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 Trainee foreign pilots fly Mihin


Mahinda Rajapakse and Sajin Vaas Gunawardena

By Dilrukshi Handunnetti, Mandana Ismail Abeywickrema and Arthur Wamanan

Instead of Sri Lanka taking pride by launching a state funded budget airline, the controversial Mihin Lanka project has now turned out to be not only an extravagance and a political embarrassment but also one that raises serious questions about passenger safety.

The Sunday Leader in extensive investigations had revealed that Mihin Air was launched sans cabinet approval or the required  approval from the Civil Aviation Authority prior to the launch, and it has now become an experimenting ground for some 'greenhorns.'

Well-informed sources confirm that Mihin Lanka has become a training school for at least three junior foreign pilots to clock in their required number of flying hours at the expense of the lives of the passengers.

Having moved into the aviation industry through the back-door stealthily, Mihin is now the official carrier of President Mahinda Rajapakse and his giant delegations on overseas trips.

What is shocking is that similar to its launch that kept even the then Civil Aviation Minister, Mangala Samaraweera in the dark, the policy of hiring pilots for this airline has been done in an equally cavalier manner.

While questions were raised whether internationally stipulated standards were adhered to when launching the airline, there were other questions about initial investment and funding sources.

Safety jeopardised

It is in such a backdrop that the latest issue of safety concerns has emerged owing to raw junior pilots being hired under a special package where the pilots allegedly fly free for Mihin in exchange for the opportunity to earn their flying hours, the much needed qualification to further their careers.

It was none other than former Aviation Minister, Mangala Samaraweera who admitted in parliament about the launch of Mihin Lanka without cabinet approval.

On November 30, 2006, replying an adjournment debate sought by UNP Parliamentarian Ravi Karunanayake, Samaraweera admitted that there was no cabinet paper but promised a joint cabinet paper by the Finance and Aviation Ministries in support of the decision. Needless to say that the aviation minister was quite at sea about the launching of a national budget airline, which alone signifies the secrecy and the irregularity of the project at the very outset.

Stark contrast

On November 21, 2006, Mihin Lanka CEO, Sajin Vaas Gunewardena submitted a pre application form to the Director General of Civil Aviation to obtain the required licence. That was processed in just days, in stark contrast to the plight of any other commercial airline that would require a couple of years to process applications and obtain approval.

But not so with Mihin. And hence the charge that following the open skies policy, Mihin was launched making many believe that the state policy was to open the skies to some, close for some others and open to still some others on a restricted basis.

Opulence

The airline was incorporated on October 27, 2006 with its registered office at the 35th Floor, West Tower, World Trade Centre. Some Rs.6 million was spent to refurbish the premises and its first directors were Sajin Vass Gunewardena (CEO), Gotabaya Rajapakse and SLAF Commander Roshan Gunatilleke.

Apart from the violation of financial regulations in the allocation of funds to form Mihin Lanka, the high costs involved in the maintenance of the airline and its heavy losses have created questions as to its viability as well.

The case of Mihin Lanka is today identified as yet another example of the government's severe lack of discipline where public funds are concerned. It is this very same lack of financial discipline that has pushed the country's economy into an abyss.

The government's lack of fiscal discipline has also pushed Colombo's inflation to 19.6% and countrywide inflation to over 20%. This, after the government had printed some Rs. 45.2 billion within a period of four months in 2007.

Millions pumped in

In order to get the airline off the ground, Mihin Lanka was provided with a sum of Rs. 500 million by the Treasury as equity. The amount was provided as partial equity following cabinet authorisation - No.06/2373/215/034 on December 20, 2006.

In addition, Lankaputhra Development Bank, interestingly headed by Mihin CEO, Sajin Vaas Gunewardena's father, invested a sum of Rs. 300 million as redeemable preference shares with an annual interest coupon of 15% payable by Mihin Lanka.

With these initial investments, Mihin Lanka was launched amidst many questions raised on the legality behind the allocation of capital for its formation, especially since no fund allocations were made in the 2006 and 2007 budgets. Nor were supplementary estimates passed to allocate funds for Mihin Lanka.

Constitution clear

Sri Lanka's Constitution is clear that it is parliament that has control of public finance and not the Chief Executive.

It has been said that the total cost of the Mihin Lanka project amounts to US$ 36.16 billion which is twice the country's foreign debt - a fact that any financial analyst would raise eyebrows at.

Issues related to the formation of Mihin Lanka and its financial allocations have been taken up for debate in the legislature by the opposition several times given the credibility crisis suffered by the airline.

JVP Parliamentarian, Wasantha Samarasinghe together with UNP MP, Ravi Karunanayake in March this year demanded answers as to how funds were raised for this project and why the financial allocations made towards the project by the government were never disclosed to parliament.

Samarasinghe also pointed out that during the formation of Mihin Lanka, powers vested with the legislature under Clause 148 of the Constitution have been violated. This also led to questioning the powers of the Treasury Secretary as to under what authority he had released funds from the Treasury towards the project.

But Mihin has certainly been lucky, given the kind of investment that flowed in its direction, irrespective of the legalities involved. Hence the question that arose as to how funds from the EPF and ETF were initially invested for the project, a claim now disputed by the government.

Total violation

It has been made clear that the government had released funds for the project without informing parliament and the respective consultative committee in violation of the constitution and governing regulations.

It now transpires that while the legislature was kept in the dark about the whole Mihin Lanka project, the consultative committee on aviation had not met till March 2007 which means the committee too was clueless about the formation of a new airline company fully owned by the state.

According to Karunanayake, the amount of Rs.1.5 billion (Rs.1,500 million) detailed in the cabinet paper of December 20, 2006, was in contravention to the sum of Rs.3.6 billion detailed in the BoI agreement as the initial cost of operations.

Justifies

The government's response in March 2007, to this claim, was that it had not released funds from the EPF and ETF accounts to Mihin Lanka and that the then Ports and Aviation Minister, Mangala Samaraweera received the necessary cabinet approval to grant Rs. 500 million to form the airline.

During one of the debates on Mihin, Chief Government Whip, Minister Jeyaraj Fernandopulle told parliament that the Treasury Secretary had released a sum of Rs.250 million in line with the powers vested in the respective ministry secretary in accordance with Section No.6 of the Appropriation Bill No.6 of 2006.

He also justified the move by saying it was done so as the respective institution at the time was not allotted under any line ministry and therefore was under President Mahinda Rajapakse. An interesting explanation indeed given the fact that the President stands to control three quarters of the entire budget allocations.

Circumventing

Fernandopulle's explanation is that although there was a necessity to present a supplementary estimate to parliament for fund allocation, the said clause has removed that necessity. Accordingly, the government claims to have the necessary legal premise to receive urgent funding through the Budget Department.

This is why the plight of the airline that is used by President Mahinda Rajapakse as his private fleet has come into question yet again.

Wither budget airline?

Despite the special privileges granted to Mihin from the very outset, the lavish spending associated with the airline negates the very concept of a budget airline, thus defeating the very purpose of having launched one.

Incurring heavy losses, the total operational cost of Mihin Lanka as of March 31, 2007 was a colossal Rs. 15,410,886.41.

MIHIN LANKA ( PVT ) LTD PER OPERATING EXPENSES AS AT 31. 03. 2007 

DESCRIPTION   AMOUNT ( LKR)

Air craft Lease Charges  90,802,000.00

Aviation Fuel      3,521,402.60

Inflight Meals & Amenities          4,488,623.59

Cabin Crew Operations   5,933,914.26

Ground Handling/Landing Parking            1,791,702.00

Staff Salaries & Allowances        16,129,577.06

Call Centre fees 3,884,375.00

Internet Booking Engine  4,709,100.00

Advertising & Promotions            25,249,614.13

Duty Travel - Overseas    8,824,640.81

Training Expenses         2,340,750.00

Lease/Hire of Vehicles    7,638,880.00

Registration & Membership fees  2,316,416.75

Professional fees           4,279,913.50

Printing & Stationery      2,148,405.00

Rent & Rates     5,490,000.40

Telephone & Other Utilities         944,139.06

Taxes & Levys   846,899.80

Bank Charges    163,793.47

Exchange Losses          929,036.59

Other Administrative Expenses   2,977,702.39

Total     195,410,886.41


Mihin Lanka staff fight shy

When The Sunday Leader contacted Mihin Lanka, the officials stated they could not comment to the newspaper.

The officials said the CEO or his secretary should be contacted for any comments regarding details on its staff, pilots and catering.

However, the CEO and his secretary are out of the country and the officials said they were not aware as to when they would be back.


Rs.8-9 mn loss per day

Despite state assistance in an unprecedented manner, records show that Mihin Lanka incurs losses amounting to Rs. 8-9 million per day.

The operating expenses of Mihin Lanka stands at Rs. 195,410,886.41 as at March 31, 2007. (See chart)

Ads and promos hit the sky

The highest expense incurred by the company is for advertising and promotions, which stands at Rs. 25,249,614.13. The amount spent on staff salaries and allowances stands at Rs. 16,129,577.06.

What is amazing in the entire scheme of things is the aircraft leasing charge of Rs.90.8 million. The staff salaries and allowances cost a thumping Rs.16.1 million while advertising and promotional work had cost Rs. 25.2 million. Maintained at great cost to the state, Mihin is now moving well beyond being a mere financial liability that cannot call itself a budget airline as it reflects zero budgeting.

Compounding the issues are the risks to the lives of passengers who are at the mercy of  inexperienced foreign pilots who are hired to fly the aircraft. By flying low cost, what passengers may not know is that their precious lives are of no concern to those who manage Mihin.

Foreign pilots work for free

Bulgarian and Turkish pilots are hired under a special scheme where they are not remunerated by the airline but by their respective countries in order to gain flying experience. Just as Mihin Lanka took the country and its economy for a ride, the stark fact is that by now it is taking hundreds of passengers on a 'death ride' when they fly Mihin on low fares.


Mihin flights

According to the winter flight schedule, Mihin flies to seven destinations. They are Dubai, Male, Bangkok, Tiruchirapalli, Trivandram, Gaya and Singapore.


Budget airline/high salaries

Mihin Lanka, purportedly a budget airline offering low airfares to passengers, is lavish with state funds in remunerating senior staff members with handsome salaries.

While it may appear stunning that rigorous budgeting procedures have not applied to Mihin as they do to other companies, a close scrutiny of the salary structures proves that the budget airline is anything but a frugal operation.

Managing Director/CEO, Sajin Vaas Gunewardena draws a monthly salary of Rs. 450,000 while Senior Manager, Flight Operations - Errol M. G. Cramer makes Rs. 500,000 a month. Head of Flight Operations, Athula Dissanayake is the highest paid with a salary of Rs. 600,000, according to particulars furnished to parliament on December 10, 2007. Head of Commercial, Rohan Perera and Head of Finance and Administration, Lohan Sajiva Suwaris draw Rs. 350,000 each.

There are six officials drawing Rs. 250,000 per month: Consultant - Sugathadasa Rajapakse, Senior Manager, Revenue Management and Planning - Anthony Laxman Guyes, Manager, In-flight Service - Gerald Charles Mendis, Manager Ground Operations - Ingrid Guruge, Manager Engineering Quality Assurance - Arulanatham Arudsothy, Manager Aircraft Engineering - Nimal Ratnayake and Manager Safety - Bernard Jansz. 

Coordinator to CEO, Vimal Perera and Manager, Human Resources and Administration, Joyce Kandaragama are paid Rs.150,000 each per month while Manager Flight Control draws Rs.100,000.

Mihin Lanka employs a total of 157 personnel. Chairman,  Mihin Lanka, Defence Secretary, Gotabaya Rajapakse does not draw a salary, it was stated.


Home and home loan

Mihin Lanka owes a sum of Rs. 300 million to the Ceylon Petroleum Corporation (CPC) for fuel purchases.

Petroleum and Petroleum Resources Minister A.H.M. Fowzie told The Sunday Leader that since its inception to date, Mihin owes Rs. 300 million to CPC for fuel purchases.

Fowzie said that the company paid for one load of fuel for every four loads of fuel purchased by CPC.

"The money is paid in installments. Since it is a government owned entity, there is no stipulated time frame for Mihin Lanka to make the payments," he said.

According to Fowzie, the government would have to make some arrangement to settle the company's debt to CPC.


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