Jan 21, 2015 (LBO) – Aircraft purchases by Sri Lanka’s previous government, which do not make business sense, have added to the financial burden of the state sector, Eran Wickramaratne, deputy minister of Public Enterprise Development, told Lanka Business Online.
Eight aircraft have been contracted for purchase over the next few years, with two likely to be delivered this year, he said. In total, six A330-300s and four A350-900 aircraft have been contracted for delivery between 2014 and 2021.
“Our problem has got compounded because during the previous period, for reasons that are really not known, we have contracted to take aircraft which don’t make any business sense to the strategy of the airline,” Wickramaratne said.
“By any stretch of your imagination, you can’t rationalize the decision. The financial drag will be tremendous as you cannot generate the revenue to support those decisions,” he said.
SriLankan Airlines had an accumulated loss of 128 billion rupees as of March 2015, up from 110 billion rupees in 2014. The company also has 143 billion rupees (1.07 billion dollars) in capital commitments for the purchase of four A350-900 aircraft over the next few years.
“If you take the airlines, there have been huge losses over a long period of time. The immediate task is to see how you can minimize the bleeding,” he said.
“An in-depth analysis is going on at the moment to decide what are the different options that can be looked at.”
Although lower oil prices will help the airline, the industry is still struggling with the same structural issues, he said.
“The oil prices will help, but when it comes to an industry everyone gets the benefit. The airline industry is in a very difficult operating environment, most airlines in the world are in a huge struggle.”
“In the airline sector in our region, the Middle Eastern players have dominated it and lots of the European airlines are unable to make profits,” he said.