Rs. 900 m monthly saving for UL with removal of 5% PAL on jet fuel
Monday, 30 December 2013 01:25
The removal of the 5% Port and Aviation Levy on fuel purchased by SriLankan Airlines from 2014 is certain to have a positive impact on the national carrier.
CEO Kapila Chandrasena told the Daily FT that relief by way of PAL removal means a Rs. 800-900 million saving per month. On an annualised basis the saving works out to Rs. 10.8 billion.
Jet fuel accounted for 47% of SriLankan Airlines’ operating expenditure. Relatively high cost fuel procurement, over 60% locally has been a issue for the national carrier whose operations transcends markets where fuel is cheaper and competitive airlines enjoys same.
In the financial year ended on 31 March 2013, SriLanka’s aircraft fuel cost was Rs. 63.75 billion, up by Rs. 15 billion or 31% from the previous year.
In the presentation of 2014 Budget in Parliament on 21 November President and Finance Minister Mahinda Rajapaksa proposed that Aviation Fuel under HS Code No 2710.19.20 will be free from PAL.
President also proposed several more initiatives aimed at boost Sri Lanka’s aviation hub aspirations. Among them were treating aviation services and related activities as exports for VAT and be exempted from Nation Building Tax (NBT). The move will also encourage backward integration of the aviation industry with the local economy.
The President also said that in terms of the ongoing capitalisation to strengthen the two airlines, a further $ 150 million will be provided to SriLankan Airlines and $ 50 million to Mihin Lanka in 2014. The Treasury has made arrangements to take over the shares acquired in SriLankan by the state banks from the foreign shareholder so that state banks could be relieved of this burden.
The 2014 Budget presentation also noted that SriLankan Airlines and Mihin Lanka are implementing a network expansion strategy to connect Sri Lanka as a transit hub to Europe, Africa, Middle East and the Asia Pacific region. The two international airports provide critical infrastructure and strategic location advantage.
Aircraft overhauling and maintenance, aviation fuel supply, ground handling, air cargo and catering facilities are being expanded at both airports to transform them to be safest airports capable of providing aviation facilities in line with international aviation requirements.
“I propose to set up to a new corporate body to provide aviation related activities such as airline catering, supply of aviation fuel, cargo and ground handling in a coordinated manner while also being competitive. The Aviation Academy is being developed as a state-of-the-art training centre to provide professional education in aviation,” the President said.
The 2014 Budget also expanded the definition of international transportation to cover the services directly related to transportation of goods or passengers between international airports situated within Sri Lanka.