A Brief Colonial History Of Ceylon(SriLanka)
Sri Lanka: One Island Two Nations
A Brief Colonial History Of Ceylon(SriLanka)
Sri Lanka: One Island Two Nations
(Full Story)
Search This Blog
Back to 500BC.
==========================
Thiranjala Weerasinghe sj.- One Island Two Nations
?????????????????????????????????????????????????Monday, June 26, 2017
Brighter Or Darker Skies Over SriLankan Airlines?
A media release in October 2016 by SriLankan Airlines stated
among other things, “The airline’s Group Loss stood at LKR 9.03
billion, which represents a 45% improvement for the 2015/16 financial
year compared to the previous year” (2014/15). The annual report
confirmed a Group Loss of LKR 9.5 billion, excluding a penalty charge of
LKR 2.5 billion, paid for cancellation of one A350-800.
The
media release by the national carrier published by The Island last week
titled “Brighter skies over SriLankan Airlines financial position”
states, “Contrary to inaccurate reports in the press, the management of
SriLankan Airlines would like to point out that since the Unity
government was formed, the airline’s losses have been dramatically
reduced.” It further reported a ‘draft’ (unaudited) loss of LKR 13.4
billion during 2016/17 excluding LKR 14.3 billion, paid for cancellation
of several A350-800 aircraft.
To
describe a LKR 3.9 billion or 41% increase in year on year Group
Losses, despite the discontinuation of traditionally loss-making routes
of Frankfurt, Paris and Rome as a “dramatic reduction of losses since
the unity government was formed” is to be mendacious.
The
present management regularly camouflage its abysmal performance with
announcements of ‘Company Losses’ and ‘Group Losses’. This directorate
or any other directorate cannot be expected to make good, nearly four
decades of monumental losses and mismanagement.
However,
the present directorate and management can and should be held
accountable for their inability to achieve an Operating Profit (surplus)
in its core business operations. An Operating Profit / Loss has no
relevance to servicing previous loans and payments for future aircraft
deliveries / cancellations. Unlike Sri Lankan Rupee figures, US Dollar
figures has no bearing on the depreciation of Sri Lankan Rupee.
Core
business activity of an airlines consist of ‘Passenger & Cargo
Transportation, carriage of Mail & Excess Baggage, ad hoc flights
(charters) and Frequent Flyer net accruals. Revenue derived thereof is
referred as Traffic Revenue. Operating Profit (surplus) is the positive
variance between Traffic Revenue and Operating Expenditure, expenditure
related to generating Traffic Revenue. Ancillary activities such as
Ground Handling, Engineering Services, Duty Free Sales, Catering,
Training Centre etc. do not belong to core business activity.
2016/17 Performance
Traffic
Revenue has reportedly dropped by 6.1% to USD 790 million in 2016/17
from USD 842 million in 2015/16. Passenger Revenue is down by 6.5% to
USD 685 million from USD 725 million and Cargo Revenue down by 7% to USD
80 from USD 87 million.
The Operating Deficit in 2016/17 amounts to USD 110 million compared to USD 87 million in 2015/16, an increase by 26%.
Key
contributory factors have been a 2% reduction in revenue passenger
kilometers (RPKs) in 2016/17 from previous year (RPK is calculated by
multiplying the number of revenue-paying passengers on board a flight by
the distance traveled), a 3% reduction in Passenger Yields and 11%
reduction in Cargo Yields from previous year. It has negated a 3%
increase in number of passengers carried from previous year.
One
of the reasons attributed to the “weakening of the balance sheet” in
the media release was the non- recovery of “drop in ticket prices” as a
result of “fuel price reduction in 2015”. Nevertheless, a reliable
source stated “average fuel price paid by the airline in US cents per
gallon in 2016/17 was 3% less than average price paid in 2015/16”.
Drop
in ticket prices need be addressed with innovative and dynamic sales,
pricing and marketing strategies, by the commercial division, besides
stringent controlling of costs by all concerned, top down.
Drop
in ticket prices is a universal phenomenon and not limited to the Sri
Lankan market and SriLankan Airlines. Qatar Airways CEO announced last
week, a 20% growth in profits of USD 541 million and a 22% growth in
passengers carried on year on year basis.
Identity Crisis
The
national carrier is undergoing an identity crisis. It is unable to
decide if it is a long haul / legacy carrier, regional carrier,
intra-regional carrier or a budget carrier. According to the carrier’s
website, it currently operates 23 aircraft comprising of 13 wide-bodied
and 11 narrow-bodied aircraft to 41 destinations including Melbourne due
to commence on October 29. Most carriers, after careful study of new
routes demand in existing routes, acquire aircraft for route expansion.
SriLankan Airlines introduces new destinations and increase frequency to
existing destinations due to an excess of aircraft.