International Economics Series
The purpose of this paper is to examine the current aviation policy in Sri Lanka and the prospects of further liberalization of air services of the country in the light of developments in the global aviation industry, taking note of the specific needs of a developing economy like Sri Lanka. It also seeks to look at policy options for air service liberalization and suggest pragmatic approaches to be taken. Despite the importance of the air transport industry, there has not been a comprehensive study on Sri Lanka’s aviation industry and its policy. Thus, this preliminary study also hopes to provide some useful information about the sector and insights to those who are involved in the industry, which will stimulate further thinking and more in-depth research.

This paper is organized as follows. Section 2 highlights the trends in the aviation industry over the last decade, in terms of scheduled passenger services, cargo and non-scheduled services. Section 3 provides an overview of the development of regulation in the industry and steps taken by individual countries (US, Australia , New Zealand ) and groups of countries (EU, APEC and ASEAN) to free air services from regulation hold. Section 4 discusses Sri Lanka ‘s aviation policy, identifies the main aspects of the present policy and looks at the country’s bilateral air service agreements, their main provisions and restrictions. Section 5 examines Sri Lanka ‘s airline industry in terms of both passenger and cargo transport. Section 6 considers policy options for liberalization and recommends plausible paths that could be taken while Section 7 looks at the airport and ancillary facilities at present in Sri Lanka and the planned expansion and improvements in the pipeline. Section 8 concludes.

by Janaka Wijayasiri, Prashan Malalasekara and Priyanga Dunusinghe