Turbulent challenges

Friday, 9 August 2013 00:00 -     - {{hitsCtrl.values.hits}}

SRI LANKA’S aviation sector is getting more blessings courtesy of the Government in the form of US$ 1.3 billion in new aircraft but at the cost of the taxpayers’ sweat and has its work cut out to prove it is worth the effort. The top officials of SriLankan on Wednesday made a significant effort to shift the blame for their losses onto high fuel costs, lack of competitiveness and a sprightly new five-year plan that aims to push the floundering carrier into profits by 2016, but the challenges remain enormous. SriLankan argued that indirect returns to the country such as half a million tourists ferried by the carrier should be taken into account as reasons or excuses for the losses, which hit US$ 190 in 2012. But the staggering cost of keeping it afloat is starting to tell. Recently the Treasury stepped in to bail out SriLankan Airlines and pay up Rs. 25 billion of the national carrier’s Rs. 36 billion fuel arrears to the Ceylon Petroleum Corporation. A Treasury bond would be given to the CPC – and this means the airline would have to pay the arrears to the Treasury. The Treasury’s intervention follows several months of attempts by the CPC to recover the arrears for fuel supplied to SriLankan Airlines and other State institutions. Even though the Government built the Mattala Airport with highflying hopes, only one budget airline operates out of it at the moment and in an effort to attract more, concessions have been increased. While this may be the most practical thing to do at the moment, it also means that income levels will be lower and the maintenance costs of Sri Lanka’s second international airport will also have to be footed by the Government. Plans to begin an aircraft maintenance and repair terminal through a joint venture with Lufthansa Technik is in the pipeline, with an ambitious start-by date in July 2014, but its profits still seem far off. Mihin Lanka has been a bleeding sore since the day it was launched, incurring losses of a whopping Rs. 8.5 billion since its inception five years ago under the authority of President Mahinda Rajapaksa. Yet, there has been no attempt made by authorities to stem the haemorrhage. It was reported that the cash-strapped budget airline has suffered a loss of Rs. 2 billion during the 2012 financial year alone, according to the Auditor General. Interestingly, the Auditor General has observed that although the company is running at a continuous loss, the annual remunerations paid to the six-member Board of Directors have increased over the years. The Auditor General has observed that such heavy losses have been incurred by the company for the last five years despite grants and concessions by the Government in substantial quantities. The Treasury granted Rs. 507 million for 2012, Rs. 406 million for 2011, Rs. 1,508 million for 2010, Rs. 2,882 million for 2009, Rs. 500 million for 2008 and Rs. 250 million for 2007. The loss sustained for the financial year 2007/2008 was Rs. 3.1 billion, Rs. 1.3 billion for 2008/2009, Rs. 1.2 billion for 2009/2010, Rs. 940 million for 2010/2011 and Rs. 1.9 billion for 2011/2012. With bills piling up, it is time for SriLankan to walk the talk and ensure it makes more profits and less excuses.

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