Govt committed to safeguard national carrier

Following is the speech made by Ports and Aviation Minister Chamal Rajapaksa in Parliament on Wednesday:

It is incorrect to state that the UPFA Government terminated the Management Agreement with the Emirates before its term expired. The agreement remained in force until the expiry of its 10-year period on March 31, 2008 and with effect from April 1, 2008, the management was transferred to the local managers of the SriLankan Airlines.

The statement that the SriLankan Airlines was constrained to publish its financial status was also erroneous according to sections 2007/07 of para 133 of the Companies Ordinance, an annual general meeting of the shareholders has to be convened.

Similarly, as per sections 166 and 167 an annual financial report setting down the objectives has to be prepared and a copy of same delivered to each shareholders 15 working days prior to its annual general meeting.

The report which should include the messages of Chairman and CEO, summery statements of revenue, balance sheet, information relating to shareholders, selected, indices, be tabled at the annual general meeting and the approval of the shareholders be obtained. Accordingly the SriLankan Airlines too has made available its statements of accounts on its finances.

Although the company accounts show a profit of Rs. 4,428 million during the 2007/2008 financial year it is inclusive of Rs. 5,634 million on account of sale of assets, aircraft and re-leasing. Accordingly the SriLankan Airlines it has incurred a loss on flight operations amounting to Rs. 1,206 million. (Section 17 in page 5-report on annual accounts) Therefore, the profit in 2007/08 referred to by the Members is not correct.

Reasons for the losses increased in 2008/09 are as follows:

01. Due to strict market competitiveness the SriLankan Airlines too failed to levy fuel adjustment surcharge during the second quarter of the period in qestion and the excalating fuel prices because too heavy a burden to be shouldered.

Although action was taken to levy the fuel adjustment surcharge during the third quarter, with the drop of prices, our competitors removed the fuel adjustment surcharge soon forcing the SriLankan Airlines too to fall in line with it. This has caused a serious dent in the airline incomes.no

02. The International Airlines too had to directly bear the burden of the global economic meltdown.

According to IATA statistics a loss of US$ 11 million is anticipated during 2009, which is more than double the forecast made in March. Compared to the previous year, the passenger transport as well as the demand for freight transport has taken a nose-dive during 2008/2009.

Although it is mentioned that the SriLankan Airlines had earned a profit in previous years if the financial reports were in fact studied it points to the fact that the total profits earned from its inception by the company stood at Rs. 9,288 million as at March 31, 2008. Due to the losses suffered during the current year a final loss of Rs. 18 million is recorded.

It is true the liabilities have exceeded the current assets. This has happened even during the Emirates Management as well. For example, during 2001, liabilities stood at Rs. 18,656 million as against assets worth of Rs. 14,247 million. Similarly in 2002, the debts amounted to Rs. 15,209 million as against assets worth of Rs. 12,062 million.

The instability which the Member tried to attribute to the SriLankan Airlines is far from true. For example, suppliers of aircraft on lease to the SriLankan Airlines have never imposed conditions which are of an injurious nature.

Lease repayments have been made on time and three A320 Airbuses have been obtained this year under lease agreements. Suppliers of aircraft would not have extended such facilities if they have entertained uncertainties on the future of the SriLankan Airlines.

Salary increases and all other expenses of the employees have to be borne by the earnings of the company. The management has informed me that the company is not facing bankruptcy as alleged by the Member. I have also advised that a new scheme be introduced to restabilize the staff.

Almost all world airlines have faced an identical crisis situation in view of the global economic recession steps are being taken to restabilise the SriLankan Airlines.

Despite such conditions, action has been taken to absorb into the permanent cadre depending on the occurrence of vacancies, those casual employees who were on contract basis at the time of the Government taking over the SriLankan Airlines management on April 1, 2008. So far 220 casual employees have been confirmed in service.

Asia Pacific Airlines have projected a total loss of US $ 3.6 billion for year 2009. This shows that the crisis is not particular to SriLankan Airlines.

Asia Pacific giants such as Japan Airlines, Singapore Airlines, Cathay Pacific Airlines, Indian Airlines and King Fisher Airlines have fallen victim to the prevailing crisis.

I would like to present to the House, the losses suffered by several international airlines during the second quarter of 2009, as furnished by the Airline Weekly. (See table)

In the face of this situation, the SriLankan Airlines has taken the following course of action under President Mahinda Rajapaksa’s guidance and my direction.

1. Introduction of an effective mechanism and productive strategies to generate more income.

2. Affiliate to other airlines to secure new routes.

3. Abandoning unproductive routes and update the route network.

4. Increased efficiency by disposing off old aircraft and replacing them with new ones and thereby cutting-down costs.

5. Explore new income generating avenues through catering services and setting up maintenance units to service aircraft of other countries.

6. In addition, a program to improve the institutions affiliated to SriLankan Airlines has been launched.

Accordingly the SriLankan Catering Service has earned a profit of Rs. 1.219 billion during 2008/09, registering an increase of Rs. 292 million over the previous year.

I should like to make an explanation relating to the Mihin Air too in response to the statement made by the Chief Opposition Whip. Mihin Air has been able to reach its objectives and targets since it was placed under my Ministry to date.

Mihin Air by its A320 Airbus leased out from the SriLankan Airlines operates 15 weekly flights to Dubai, Kuwait, Trichi, Varanasai and Bodhgaya.

I am tabling herewith a report on Mihin Air operations from January 2009 to August. According to this report, the Mihin Air has been able to earn an income of US$ 674,564 in January 2009 and US$ 1.81 million in August 2009. Similarly, the loss of US$ 1.54 million occurred in January has been offset by a profit of US$ 2,813 earned by August.

I would like to assure that both the President and myself as minister-in-charge take all steps necessary to safeguard the interests of both SriLankan Airlines and Mihin Air and with all Sri Lankans extending their cooperation.

Losses suffered (US $) million
Japan Airlines -	1,040
All Nippon 	-	521
Singapore Airlines -	206
Cathay Pacific -	165
Korean Airlines -	223
Thai Airlines 	-	104
Malaysian Airlines -	133