SriLankan Airlines, the national carrier of Sri Lanka, has achieved a significant financial turnaround, recording a profit for the nine months ended December 31, 2023. This marks a pivotal shift towards financial stability as the airline gears up for privatisation.
According to the 2023 budget position report, SriLankan Airlines posted a profit of Rs.1.124 billion for the nine-month period. This is a notable achievement, considering the financial struggles the airline has faced over the past few years. For the financial years ending March 31 of 2023, 2022, 2021, and 2020, the airline reported substantial losses of Rs.73.26 billion, Rs.165.89 billion, Rs.45.23 billion, and Rs.47.19 billion respectively.
Financial Performance
The airline generated a revenue of Rs.248 billion for the nine months through December 31, 2023. During the same period, expenditure amounted to Rs.223 billion, resulting in earnings before tax of Rs.24.5 billion. However, the airline faced an exchange loss on transactions amounting to Rs.603 million, a significant reduction compared to the Rs.25 billion loss in the fiscal year 2022/23. Interest costs were recorded at Rs.26 billion, while an exchange gain on loans and fixed deposits conversions amounted to Rs.3.15 billion.
Despite these positive developments, the accumulated loss of SriLankan Airlines stands at a daunting Rs.611.2 billion, highlighting the deep-rooted financial challenges that still need to be addressed.
Government Support and Financial Assistance
To support SriLankan Airlines amid its cash flow issues, the government provided a US $11.6 million treasury guarantee to the International Air Transport Association (IATA) during the fiscal year 2022/23. Additionally, in December 2023, the General Treasury infused additional equity capital into the airline, amounting to Rs.102.5 billion, to settle its outstanding balance with the Ceylon Petroleum Corporation. This intervention was approved by the Cabinet of Ministers.
Operational Impact and Future Prospects
The financial constraints of SriLankan Airlines have led to disruptions in operations in recent times. As the government faces its own fiscal constraints, continuous equity injections into the airline are not feasible. Consequently, the government has decided to privatize the national carrier. This move is aimed at attracting new investor funds to restore the airline’s financial sustainability and operational efficiency.
Aviation Minister Nimal Siripala de Silva, in March, urged SriLankan Airlines to enhance its financial performance. He emphasized the necessity for the airline to trim costs and improve financial discipline, warning that failure to do so could jeopardize the jobs of its 6,000 employees.
Conclusion
The profit of Rs.1.124 billion for the nine months ended December 31, 2023, marks a significant milestone for SriLankan Airlines. However, with an accumulated loss of Rs.611.2 billion and ongoing operational challenges, the path to sustained financial health remains complex. The upcoming privatisation is expected to bring much-needed capital and management expertise to navigate the airline towards a more stable and profitable future.
