Feb 21, 2017

Sri Lankan Airlines records a drop in revenue

Mismanagement, operation inefficiencies and incompetence of the present top management of Sri Lankan Airlines has pushed the national carrier into deep financial turbulence following the Treasury’s refusal to grant tax payers money to revenue loss caused by operational slip-ups.

The national carrier has recorded a revenue drop of Rs. 2.4 billion during the 2015 /2016 financial year comparing to 2014/2015 financial year.

Despite the airline's claim of operational improvements and cut down of waste, the revenue has dropped to Rs. 129.48 billion in 2016 from Rs. 131.92 billion in 2015, according to the annual report of the Sri Lankan Airlines.

Aircraft rental amounting to Rs. 20.1 billion was an increase of Rs 3.8 billion or 23% from the previous year.

The payments due from the lease of a 330 Aircraft to PIA are yet to be recovered and it was a substantial loss for the airline in spite of five new aircraft joined the fleet during the financial year under review, aviation analysts said.

It has spent a sum of Rs. 14.5 billion spent on aircraft maintenance and overhaul and this was a Rs 2.5 billion or 21 percent increase from previous year.

Meanwhile,Treasury officials strongly protested against the releasing of any money to the national carrier following its plight in A330 aircraft deal with Pakistan Airlines.      

Sri Lankan Airlines plans to seek a new facility of US$ 125 million from the Consortium of Middle Eastern Banks (CMEB) to “fund working capital and operational requirements.

A part of the money is to be used for the settlement of instalments of Aercap amounting to US$ 90.5 million which  is the compensation for the rejection of three Airbus A 350 aircraft which the previous Government had signed an agreement to  purchase those aircraft.    

As a capital contribution the Government has infused $125 million in 2012, $100 million in 2013 and $150 million in 2014 by issuing bonds, a Cabinet memorandum revealed.

Additionally, SriLankan Airlines acquired a credit facility of $175 million from the Mashreq Bank of United Arab Emirates (UAE) in 2012 with a sovereign guarantee of $50 million in 2014.

In the same year the national carrier issued an international bond of $175 million also with a sovereign guarantee.

The Treasury has issued two Letters of Comfort to both People’s Bank and Bank of Ceylon to extend a credit facility of Rs. 30 billion to meet the company’s financial requirements. The Letters of Comfort ceased on 31 March 2016.