SriLankan Airlines achieves first operating profit in 15 years; devaluation deepens net loss

• Operating profit at Rs. 1.7 b in FY22 as against loss of Rs. 8.12 b in FY21
• Net loss soars to Rs. 164 b from Rs. 49.7 b in FY21; of the loss 87% amounted to exchange loss
• Drastic 164% rise in Group revenue to Rs. 134.3 b
• Cargo revenue at Rs. 44.8 b highest in airline’s history
• Slated for restructuring national carrier’s accumulated Group losses amount to Rs. 529 b whilst long and short-term debt at Rs. 380 b

For the first time in 15 years, SriLankan Airlines has succeeded to post an operating profit of Rs. 1.7 billion in FY22 reflecting improvement as against a loss of Rs. 8.12 billion in the previous year. However, the significant devaluation of the Sri Lanka rupee in March 2022 resulted in an exchange loss of Rs. 143 billion for the year, driving the Group to record a full-year net loss of Rs. 164 billion after exchange loss and finance charges as against Rs. 49 .7 billion in FY21.

Of the loss 87% consisted of exchange losses as opposed to 40% in FY21. SriLankan Airlines Chairman Ashok Pathirage said, “With the successful implementation of our new business strategy in line with the increase travel demand, it is significant to note that the Group recorded a profit (when reported in dollar terms, as over 75% of the Group’s revenues are generated in foreign currencies), for the fourth quarter of the financial year.”

He said that the national carrier has recognised that the debt burden of the company largely relating to liquidity sourcing made in the past, remained a drawback to an otherwise improving financial performance.

Therefore, the company explored the possibilities of restructuring some of these debts, the majority of which are held by institutions owned by the Government of Sri Lanka.

“I am pleased to place on record that the Government of Sri Lanka announced its intent to restructure the company in line with policy initiatives of the country and the Cabinet has in principle approved the requirement to restructure SLA,” Pathirage said in the national carrier’s Annual Report for FY22 released yesterday.

As of 31 March 2022, short-term interest-bearing liabilities amounted to Rs. 164.2 billion up from Rs. 135.7 billion a year ago. Long-term interest-bearing liabilities were Rs. 215.5 billion, as against Rs. 163.4 billion in FY21.

SriLankan Airlines’ accumulated losses as at end FY22 was Rs. 529 billion at Group level as against Rs. 366.2 billion in FY21. At company level the accumulated loss was Rs. 537.5 billion in FY22.

CEO Richard Nuttall said the airline faced greater challenges in the first half of the financial year 2022/23 with a challenging local economic situation, high-interest rates as well as a shortage in jet fuel supply. But with a lowered cost base and agility in both commercial and operational aspects, we succeeded in improving our financial performance with a positive operating performance for the period.

The Group revenue in FY22 saw a drastic increase of 164% to Rs. 134.3 billion.

SriLankan Airlines said the overall number of passengers carried grew significantly by 779% compared to 2021, driven by the increased demand for passenger travel resulting from the relaxation of travel restrictions by countries.

Airline’s market capacity in FY22 increased by 166% over the previous year, while the overall passenger cabin factor increased to 49% from 20%.

Cargo services experienced an increase in demand during the year, achieving the highest cargo revenue generated in the history of the airline, amounting to Rs. 44 billion which reflected a year-on-year growth of 48%.

Although the percentage contributed by cargo revenue was reduced in the year under review, a significant increase of 73% was reflected in the cargo tons carried mainly owing to the increased capacity with the resumption of the schedule.

The contribution from cargo to the total payload stood at 47% when compared to 78% in the previous financial year.