News
Losses mount onboard SriLankan Airlines
SriLankan Airlines has incurred a whopping Rs. 17 billion loss for the 2011/12 financial year ending March 31, and the national carrier attributes this loss to the increased costs in jet fuel for which it will be adopting a hedging policy this year to curtail costs to some extent.
Compared to a Rs. 176 million loss in 2010/11, the carrier’s loss of Rs. 17.16 billion was explained to be due to the 36% increase in jet fuel costs, the national carrier’s Chief Executive Officer Kapila Chandrasena told the Sunday Times yesterday.
The airline said its loss before tax was at Rs.17,161.04 million (Rs. 17.16 billion), but revenues were recorded to have increased by 18% to Rs. 92,257 million this financial year compared to Rs. 78,515 million last financial year.
He noted that while some percentage of the fuel costs was passed down to the customer, the airline, too, had to bear its expenses in a bid to remain competitive, especially in the Middle Eastern market.
Prospects of meeting a breakeven by 2014 depended on the fuel costs, he explained adding that “we are having domestic taxes … and if this continues to go up then the breakeven will move forward”.
In this respect, the airline believed there was a need to adopt a fuel hedging policy to hold the upside without which, the airline would not be able to hold the business plan, Mr. Chandrasena said.
Currently, the carrier has engaged consultants in this regard, and were in the process of developing a policy for fuel hedging to be established “within the next six months if the relevant approvals were obtained” due to the highly volatile fuel prices.
Further cost cutting measures would be adopted by flying into the opportunistic markets and expand on those, he said.
In this respect, the carrier would be looking at expanding into Korea by extending the Hong Kong flight to Seoul and not on a direct flight.
SriLankan’s main thrust this year would be to “sustain the markets and balance sheet, reallocate capacity and obtain more revenue,” Mr. Chandrasena said.
He also observed that within the network “we may do reallocations” for instance, if the European market is doing badly then the airline would shift its flights to Asia.
The company also aims to increase revenue this year by focusing on increasing yield through selective increases in fare structure and strengthening of revenue management, the company said in an emailed interview.
By leveraging on the business class product the company hopes to optimise its revenue on this. The company looks at optimising its business class revenue by upgrading this unit on its aircraft operating on the long haul routes.
More investments would be incurred this year especially when the airline expands its engineering unit for third party aircraft maintenance projects with other airlines. At present the airline has obtained work with an Indian carrier.
In addition, the company is eyeing a second full flight simulator for A330 aircraft aimed at reducing its own costs incurred for training.
Seat factor for last year increased to 79.10% compared to the previous year having carried a total of 3.46 million passengers up by 21% compared to 2010.
The company attributed its losses to the increased costs in fuel and dip in air travel demand due to the recession in Europe and political unrest in the Middle East.
However, the company had incurred expenditures in what it called “significant investments in acquiring additional capacity and enhancement of supporting services” in addition to “cabin upgrades” both of which were expected to yield results in the future, the airline said.
Cargo revenues increased by 26% whilst Cargo tonnage increased by 19% in comparison with last year. Net Income from Sri Lankan Catering for the same period represents a 150% increase from the previous year, the company said.
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