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Sat, 01 November 2014 14:17:12
Sri Lanka's state-run budget carrier loses Rs930mn
19 Apr, 2010 10:02:58
Apr 19, 2010 (LBO) - Sri Lanka's controversial state-run budget carrier Mihin Lanka lost 930 million rupees in 2009, despite support from the island's national carrier SriLankan, which itself made 12.2 billion rupees in operational losses, official data shows.
The two state airlines together have lost 13.1 billion rupees in operations according to data in the annual report of Sri Lanka's central bank.

SriLankan airline is a full-service carrier but has tended to make losses from airline operations for much of its life.

It usually made net profits with positive margins from monopolies in food supply and ground handling at Sri Lanka's only international airport. But now competition has been allowed in both areas and SriLankan still retains most of the market.

In the financial year to March 2009 SriLankan reported a net loss of 9.9 billion rupees, but is now hoping to slash losses after a 30-year ethnic war ended in May 2009 and tourism picked up.

Mihin Lanka was started as a budget carrier despite Sri Lanka's past experience with state-run full service airlines, and has now become a high profile symbol of arbitrary state decision-making and wastage of people's money on state business gambles.

Sri Lanka's state airlines now have to compete with state airlines in better managed Asian nations such as Singapore and also cost-efficient privately owned budget carriers.

State carries from oil rich Middle Eastern nations run by largely expat managers with experience in competitive markets in Europe, are also taking market share.

After starting in 2007, Mihin Lanka burnt up its start-up capital given from people's money and notched up losses of 1.4 billion in nine months.

Mihin folded in May 2008 with an estimated 3.0 billion in debt and losses but was re-started in January 2009 with another cash injection from people's money.

The airline is now sharing services with SriLankan including pilots. There is no information available on the cross-subsidy given by SriLankan to Mihin and how much of its 12.2 billion operational loss is due to the burden of the budget carrier.

SriLankan ran without support from people's money after it was privatized and handed over to Emirates airline in 1998.

A finance ministry report showed that the state has issued guarantees for 2.7 billion for Mihin Lanka and Sri Lankan to borrow from state-run Bank of Ceylon.

A credit guarantee for 1,552.5 million rupees was related to Mihin and SriLankan's loans got a 'comfort letter' for 1,150 million rupees, the report showed.

Mihin also left debts with state-run Ceylon Petroleum Corporation and the airports authority when it ran aground in 2008. Reports also say that the government may buy Chinese made planes for Mihin Lanka.

Emirates pulled out of SriLankan management in March amid controversial circumstances following a row over seat allocations to a presidential delegation.

Officials have said recently that talks were on to buy back a 43 percent stake in SriLankan from Emirates. The Emirates management also resisted propping up Mihin Lanka.

Sri Lanka's President Mahinda Rajapaksa has blamed competition from liberalized air service agreements for losses in SriLankan and called for more protection though the government has earlier wanted to make Colombo a regional aviation hub.

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READER COMMENT(S)
2. AB Apr 20
This shows clearly the poor management of aviation sector in SL. And our government should know that SL is not a country like other developed nations where government leaders can use the air line for their wish as its badly waiting for money from outside SL
1. n.wijeratne Apr 20
Pity we dont have a system of punishing people responsible for this type of losses-specially Mihin Airways-AG can you think of some method of putting such people behind Bars?