SriLankan Airlines marked year of transformation in its recently ended financial year, carrying the highest number of passengers ever in the airline’s history. Based on draft un-audited accounts, the total operational revenue increased to LKR136.68 billion from LKR129.48 billion in the prior year. However, difficult market conditions resulted the airline to record an un-audited Net group loss (before finance and one-off charges) of LKR6.49 billion (USD15.12 million) for the year. This is an increase from the LKR2.90 billion (USD3.15 million) loss recorded in the prior year – but a significant improvement from the deficit that had been budgeted for the year. The year was profoundly challenging for airlines worldwide, with the International Air Transport Association (IATA) estimating an 8% global decline in air fares in USD terms. Despite these challenging conditions, SriLankan managed to control the decline in its average fares to only 3% in USD terms year-over-year – a satisfactory performance in relation to many leading airlines in the world who have seen significantly higher fare declines.
The depreciation of the Sri Lanka Rupee against the US Dollar had a significant negative impact on the airline, as a majority of costs in the global airline business are USD denominated. The impact of this was further exacerbated by the relatively high price of jet fuel in Colombo, where the largest share of the airline’s fuel uplift takes place. In the face of these challenges, the airline accelerated its cost reduction efforts, enabling a reduction of its Unit Cost (CASK) in USD terms.
During the last quarter of the financial year, the airline’s financial performance was further significantly and adversely affected due to the very necessary runway re-surfacing project at Colombo’s Bandaranaike International Airport – which required the airline to cancel over 600 flights during the period.
A significant improvement in performance was recorded at the airline’s Strategic Business Units – with key performing units such as SriLankan Catering and the ground handling entity recording profit improvements.
The airline successfully completed the integration of Mihin Lanka’s operations into the SriLankan network during the year, marking a seamless transfer conducted in a relatively short time frame. At the end of the year, SriLankan was serving 36 international destinations from its hub in Colombo, with an operating fleet of 24 aircraft.
It has already announced plans to add three new destinations in India from Summer 2017, thereby becoming the largest foreign airline into India by the number of cities served. Meanwhile the primary shareholder, the Government of Sri Lanka, is undertaking an initiative to select a suitable strategic partner for the airline.
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