SriLankan Claims Moving Out Of Red

SriLankan Airlines claims it is moving out of the red, denying reports that it suffered huge losses even after the new government took office.

The airline says that Rs. 91.8 billion in losses suffered between 2011 and 2015 had reduced to a fraction of this colossal number by 2017.

A statement by the airline said that a fuel price reduction of 2015 saw a drop in ticket prices that did not recover when fuel increased again.

The effect of this, coupled with the acceptance of several new (and expensive) aircraft, a depreciation of the Rupee and other currencies against the USD (the majority of airline costs are in USD) saw a weakening of the balance sheet.

The runway re-surfacing project at Colombo Airport, which was absolutely necessary, also forced the national carrier to cancel over 600 flights, equivalent to two entire weeks of scheduled services, in the first three months of 2017. These factors combined to worsen the performance of what could have been a successful financial year in 2016/17.

The airline says it continues to pay a heavy price for the extremely high lease rental agreements entered into by the previous government. The cost of terminating the leases on four A350-900 aircraft that were grossly overpriced and completely unsuitable for the national carrier, imposed a further burden on the airline. (One-off items in table above).

The airline is now undergoing a modest recovery in revenues and is about to launch significant regional expansion. Three new destinations in India, direct flights to Hong Kong and Guangzhou and a long awaited non-stop service to Australia are all planned in the coming months.

Further restructuring is required in order to reduce the cost base and make the company competitive in this extremely challenging market.

 

The World Bank gave 354.86 million dollars in loans and 9.28 million dollars in grants. The Asian Development Bank came close behind at 336.63 million dollars.

 

Japans gave 159.7 million dollars in loans and 7.01 million dollars in grants.

 

Germany gave 5.43 million dollars in loans and 3.98 million dollars in grants. UN agencies gave 22.63 million dollars in loans and 9.7 million in grants.

 

China has replaced Japan and ADB as top lender to Sri Lanka with the country getting heavily involved over the last decade.

 

A China funded coal plant has radically brought down power generation costs, but there has also been so-called ‘vanity projects’ such as the Mattala Rajapaksa International Airport, and a port which has added to costs. Some of the loans taken by state enterprises are not included in the central government debt. (Courtesy Economynext)

 

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