Mihin Lanka has never recorded an annual profit since its inception in 2007 and the accumulated loss as at 31 March 2016 was Rs. 17.27 billion, the budget airline said in a statement.
The financial performance for the current year has followed the same trend of losses. For the six-month period ending 30 September 2016, the airline reported a net loss of Rs. 181 million and for the remainder of the financial year it was budgeted to lose a further Rs. 1 billion.
The airline issued a statement with reference to several media reports on the financial performance of Mihin Lanka.
Mihin Lanka Ltd. was incorporated on 27 October 2006 pursuant to Sec 15 (1) of Companies Act No. 17 of 1982 and re-registered under the Companies Act No. 7 of 2007 on 6 July 2007.
The airline commenced operations in April 2007 with two wet-leased narrow bodied aircraft, initially operating to several regional destinations. Cash-flow problems forced the airline to suspend its operations in April 2008 and it resumed operations in January 2009 with another wet-leased aircraft. The airline moderately expanded its operations during the subsequent years, serving 12 destinations at its peak.
However, despite initial expectations of Mihin Lanka being a budget carrier with a potential to be profitable, the financial performance of the airline since inception has been far below expectations. Mihin Lanka has never recorded an annual profit since its inception and the accumulated loss as at 31 March 2016 was Rs. 17.27 billion.
Under these circumstances, a proposal was made to the Cabinet Committee on Economic Management (CCEM) held on 14 September 2016 for SriLankan Airlines to take over all the routes of Mihin Lanka by 30 October 2016, which was approved. This approval upheld an earlier Cabinet directive regarding the same matter issued in April 2015.
The enhanced network and better economies of scale are envisaged to improve SriLankan Airlines’ financial performance and result in a net benefit.
Accordingly, SriLankan Airlines has taken over services to Mihin Lanka destinations effective from 30 October 2016. Of the nearly 300 employees of Mihin Lanka, 130 employees have already been absorbed by SriLankan Airlines effective November 2016. The remaining employees have been offered a VRS scheme in accordance with Government specified guidelines.
In view of the ongoing Government-led project to find a suitable partner for SriLankan Airlines to form a Public Private Partnership (PPP), it has been decided that Mihin Lanka will continue to have its Air Operator Certificate (AOC) until 31 March 2017.