Sri Lankan Airlines ltd

Descending further for SriLankan Airlines

SriLankan Airlines, the domestic airline, recently hosted its 39th Annual General Meeting (AGM) of shareholders last Monday in the auditorium of the Institute of Chartered Accountants of Sri Lanka in Malalasekera Mawatha in Colombo 7, chaired by Chairman Ajith Dias and in the presence of six of seven residual Managing Directors. Chairman Ajith Dias and Chairman Ajith Dias were present at the meeting.

Many former and present employees' stockholders visited the event well, and were concerned about the company's prospects. In 2016/17, a consolidated loss of LKR 28,339.51 million was recorded, 135% more than the consolidated loss of LKR 12,083. 82 million in settlement for the termination of leasing contracts for four Airbus 350-900s.

Operating expenditure increased significantly year-on-year: Maintenance & Overhaul (22%), Leased Equipment 13%, Leased Equipment 12% and Marketing & Advertising 11%. It must be praised for stressing in its embassy that the airline's business is hindered by the "method of interaction, coverage and decision-making through administrative and policy channels", an apparent indication of policy intrusion.

Suren Ratwatte, Chief Executive Officer, said in his statement to shareholders: "In the year under report, we strategically streamlined our route and our fleets and positioned ourselves as an essentially local operator. Or, the company has at least partially completed the reorganisation programme while the authorisation is still pending.

Also during the interviews, he argued that the company needed less wide-body A330 planes and more A320/321 wide-body planes to make the company viable. In 2016/17, however, only 6 out of 24 A320/321 widebody services reached a break-even payload. It did not refer to the 12% rise in personnel expenses compared with the year before.

A number of former and present employees asked us a number of frequently asked question about the airlines present state. Regarding the question of the funds due to SriLankan Airlines by Mihin Air, which were now taken over by the domestic company, it was explained that the authorities would finally refund the fees. There was no sensible answer to the question of high personnel expenses.

7,021 people were engaged in the maintenance of 24 aircrafts, a proportion of 292 per one. Airlines known to have a lower staff-to-aircraft ratio than domestic airlines are Syrian Arab Airlines 400:1 and Pakistan International Airlines 391:1. Over the past year, Air India has succeeded in reducing the personnel to air travel ratios from 300:1 in 2012 to 108:1 by 2015.

One of the CEO's miscellaneous messages to reposition the company as a local operator has been challenged based on the fact that local airlines are in most cases low-cost airlines, while SriLankan Airlines was a full-service one. A former member of staff mentioned the appropriateness of the $115 million disbursement (LKR14,362,81 million) plus the losses of prepayments for the annulment of four A350-900s without examining the best way to use the plane.

A full investigation was carried out to determine whether the four planes could be used sensibly before the ultimate termination of all four leasing contracts was decided despite the high cancellations charges. As a reaction to the question of the incapacity to break even despite a cab of 80% and a freight loading ratio of 50%, it was mainly due to high aviation cost and rent.

Both of these payors represent 23% and 16% of group operational expenses, respectively. By the time the present board of directors took over in January 2015, the number of employees was 7,870, which rose to 8,029 within two years. The Group' s personnel expenses for 2016/17 were LKR 20,015. Until now, pilot and cabin crew expenses have been shown seperately and not in "employee expenses".

We are now including crewing pay on the same line as the rest of the personnel, but hotels and meals subsidies are shown on a seperate line. The number of employees has risen (due to CBAs), but the number of employees has not risen sharply (34 in total), although we use many more planes and ASKs.

Losing enterprises, in particular those to be reorganised, usually put a stop to recruiting, as carried out by GoSL in 1996 in order to prepare for privatisation. Beyond January 2015, the present workforce size is an indicator that most, if not all, of the vacancies resulting from departures and retirements have been taken on, despite increasing casualties, the reduction of the rail system and the associated cuts.

The Group' s personnel expenses in fiscal year 2016/17, incl. crew salaries, were LKR 20,015. In spite of the three extra planes that were added to the 2016/17 fleets, the load factor of the planes increased only slightly by 0.42 unit/hour. While the ASKs 2016/17 were 15,608. It is 10 million with 24 planes less than ASKs in 2015/16 in the amount of 15,790 ASKs.

Twenty-eight million with 21 planes and 16,180. Twenty-seven million ASKs in 2014/15 with 21 planes. The cost of maintaining and overhauling aeroplanes was LKR 17,644. 9 million in March 2016/17, up 48% from LKR 11,932 million. In 2014/15, the total amount of EUR 41 million was achieved despite the introduction of several new planes, which generally leads to lower servicing and reconditioning expenses.

Low utilisation of the 24 aeroplane fleets was increased, but no good reason was given. Capacity utilisation in 2016/17 with a total of 24 aircrafts was 12. CO2 unit hour with a total of 21 planes in the prior year. Industrial standard for wide-body jets exceeding 15 hour blocks per workday.

The two undesirable Airbus A330-200s in the portfolio are a key reason for the low capacity utilisation of the planes. Later this year, when the leases for three old A330-200 planes ran out, the Board instructed the Chief Executive Officer to renew the leases, subject to Pakistan International Airlines confirming the long-term rental of three of the six newer A330-300 planes of the domestic airline, which failed to materialise.

Meanwhile, the Chief Executive Officer renewed the leasing contracts for three older A330-200s, two of which are no longer needed. Then SriLankan Airlines tried to get out of the arrangement and was confronted with disputes before the London Trade Court, which forced the carrier to take all three planes, of which only one is necessary.

Meanwhile, an inside user has dropped from an earlier low of 11.67 blocked hrs per annum to an even lower value of 9, provided it has been verified as anonymous. Recently, in reaction to a call for tenders to fill 45 vacant posts in the airline's security department, forty applicants were submitted from the scheduled services department.

Ministers' permission is now needed, first for all vacancies and again for the hiring of all chosen applicants, which means that the month before the end of the hiring procedures will pass. Apparently the Scheduling Secretary, who recently lodged a complaint with the President that he had been circumvented by the carrier in the decision-making procedure, has now succeeded in putting pressure on the Board and the CEO.

SriLankan Airlines Ltd. has been transformed into SriLankan Airlines Corporation, which provides employment for young men and women, as started by the former government. Meanwhile, the much-vaunted transition of the domestic company into the Tamasek / Singapore Airlines size seems to have taken place directly from the dashboard.

It is sufficient to indicate to airlines around the globe that a Chief Executive Officer who does not generate at least an operating surplus will receive a warning and no incentive award. The topics discussed included personnel expenses and crew costs.