base.”

Samarajiva who has been advocating the use of the airport as a regional base for freight says airlines could still be drawn to the airport if costs were attractive enough and there was a window to also open up fresh regional opportunities.

At the moment fuel is trucked to Mattala from Colombo, which automatically push costs up. To bring costs down costs, fuel has to be hauled from nearby Hambantota port where storage has already been built, preferably through a planned pipeline.


  1. What do we mean by a white elephant airport? Need for second airport has been disused and accepted since 1990 as far as I can remember. It was not justified on the basis of passenger nos or capacity issue of Katunayake. Areas identified included Weerawila and Hingurakkgoda. Whether Mattala is a justifiable investment depend on successive marketing and promotion efforts and country’s investment environment and micro policy environment

  2. It would be helpful to read the article before commenting. It is one thing to have a backup airport (landing strip, control tower, etc.); quite another to build a full-fledged international airport without proper fuel supply in the middle of nowhere. The latter is commercially and operationally flawed, as has been demonstrated by the fact that it attracted only 8 passengers a day despite fifth freedom and below-cost ground charges.