June 15, 2017 (LBO) – Srilankan Airlines said on Thursday that media was misguided when reporting losses and the airline had dramatically reduced the annual loss since the formation of the Unity government.
“Contrary to inaccurate reports in the press, the management of SriLankan Airlines would like to point out that since the Unity Government was formed, the airline’s losses have been dramatically reduced,” a statement from the airline said.
The airline’s annual loss increased from 17.2 billion rupees in 2011 to 27.8 billion rupees in 2016, although this included one-off compensation paid for cancellation of four previously contracted aircraft of 14.4 billion rupees.
The airline said the loss last year, excluding this one-off payment, was 13.4 billion rupees, suggesting that the decision to lease several aircraft had been outside of the airline’s purview.
The full statement follows:
Contrary to inaccurate reports in the press, the management of SriLankan Airlines would like to point out that since the Unity Government was formed, the airline’s losses have been dramatically reduced.
The fuel price reduction of 2015 saw a drop in ticket prices that did not recover when fuel increased again.
The effect of this, coupled with the acceptance of several new (and expensive) aircraft, a depreciation of the LKR and other currencies against the USD (the majority of airline costs are in USD) saw a weakening of the balance sheet.
The runway re-surfacing project at Colombo Airport, which was absolutely necessary, also forced the national carrier to cancel over 600 flights, equivalent to two entire weeks of scheduled services, in the first three months of 2017. These factors combined to worsen the performance of what could have been a successful financial year in 2016/17.
The airline continues to pay a heavy price for the extremely high lease rental agreements entered into by the previous government. The cost of terminating the leases on four A350-900 aircraft that were grossly overpriced and completely unsuitable for the national carrier, imposed a further burden on the airline. (One-off items in table above)
The airline is now undergoing a modest recovery in revenues and is about to launch significant regional expansion. Three new destinations in India, direct flights to Hong Kong & Bangkok and a long awaited non-stop service to Australia are all planned in the coming months.
Further restructuring is required in order to reduce the cost base and make the company competitive in this extremely challenging market.
The Directors and management team are confident that with the support of the shareholder, the recovery of the national airline will continue and the positive trend will be further improved upon.