Stop this nosedive | Daily News

Stop this nosedive

There does not seem to be any shortage of doomsday stories coming out of the national carrier SriLankan Airlines, now the subject of a Presidential Commission of Inquiry. Some of these stories are quite bizarre, but unfortunately they also happen to be true.

Those who land at the Bandaranaike International Airport (BIA) these days can see a SriLankan Airlines Airbus A330-200 with one of the two engines missing. It won’t be going anywhere soon, what with one engine gone. But this is no laughing matter, as the airline is apparently losing a massive RS.110 million per month on this plane. This is a convoluted story that highlights how bad things have been – and sometimes still are – at the company.

This aircraft was acquired in 2017 as part of the conditions agreed to between the previous management of the airline and aircraft lessor AerCap, as a settlement against the cancellation of the order of four new Airbus A350-900 aircraft. However, the cabin configuration of this aircraft, manufactured in 2009, is, according to the airline, not suitable for SriLankan Airlines’ operations, having many seats and minimum space between seats in its Business Class cabin. But here comes the best part: “It is a standard practice in most airlines that various interchangeable parts or components such as the engines that are urgently required for an operational aircraft are taken out of aircraft that are not in immediate use, if such parts are not at the time in stock in the airline’s spare parts stores. SriLankan has removed one of the engines from this aircraft and fitted it to another aircraft as one of its engines is undergoing some maintenance work. These parts would be replaced prior to the aircraft being leased to another airline, once such a lease agreement is signed for the use of this aircraft.”

But that does not end there since SriLankan airlines is paying Rs.110 million a month for the grounded A330-200 aircraft acquired during the cancellation of the lease on three A350-900 airbuses in 2016/2017, the Presidential Commission of Inquiry into irregularities at SriLankan Airlines was told by SriLankan's Group Internal Auditor Mahesh Nanayakkara. He informed the Commission that the airline was paying Rs.1.3 billion a year for this grounded aircraft. This is on top of the US$ 98 million the airline had to pay AerCap for the cancellation of the A350 order. Remember, an all-new Airbus A320 can be brought for just US$ 101 million at list prices, never mind the fact that airlines rarely, if ever, play list prices to either Airbus or Boeing. As a developing country, we just cannot afford to play around with money in this manner.

Clearly, SriLankan has engaged in a criminal wastage of public funds. The simple fact is that a plane makes money only when it is in the air. The grounded plane would have been deployed with the addition of some modifications to the seat layout to strengthen the airline’s regional network. Alas, grey cells seem to be rarely exercised at the airline.

In fact, the revelations being made at the Presidential Commission are really mind-boggling. As revealed at the Commission, there is no doubt that the previous Mahinda Rajapaksa administration is responsible for the most part for the airline’s decline. There is no denying that they used the airline as a “family taxi” even to fly to exotic destinations in far-off South America. Most of these charter bills have still not been paid to the airline. President Rajapaksa’s vanity project Mihin Lanka still owes Rs.745 million to SriLankan.

But what is more worrying is that some of the sordid practices have continued even afterwards. For example, it was revealed that the airline had 190 employees who were drawing salaries in excess of Rs.1 million per month. No wonder the airline was making huge losses. Some aviation analysts predict a first-quarter loss of Rs.40 billion or more for the airline.

It is time that the SriLankan Airlines studied the management practices and success stories of State-owned airlines in other countries. Singapore Airlines obviously comes to mind, but it is not a good comparison given the huge disparity between the economies of Singapore and Sri Lanka. Ethiopian Airlines would be a much better example, with Ethiopia having a roughly equivalent GDP and a lower GDP Per Capita.

In comparison to SriLankan, Ethiopian has been a massive success story. The airline serves more than 119 international destinations across five continents and has a fleet of 108 aircraft with 65 more on order including 15 Airbus A350s, 5 Boeing B787s, 4 Boeing B777s (cargo), 10 Bombardier Q400s, 2 Boeing B737s (cargo), and 29 Boeing B737MAX8s. One can just compare this with SriLankan, which has just 27 aircraft (some of which are nearly 19-years-old) with zero orders. The African airline has a well-defined 15 year plan that will see a major expansion. Fleet renewal is a must for any airline and once SriLankan’s financial situation is addressed this question must be answered immediately. Staying young is the secret of any airline’s success. 


 

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A few things people don't understand about SriLankan:- New aircraft are leased at up to 30% above market rates on 12 year leases with no termination clause. This makes it impossible to make money operating these aircraft. The no termination clause means SriLankan has to pay. There are still 4 A350 on order fro airbus. There is still U$800 million outstanding for these aircraft. Since this order hasn't been cancelled the logical explanation is that there is no termination clause in this contract. It also looks like these aircraft were bought at full list price instead of the usual 40-50% discount given to most Airlines. Both items above represent several Billion USD in forward liabilities. This why nobody will buy this company. There is no way out of this mess except to close down the Airline for the good of the country imho.

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