National carrier, SriLankan Airlines, made an operating loss of Rs.14.1 billion in 2016 compared to a loss of Rs.4.9 billion in 2015, the 2016 Central Bank annual report released this week showed.
According to the report, the losses were mainly due to higher costs related to aircraft maintenance and lease as global fuel prices have remained relatively low throughout
In 2016, the SriLankan replaced its last four-engine Airbus A340 aircraft that was used for two decades with two fuel efficient, modern, brand new, twin-engine A330-300 aircraft.
In addition, two aircraft of Mihin Lanka were also absorbed to the SriLankan fleet. Mihin Lanka ceased its operations in October 2016 and SriLankan took over Mihin Lanka’s schedule by upgrading all routes to full service operations from the budget flight operations.
In 2016, the SriLankan had to incur the full maintenance and lease costs of the fleet introduced in 2015, leading to a higher operating expenditure and substantial operating losses in 2016 in comparison
By end 2016, the fleet of the SriLankan comprised 13 wide body aircraft and eight narrow body aircraft. This includes seven A330-300s, six A330-200s, six A320s and two A321 aircraft. The airline welcomed its first A320neo in February 2017 and a second aircraft is expected this month.
“Maintaining a massive loss-making airline, which is funded through the government cash flow, is a huge burden to the government budget.
Hence, the measures taken towards securing a strategic partner have to be accomplished to resolve the need for capital injection and debt consolidation and thereby remove the burden on the government budget,” the Central Bank annual report noted.
The US-based global investment giant Texas Pacific Group (TPG) is currently said to be carrying out a due diligence on SriLankan following a round of calling of expression of interests by the airline to find a suitable strategic partner.
Prime Minister Ranil Wickremesinghe went on record saying that the airline had liabilities running over US $ 3 billion and as a last ditch attempt to save it the government would have to absorb the debt to make the airline presentable to a future strategic partner.
During the previous Rajapaksa administration, the airline was said to have been grossly mismanaged under the chairmanship of the brother-in-law of the then President Mahinda Rajapaksa. However, a report commissioned by the current government on the past activities of the airline through a prominent lawyer in the country has been thrown into the backburner without any action being taken against the perpetrators.