The uneconomical operations of SriLankan Airlines(SLA) and losses cannot be absorbed either to the limited fiscal space or state banking sector, hindering the productive private sector credit growth,” the Finance Ministry recently noted.
It has recommended an immediate transformation for the airline to clear up its liabilities through a proper business restructuring by selecting a suitable business partner
Even though, financing the losses of the SLA at this distressed economic condition cannot be further continued, the Government approved the re-issuance of all Letters of Comfort that expired during the period amounting to US$ 205.4 million and Rs. 27.6 billion, in favor of two state banks to continue SLA’s operations.
The uneconomical operations of the SLA and losses cannot be absorbed either to the limited fiscal space or state banking sector hindering the productive private sector credit growth.
However, under the prevailing economic conditions, the Government is no longer in a position to finance SLA’s losses and therefore SLA requires an immediate transformation to clear up their liabilities through a proper business restructuring by selecting a suitable business partner, Finance Ministery emphasised.
Aviation Minister Nimal Siripala de Silva While urging the local investors to come forward, the government plans to complete the restructuring process of loss-making SriLankan Airlines in a transparent manner within this year.
He stressed that all stakeholders must agree in principle the need to restructure the airline, as it would be a great unjust to the citizens if the government continues to fund the loss-making airline in the current context with taxpayer money.
In 2021, SriLankan reported a staggering loss of Rs.171 billion, bringing its accumulated loss to a whopping Rs.542 billion. As of March 31, 2022, SriLankan’s interest-bearing loans had increased to Rs.372 billion and its unpaid bills rose to Rs.183 billion, including bills payable to Ceylon Petroleum Corporation amounting to Rs.89 billion, bringing the total liabilities to a record Rs.618 billion.
The minister pointed out that the government has already exhausted a large amount of public funds, which could have been invested in other crucial areas to maintain SriLankan, which has turned to end up as another “white elephant”.
In this backdrop, SLA had to incur Rs. 122 billion as finance costs, compared to Rs. 36 billion in the previous year. This scenario has had a significant impact to the banking sector and activities amounted to Rs. 2.3 billion and Rs. 5.1 billion, respectively in 2021.
However, the other operational income of AASL in 2021, has shown a trivial declined to Rs. 3.8 billion compared to Rs. 3.9 billion in 2020.
Coupled with the reduction of administrative cost and Net Finance cost, the bottom-line impact of the AASL shows an improvement in 2021 having a reduction of total loss to Rs. 755 million from the loss of Rs. 3,753 million in previous year. Furthermore, the capital erosion of SLA has been aggravated by the
massive loss experienced in 2021/22, throwing further doubt on SLA’s going concern in light of the government’s restricted fiscal space and the financial environment of the state banking sector.
However, despite the numerus challenges prevailed in the country, SLA raised its operational income from passenger and cargo operations by 163 percent to Rs. 133,276 million in 2021/22 from Rs. 50,694 million recorded in 2020/21.
This was largely owing to an increase in Passenger Carried Kilometers from 748.13 RPK million in 2020/21 to 4,968.59 RPK million in 2021/22.
