Sri Lanka state budget carrier shows fat margins

The firm had seen negligible finance charges of around 51 million rupees in the period. The profits before interest indicate remarkable gross margins of around 40 percent.

In the year to March 2011 the firm had lost 940 million rupees on revenues of 3.14 billion rupees, down from 1.2 billion a year earlier. Costs were cut by changing 'wet leases' of its aircraft to 'dry leases', a report by the finance ministry said.

The turnaround has come in the next nine months with just an 18 percent increase in passengers carried to 266,292 and cargo rising to 1,290 tonnes from 959 tonnes.

The performance is even more remarkable since the airline only operates only two aircraft to seven destinations. The carrier is expected to acquire a third aircraft in the first quarter of 2012, the report said.

Its sister carrier, SriLankan which operates over 20 aircraft had meanwhile lost 15.56 billion rupees before interest in the 9 months to December. Interest charges were 741 million rupees.

Mihin Lanka's long term liabilities fell to 414 million rupees by December from 2,802 million in March but its long term liabilities rose to 4.39 billion rupees from 2.23 billion rupees.

It had negative net assets of 3.2 billion rupees down from 3.8 billion in March.

READER COMMENT(S)

5. Avindra-Doha Jun 26

If the Finance ministry informnation is credible, only possible reason I can think of is the change from "wet" to "Dry" lease that would have given the cost saving. Mihin was on Wet lease meaning that the co had to pay for air craft, engineers, ground staff including crew to the lessor. And since it is for a short period a huge cost was incurred. Dry lease is a long term agreement to lease only the air craft. So tremendous cost savings could be expected.

The way it was rushed to commence Mihin in the past few years probably pushed the company to opt for a wet lease due to approvals etc. That said, I still have my doubts on the figures.

4. FF Jun 26

Looks like some seriously creative accounting is taking place at Mihin Lanka. It could also be possible that SriLankan has taken over Mihin Lanka's liabilities (which would explain the "negligible finance charges").

I am not sure how the code sharing arrangement works between SriLankan and Mihin, but it appears this is an excuse for tranfering funds (perhaps large and unreasonable amounts) from UL to MJ. Usually code sharing takes place between carriers of equal stature. I cannot figure out how a full service airline can code share with a budget airline.

I hope some one puts an end to this parasite. The name and image of SriLankan Airlines and of the country is being tarnished because of this egoistic misadventure.

3. Chandrasakera Jun 25

How come.. Just three days ago Chairman Sri Lankan and Mihin Air. Mr.Nishantha Wickremasinghe when interviewed by a press reporter said that Mihin Air is in total disarray and loosing money heavily, and he even do not have any intention to combine it with Sri Lankan as it further eats up into it's losses.

Can anybody please tell the GOSL press not to publish bogus Financy Ministry reports.How come with 12 Billion rupee loss Mihin make 2 Billion profit overnight. Also never herd any airline in the world making 40% operation profit in 9 months. Over to you opposition MP's and general public.

2. gyan Jun 25

I agree with the previous comment. Mihin Lanka has a parasitic existence on Sri Lankan Airlines in the form of Code Sharing!

I worked this out on a recent flight to BKK on Sri Lankan. Some of the passengers were Mihin Lanka and getting a cheap ride on Sri Lankan!!

Funny way to run a railroad, as Bugs Bunny would have said!

1. Rohan Samarajiva Jun 25

Indeed a miracle.
Perhaps someone can explain why lucrative UL routes such as Colombo-Delhi were code-shared with MJ?

Usually both airlines contribute something when code-sharing. What exactly did MJ contribute? And how much did it get from UL for its services?