SriLankan Airlines posts loss of $135m

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SriLankan Airlines has reported it recorded a net loss for the nine months ending 31 December 2018 of $135 million (LKR 40 billion) against a loss for the corresponding period of the previous year of $66 million (LKR 11 billion).

Despite the loss, the airline said it improved its performance across all sectors in spite of rising fuel prices, high interest expenses and currency depreciation as capacity, passenger and cargo revenue, market yield and unit cost all improved.

However it said that improvement in topline was overshadowed drastically by the increase in operating cost base owing to high fuel prices.

At $902 million (LKR 147 billion), the total operating cost recorded an increase of 15 per cent against the previous year. Impact due to rise in aviation fuel prices was $66 million. Further, increase in aircraft maintenance cost and aircraft lease cost due to the addition of one A321neo aircraft was reported during this period.

During this period, SriLankan’s net traffic revenue from core airline operations increased to $746 Million with a year-on-year growth of eight per cent. Overall seat capacity or available seat kilometres (ASKs) improved by 6.5 per cent through “effective deployment” of the aircraft fleet to profitable markets by way of frequency optimisation and utilising right aircraft types.

The airline said effective and timely management of aircraft deployment and flight frequencies on the basis of market dynamics allowed it to optimises revenue amidst the increased competitive climate.

Flight frequencies to markets such as London, Melbourne, Dubai, Abu Dhabi, Doha and Delhi were increased to meet the seasonal demand and it proved to be an effective strategy as the performance of these routes improved significantly.

Although a marginal reduction in total number of passengers carried (0.3 per cent) was reported for the nine-month period, overall seat factor remained at 82 per cent.

The overall passenger yield which is measured as yield per revenue passenger kilometer improved by nearly 1.6 per cent from previous year.

The airline said: “Improvement of market yield without deteriorating overall seat factor, considered as a challenging proposition in airline industry, was achieved by SriLankan through implementation of effective pricing initiatives which included timely imposition of fuel surcharges to minimize the impact of rising fuel cost.”

SriLankan Airlines management has presented a restructuring plan to the GoSL which focuses on progressive consolidation to bring the airline to a break-even position in three years.

This plan specifies the action required 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.

Chief executive officer, Vipula Gunatilleka said that 2019 will be the “year of consolidation” for the airline and the management initiatives undertaken during the 2nd half of 2018 are expected to show positive results.

He added management would continue to focus on revenue enhancement though effective capacity deployment to enhance revenue and expenditure reduction strategies to direct the airline towards sustainable financial viability.