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 Spotlight  

Mihin again losing millions per day


Chamal Rajapakse

By Ranjith Jayasundera

Mihin Lanka is crashing once again with regular empty or barely half full flights causing the airline to run at a loss of over Rs 1 million per day. Several flights have flown empty with zero passengers leaving the airline far short of the three million rupees in revenue required per day in order for it to just break even.

Two flights had actually flown with zero passengers, and only three out of the 38 flights flown thus far by Mihin Lanka's new aircraft have had a load factor of over 50%. One of these flights was the airline's inaugural flight to Dubai, which carried 141 passengers.

The other two flights that were over half full were also flights to Dubai, carrying just 98 and 101 passengers respectively, out of the aircraft's 186 seat capacity.

The Sunday Leader was able to acquire data from within Mihin Lanka detailing the number of passengers on every single flight flown by Mihin up until last Friday, January 16. As a bonus, if you are reading this article early on Sunday morning, the information presented here is up to the minute, since Mihin Lanka does not fly on Saturdays, allegedly due to astrological superstitions.

Our analysis found that the average load factor on a Mihin Lanka flight is a shockingly pathetic 23%. In layman's terms, a typical Mihin flight will have around 46 passengers out of the 186 that it can carry.

What is more, out of the 300 non-refundable flying hours purchased by Mihin Lanka from the aircraft's owner Transavia, the airline has used just over 120 hours with more than half of the month now over.

Mihin Lanka is paying Transavia US$ 2,890 per flying hour with a guaranteed non-refundable purchase of 300 flying hours (US$867,000) per month for a period of three months. At this rate of usage - aided by a bizarre decision not to fly on Saturdays - the airline is paying millions of rupees for flight time that it will never use.

Without even thinking of how many passengers would fly on Mihin in its first month, the airline's flight schedule alone condemns it to waste over 50 flying hours bought at US$ 2,890 each totalling a loss of over US$ 144,500 that Mihin's management has signed of on before the first flight even took off.

When The Sunday Leader exposed these very same dangers in the Transavia wet lease agreement in our November 30 issue, UNP Parliamentarian Ravi Karunanayake opined that the airline may waste 30 flight hours per month in a worst case scenario and went as far as to allege that "this is where the corruption is."

Wasted hours

Now with the Mihin business plan itself throwing away over 50 flight hours it will be difficult for the public not to concur with the UNP's assessment. The performance of the airline even after starting its "new leaf" by saying dasvidanya to over Rs 16 million in wasted flight hours for January, leaves us in little doubt that the Rs 6 billion parliament has doled out to Mihin Lanka can be safely presumed flushed down the toilet during the course of 2009.

 All hopes that a proper management structure and business plan could be brought to the table by new Chairman Raja Edirisuriya were reduced to naught when Aviation Minister Chamal Rajapakse installed former SLT Chief Marketing Officer (CMO) Kapila Chandrasena as the Chief Executive Officer (CEO) of Mihin Lanka, replacing Anura Bandara.

Chandrasena is identified with both Sajin Vaas Gunawardena and the Aviation Minister's son Sasheendra Rajapakse. He is also alleged to have played a role in SLT's forced purchase of a company called Sky Networks (Pvt) Ltd, owned by President Rajapakse's sister's son, Himal Laleendra Hettiarachchi, for the purpose of acquiring a WiMax license. This affair was exposed in The Sunday Leader issue of February 24, 2008.

Employees at Mihin Lanka have watched in awe as Kapila Chandrasena and Raja Edirisuriya fought bitter battles over who calls the shots at Mihin Lanka from the day of Chandrasena's appointment.

With Mihin looking at another round of astounding and crippling losses, Edirisuriya has effectively thrown in the towel and left for the United States. A source close to the Chairman said that as a successful businessman of his own repute, with interests in his hometown of Los Angeles and elsewhere in the United States, Edirisuriya felt little point in tarnishing his own name further by being in charge of a business over which he had no control.

The irate Chairman went as far as to write to Aviation Minister Chamal Rajapakse last Friday outlining his grievances with Mihin CEO Kapila Chandrasena and how he made it impossible to run the affairs of the airline. Raja Edirisuriya issued the Minister an ultimatum that if Chandrasena was not removed from Mihin Lanka entirely, to consider that communiqu‚ as Edirisuriya's final resignation from Mihin Lanka.

Whether the Minister will side with the family blue eyed boy or with the man invited to Sri Lanka from his cushy private sector environs by President Rajapakse to salvage Mihin Lanka is literally a six billion rupee question that taxpayers will soon need to know the answer to.

In Edirisuriya's absence however, there are few moves to cut any corners in Mihin Lanka's affairs. While the aircrew were slated to be put up at the Taj Samudra Hotel on a single room bed and breakfast basis rate of US$ 45 per night, a decision was taken to instead house the crew at the Taj Airport Gardens Hotel even after the Taj Samudra had been paid a deposit.

The rationale for the higher rate and forfeiture of the deposit from the airline's management had apparently been the proximity of Airport Gardens to the Katunayake Airport - a factor that hasn't affected the decisions at any other major airline, who house their air crews in Colombo at cheaper rates, and deal with the commute like anyone else. Some budget airline then, Mihin must be.

Another hotel

Yet even after operations had commenced, moves have come afoot to move the aircrew to another hotel once again, this time a hotel on the Negombo beach, located a good 30 minutes northwest of the airport.

A management decision has been made to move the staff to the Negombo hotel after January 31. And the reason for the move is certainly not bargain basement pricing. The Negombo deal for a single room on bed and breakfast basis is, wait for it, $90 per night - more than double the original price quoted by Taj Samudra coupled with a drive of its own to get to the airport.

In the midst of all this, several meetings have been held between officials of the Treasury, Aviation Ministry, Mihin Lanka and SriLankan Airlines, in an attempt to palm off management of the again-ailing budget carrier onto the somewhat sturdier national carrier.

Being dangled like a carrot on a stick in front of SriLankan Airlines, is the Rs 6 billion cash package approved for Mihin Lanka by parliament.

At the second meeting held on January 9, SriLankan CEO Manoj Gunawardena and Director Nihal Jayamanne and Chairman A.N. Wickremasinghe had managed to stall for time by telling those assembled from Mihin, the Treasury and Aviation Ministry that they should seek cabinet approval for a partnership, and then run all proposals through SriLankan's other shareholders.

The other shareholders of the national airline are its employees and Emirates. SriLankan also made clear that if a management agreement was to be drafted, it would be on their terms as they would be acquiring the enormous liability that is today Mihin Lanka.

While no one is to blame but the bungling and incompetent staff at Mihin Lanka for the pathetic number of passengers who have boarded each of the airline's flights, some recent Supreme Court verdicts raise serious questions about who could be held accountable to courts for the fraud that is buying more flying hours for a month than a single aircraft could possibly use.

Just as the Supreme Court chastised the CPC Chairman for signing oil hedging agreements that did not protect Sri Lanka from the possibility of a dramatic world fuel price drop, it would be interesting to see who if anyone the highest court of the land holds to account for signing away millions of rupees in taxpayer money that would never be utilised, with cabinet approval.

If the public spirited citizens who have been planning now for months to take legal action against those behind the Mihin Lanka scandal have their way, the Rajapakses will have more than just a bumpy ride through the corridors of Hulftsdorp. .

Dubai Flights

Date     Passengers      Load Factor      Passengers      Load Factor
            Out bound                                                           In bound
01-Jan    143
                       77%                   81                    44%
02-Jan      60                       32%                   20                    11%
03-Jan    101
                       54%                   31                    17%
04-Jan      31                       17%                   30                    16%
05-Jan      40                        22%                  23                    12%
06-Jan      52                        28%                  38                     20%
07-Jan      62                        33%                  61                     33%
08-Jan      98                        53%                  67                     36%
09-Jan      68                        37%                  34                     18%
11-Jan      70                        38%                  43                     23%
13-Jan      30
                        16%                  41                     22%
15-Jan      40
                        22%                  17                       9%
16-Jan      70 
                       38%                  30                     16%
 

Total Outbound Passengers:   865
Total Inbound Passengers:     516
Total Flight Hours:                   117


Trivandrum Flights 

Date     Passengers      Load            Pass                 Load
             Outbound        Factor          Inbound           Factor
09-Jan           7                 4%                 5                  3%
12-Jan          18              10%                 7                  4%
13-Jan          11                6%                 0                  0%
14-Jan            0                0%                40                22%
16-Jan            3                2%                  2                1%

Total Outbound Passengers:   39
Total Inbound Passengers:     54
Total Flight Hours:       10

 


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