Dec 23, 2016

SL incurs over US$15.9 m loss over PIA deal

Sri Lanka’s cash strapped national carrier – SriLankan Airlines has already incurred a loss of over US$15.9 million due to the grounding of two A330 aircraft as a result of the delay in acquiring those two planes by Pakistan International Airlines (PIA) under a an agreements reached in August this year.

 PIA negotiators have informed the Sri Lankan Airlines CEO Suren Ratwatte to to revise the wet lease agreement with a discount on the previous aircraft acquired by them and enter into dry lease agreement with other two air craft at a discount payment.

Pakistan Airline was not able to make sufficient money from the aircraft operation and hence it has requested to discount rental payment for second aircraft as well for acquisition on dry lease.

Board of Directors of Sri Lankan has directed the CEO Suren Ratwatte to find an amicable solution to the present problem.

Negotiations are now under way between the two airlines to settle the issue; sources closely connected to the Sri Lankan board members said adding that the board has already expressed concern on this matter to the CEO. 

Three A-330 aircraft deal ran into severe turbulence following Pakistan International Airlines (PIA) delay in the installment payment for the wet leasing of the first A-330 in August and failure to take over other two aircraft under a dry lease agreement.

Sri Lankan Airlines has grounded the two A 330’s in anticipation of the PIA take over incurring a loss of US$177,000 daily as the Pakistan Authorities have not moved forward to acquire second aircraft neither on dry nor on wet lease, sources connected to Sri Lankan Air Lines said.

At the moment, Sri Lankan - PIA three A 330 Aircraft deal will become a doubtful starter as the Pakistan Airline is currently negotiating with Turkey’s Pegasus Airlines to acquire. Four B337-800 aircraft on a dry lease, Pakistan Aviation official said.. 

A high level team of Pegasus Air Lines visited Pakistan this week to negotiate this deal as the Air Line is in a hurry to sell or lease seventy-four aircraft (twelve A320-200s, four A320neo, and fifty-eight B737-800s) as Turkey’s tourism market has suffered from the impact of regional conflicts as well as political instability at home that culminated in July’s failed military coup, he disclosed.

Despite lower fuel cost, accumulated losses of PIA increased to Rs. 267.56 billion at the end of the January-March quarter of 2016, up 2.3 per cent. 

The PIA sources said the prolonged strike in February, which was led by employees in protest against the government’s intention to privatise the state-owned company, was the key reason behind the losses.

Under these circumstances, Sri Lankan Airlines will have to wait in for turbulence with the newly-hatched PIA deal failing to break even at the least.