SriLankan and Mihin ready to fly high

With US$ 500 m capital infusion national carrier ready for stronger take off

By Cheranka Mendis

Sri Lanka’s national carrier SriLankan Airlines and budget carrier Mihin Lanka are growing despite challenges and are no longer loss-making entities, SriLankan Airlines Chairman Nishantha Wickremasinghe said.

Hosting a group of journalists around the SriLankan base in Katunayake, Wickremasinghe stated that the airlines had recovered from negative external factors such as the increases in fuel prices, recession in Europe and political instability in the Middle East, adding that SriLankan Airlines is now aspiring to become the best airline in South Asia and become a profitable operation.

Based on a five-year business plan, the Government has agreed to recapitalise the company – something they have not done for the past 12-15 years, he said. “New capital of US$ 500 million will be infused to improve the Balance Sheet and strengthen overall operations.”

Since February this year, Mihin Lanka has been meeting its direct operational cost, he said. “We expect to achieve profit by 2013. We are extremely confident on our stand as at now since we were only expected to meet direct operational costs next year.”

Planned growth on the airlines and ancillary services while managing financial status has become a top priority for the airlines, he said. “We are keen to provide strategies to secure required funding by balancing the balance sheet.”

Stating that both airlines are of vital importance to the Government’s plans for the future, Wickremasinghe asserted that the State has shown signs of committing towards the expansion and sustainability of the airlines.

While fleet expansion is part of the future growth plan, a fleet modernisation programme is now on where all aircraft will be equipped with new entertainment systems, refurbished beds and flat beds in the business class compartment.

On average the country handles 120 flights a day and at peak times handles even 3,500 passengers and 14 aircraft movements within two-and-a-half hours.

Adding to the positivism, SriLankan Cargo is one of the key profit centres within the organisation. Expected to bring in revenue of US$ 110 million this year as opposed to US$ 94 million last year, total revenue of cargo contributes 13% to the organisation.

Senior Manager Cargo Worldwide Sales and Marketing M.M. Ali Kamil told Daily FT that SriLankan Cargo managed to achieve US$ 50 million within the first six months of the year as expected. Banking on growth this year as well, he stated that last year a revenue growth of 14% was achieved while tonnage increased by 20%. “The trend is very good. We are confident that the growth will continue this year, more so than the last.”

Last month recorded the highest-ever tonnage handled by SriLankan Cargo, he said, which was an astounding 16,133 metric tons. SriLankan Cargo maintains a 40:60 ratio in handling import and export cargo.

The division receives revenue under two arms in terms of import handling – freight charges and handling charges. Senior Manager Worldwide Cargo Operations Janaka Munasinghe acknowledged that the company receives US$ 1 million each month under handling charges only. “During the first seven months of the year, the import section has grown by 12.5%. The target is to achieve 15 million by the end of the year,” Munasinghe said.

The airline’s catering arm is also a profit-making unit. Bringing in Rs. 2.1 billion in the last financial year preparing 15,000 meals a day, the number is expected to rise in the future with British Airways now coming in. 

Engineering Services, which has been undertaking third party aircraft engineering since 2009, manages to bring in close to US$ 3-4 million a year, Production Planning Manager Arjuna Kapugeekiyana said. So far, the unit has completed engineering work on 55 IndiGO airlines and three Emirates flights along with Airblue Pakistan, Kingfisher and Jet Airways.

SriLankan Flight Training, started in October last year, is also planning to purchase an A330 simulator in 2013 owing to high demand. Currently having only an A320, the plan is to purchase the simulator on a financial lease from Lockheed Martin. The outright cost is estimated at US$ 13 million.

Pix by Daminda Harsha Perera