The national carrier, SriLankan Airlines, recorded a significant improvement in performance, for the nine months ended December 31, 2018 against the corresponding period in the previous year.
Last year was a challenging one for the Airline due to the adverse impact of rising global fuel prices, rapid depreciation of local and regional currencies and political instability.
SriLankan’s net traffic revenue from core airline operations increased to USD 746 million (Rs. 120 billion) with year-on-year growth of 8%. Overall seat capacity or Available Seat Kilometres (ASKs) improved by 6.5% through effective deployment of the aircraft fleet to profitable markets by way of frequency optimisation and using right aircraft types.
Australian tourist arrivals grew by 36% in first 12 months since launch of SriLankan’s direct flight to Melbourne.
Increase in passenger revenue would have been much higher if not for the depreciation of key revenue generating currencies which amounted to USD 9 million.
Overall seat factor (network-wide seat occupation) remained at 82% of the capacity deployed. The overall passenger yield which is measured as yield per Revenue Passenger Kilometre improved by nearly 1.6% compared to the previous year.
However, improvement in topline was overshadowed drastically by the increase in operating cost base owing to high fuel prices. At USD 902 million (Rs. 147 billion), the total operating cost recorded an increase of 15% against the previous year. Impact due to rise in aviation fuel prices was USD 66 million.
As most of payments denominated in USD, SriLankan’s exposure to currency depreciation in 2018 was substantially unprecedented and resulted in higher operating costs beyond the initial projections. Interest cost for the nine months ended amounted to USD 47 million and the negative impact of the Withholding Taxes on aircraft related payments amounting to USD 23 million further negated the positive results from the operations.
The Government is making arrangements for SriLankan Airlines to be exempted from Withholding Taxes on aircraft related payments. The Airline’s commitment to effectively manage controllable costs was well exemplified by overall reduction of overheads in other areas such as, Commercial and administration against the previous year. The cumulative unit cost (Cost per Available Seat Kilometer – CASK) excluding fuel and interest cost showed a reduction of 3%.
However, the net loss for the nine months was USD 135 million (Rs. 40 billion) against the loss for corresponding period of the previous year was at USD 66 million (Rs. 11 billion).
The management of SriLankan Airlines presented a restructuring plan to the Government which focuses on progressive consolidation to bring the Airline to a breakeven position in three years.
This plan specifies the action needed from the GoSL to reduce finance cost, high fuel processing charges and various initiatives identified by the management to reduce the costs and improve revenue.
CEO Vipula Gunatilleka said that 2019 will be the year of consolidation for the Airline and the management initiatives undertaken during the second half of last year 2018 are expected to show positive results.