SriLankan nosedives with Rs. 5 billion loss in three months

[monson]

National carrier under Sajin's brother takes Mihin route

SriLankan nosedives with Rs. 5 billion loss in three months

By Ruan Pethiyagoda

The news from the state aviation industry only continues to go from bad to worse. Aviation officials from Minister Chamal Rajapakse, outgoing Mihin Lanka CEO Sajin Vaas Gunawardena and his replacement Anura Bandara insist that the situation is improving. But it is not.

The latest blow for the industry's reputation came last Wednesday in parliament when UNP MP Ravi Karunanayake sparked an adjournment debate that revealed the dilapidated state of SriLankan Airlines, just three months after its management was taken over by the government from Emirates.

Speaking on behalf of the government, Engineering and Construction Services Minister Rajitha Senaratne admitted that the flight operations of SriLankan Airlines had in the past three months lost an unprecedented sum of Rs. 5.67 billion rupees. He claimed however that the catering services, ground handling and duty free sections of the company had made profits in the same period, leaving the total 'group loss' at "only Rs.4.885 billion."

Double the loss

This was more than double the loss sustained by the airline last year during the same period under Emirates management, which was Rs.2.3 billion; a loss that the government attributes primarily to the increased fuel cost over the last year.

The Minister also did not deny that the national carrier was suffering from a lack of pilots, and that it was mishandling its casual staff by firing and re-hiring them every six months to prevent being drawn into an employment contract.

The national carrier's Communications Manager, Ruwini Jayasinghe confirmed the financial statistics presented in parliament, but was not able to comment on the casual staff policy since it was not formally raised in parliament.

Speaking to The Sunday Leader, Karunanayake alleged that all of SriLankan Airline's woes began with the privatisation and handover of management to Emirates. "This is something the UNP was against from the very beginning," he said. "The SLFP went ahead with this without heeding our concerns. Then this government started Mihin Lanka, which has lost over Rs.3 billion. And now just months after taking over SriLankan Airlines from Emirates, they have posted an unprecedented loss."

The MP also rebuffed the government's explanation of skyrocketing fuel costs as the reason for SriLankan Airline's turning a loss. "Fuel costs have been steadily rising for over a year, but this loss is sudden. They cannot possibly expect anyone to believe that only on the day they take over the airline, it starts making thumping losses, and that it's someone else's fault."

A senior SriLankan Airlines official who did not wish to be named also said that the board is of the view that the downturn in tourist arrivals in recent months has also contributed to the carrier's poor performance over the last few months.

Alternate routes

This cannot however be a significant factor. Although tourist arrivals for April 2008 were 10% lower than those for the same month in 2007, and arrivals in June similarly dropped 9.3%, there was an increase of 18.4% in tourist arrivals in May, and the net drop in arrivals for this period was thus just under 1.5%.

What is more likely is that tourists have begun flying on alternate routes due to SriLankan Airlines' uncompetitive fares. Due to a recently added fuel surcharge, travel on SriLankan Airlines is more expensive than competing airlines such as Emirates on several key routes - even though Emirates is renowned for better service and aircraft condition. Both the base fare and tax components of SriLankan Airlines flights are higher than the corresponding rates on Emirates.

We chose Emirates to compare with for two reasons. Firstly it is in the same prestige category as SriLankan Airlines and secondly due to its former relationship with our national carrier.

The total SriLankan Airlines internet return fare from Colombo to London in August is Rs.144,100; yet the corresponding price for an Emirates ticket during the same period is Rs.133,800; over Rs.10,000 cheaper. Similarly, return flights to Male in August are Rs.37,000 on SriLankan Airlines and Rs.31,500 on Emirates.

With several other airlines also available to fly the majority of SriLankan's routes, such as Qatar, Kuwait Airways and Austrian Air, the carrier will be hard-pressed to compete with its higher prices and its recently blemished safety record.

Potential catastrophe

It was by chance only that a potential catastrophe for SriLankan Airlines at Heathrow Airport was avoided some weeks ago. A UL flight bound for Heathrow had taken off carrying a piece of luggage belonging to a passenger who had been off-loaded, of all reasons, for 'security' reasons!

It was only when the aircraft was soaring over the Middle East that the mistake was realised and the plane was forced to make an emergency landing in Dubai that cost the carrier over Rs.40 million in fuel alone.

Should the mistake not have been detected, and the plane had carried on to Heathrow and unloaded the unaccompanied bag, the potential reaction of the terror-paranoid British authorities would have left little to the imagination. This near disaster came in succession to the collision of another SriLankan Airlines flight with a stationary British Airways craft on the Heathrow tarmac last October, and President Rajapakse's temper tantrum last December which led to the booting of Emirates in the first place.

It said an awful lot for the President's patriotism when all it took for him to cause the expulsion of Emirates-appointed CEO Peter Hill was for the latter to hurt his feelings by not kicking off passengers from a fully booked flight to accommodate his entourage, after many months of grandstanding on 'real' issues between the government and the UAE giant.

What matters now is not the mess that the government has gotten SriLankan Airlines into over the last three months, but how it plans to extricate the carrier from this mess and prevent it from becoming yet another dreaded Mihin Lanka.

Aviation Minister Chamal Rajapakse told parliament on Wednesday that his Ministry was taking several measures to cut costs at SriLankan Airlines, which we can only hope will find its way out of this most recent depression.

Labelled

The stakes are high, and it is incumbent upon the Minister to ensure that SriLankan Airlines' new CEO, Manoj Vaas Gunawardena does not get prematurely labelled as his "brother's brother" taking SriLankan down the same path that Sajin took Mihin Lanka.

Manoj Vaas counts many years of experience both at SriLankan and in the aviation industry as a whole, yet his reputation and position have been made precarious by brother Sajin's pooping of Rs. 3 billion at Mihin Lanka. Efforts to contact Gunawardena for comment however failed as his office said that he was unavailable.

Lease agreement

What complicates the situation further is a tacit clause in the SriLankan Airlines' lease agreements with the owners of its aircraft. According to Parliamentarian Ravi Karunanayake, should the cash flow or bank balance of SriLankan drop below a certain fixed amount, the lessor retains the right to repossess all the aircraft.

"They had Rs.14 billion in the bank when they took over from Emirates, and now they are down to just over Rs.7 billion," said Karunanayake. "If they don't get their act together soon, this will become another disaster for the people at the hands of this government."

It is in the best interests of the Minister, the CEO and the public that a plan to bring SriLankan out of its current position is laid out on the table and thrashed out. The country can scarcely afford the kind of money that the state aviation industry has been costing it in losses and debts over the last year.

 

[northtech]

tx 4 infor !!!