Turbulent industry

Tuesday, 16 July 2013 01:28 -     - {{hitsCtrl.values.hits}}

SRI LANKA’S aviation sector is getting more blessings courtesy of the Government but at the cost of the taxpayer’s sweat – a usual tale. It was reported over the weekend that the Treasury has stepped in to bail out SriLankan Airlines and pay up Rs. 25 billion of the national carrier’s Rs. 36 billion fuel arrears to the Ceylon Petroleum Corporation. A Treasury bond would be given to the CPC – and this means the airline would have to pay the arrears to the Treasury. However, early this year, the national carrier had worked out a deal to buy a fleet of Airbus aircraft costing more than Rs. 315 billon. This included four brand new A 350-900 and six A 330-300 aircraft. The Treasury’s intervention follows several months of attempts by the CPC to recover the arrears for fuel supplied to SriLankan Airlines and other State institutions. Civil Aviation Minister Priyankara Jayaratna had confirmed that after several rounds of discussions, the Treasury agreed to pay Rs. 25 billion while the national carrier would have to pay the balance Rs. 11 billion. However, during 2011/12, the national carrier’s losses skyrocketed to Rs. 19.6 billion from Rs. 378 million in the previous year. According to data published in the Annual Report of the Ministry of Finance and Planning, the operating losses of the CPC in just 2011 and 2012 have been close to Rs. 200 billion and even if all the arrears of Government institutions are paid, it would be a drop in this bottomless bucket. According to the data published in the Central Bank Annual Report 2012, six major public corporations have made operational losses amounting to Rs. 185 billion in 2012. Even though the Government built the Mattala airport with high flying hopes, only one budget airline operates out of it at the moment and in an effort to attract more, concessions has been increased. While this may be the most practical thing to do at the moment, it also means that income levels will be lower and the maintenance costs of Sri Lanka’s second international airport will also have to be footed by the Government. Mihin Lanka has been a bleeding sore since the day it was launched, incurring losses of a whopping Rs. 8.5 billion since its inception five years ago under the authority of President Mahinda Rajapaksa. Yet, there has been no attempt made by authorities to stem the haemorrhage. It was reported that the cash-strapped budget airline has suffered a loss of Rs. 2 billion during the 2012 financial year alone, according to the Auditor General. Interestingly, the Auditor General has observed that although the company is running at a continuous loss, the annual remunerations paid to the six-member Board of Directors have increased over the years. The Auditor General has observed that such heavy losses have been incurred by the company for the last five years despite grants and concessions by the Government in substantial quantities. The Treasury granted Rs. 507 million for 2012, Rs. 406 million for 2011, Rs. 1,508 million for 2010, Rs. 2,882 million for 2009, Rs. 500 million for 2008 and Rs. 250 million for 2007. The loss sustained for the financial year 2007/2008 was Rs. 3.1 billion, Rs. 1.3 billion for 2008/2009, Rs. 1.2 billion for 2009/2010, Rs. 940 million for 2010/2011 and Rs. 1.9 billion for 2011/2012. It is therefore clear that massive mismanagement and inefficiency also plays a part in the consistently loss making industry, which as it grows bigger only seems to become a fatter leech.