SriLankan Airlines (SLA), the debt-ridden National Carrier, is facing a risk of losing its clientele due to safety and quality concerns which have arisen following several safety related incidents over the past few months, The Sunday Morning learns.
It is reliably learnt that some passengers have requested the airline, through their travel agents, to reimburse payments by cancelling already booked flights. Sources in the travel industry allege that the cancellations have been requested due to safety and quality concerns. However, the airline has refused to refund the payments by cancelling the bookings, it is learnt.
SriLankan Airlines did not respond to inquiries made by The Sunday Morning regarding the cancellation and safety issues at the time of going to print.
On 8 April, UL 225 to Dubai was forced to make an emergency landing in Sri Lanka in about one hour and 10 minutes after takeoff. This was after the departure of the flight had already been delayed by 10 hours due to technical issues and the emergency landing was reportedly due to cracks in the windscreen.
Then, on 14 April, flight UL 605 was delayed for over 30 hours in Melbourne due to technical issues. A special team had to be flown out to Melbourne from Colombo to address the technical issue.
Again on 21 April, SriLankan Airlines flight UL 225 enroute to Dubai had to turn around mid-flight. It dumped fuel to reduce weight and returned to the Bandaranaike International Airport (BIA).
According to a source close to the subject, the shortage of operational aircraft in the SriLankan fleet has resulted in difficulties in sustaining operations, as the airline is currently managing with only around 20 aircraft.
As per official statistics, SriLankan Airlines currently operates over 560 flights per week across Asia. The airline operates to 126 destinations in 61 countries (including codeshare operations) from its main hub located at Bandaranaike International Airport near Colombo.
It joined the ‘oneworld’ airline alliance on 1 May 2014.
The fleet
According to the SLA, it has an all-Airbus fleet of 24 modern, sophisticated aircraft which includes 12 A330 (long haul) and 12 A320/A321 (medium haul) aircraft.
It includes two A320-232 (4R-ABL/MRE) aircraft with 12 business class and 138 economy class (4R-ABL) seats and 12 business class and 150 economy class (4R-MRE) seats respectively.
Additionally, it includes three A320-214 (4R-ABM/N/O) aircraft with 16 business class and 120 economy class (4R-ABM/N/O) seats, A321-231 (4R-ABQ) aircraft with 16 business class and 153 economy class (4R-ABQ) seats, four A330-243 (4R-ALA/B/C/H) aircraft, two A320neo aircraft with 12 business class and 138 economy class seats, and four A320 aircraft with 12 business class and 176 economy class seats.
Cancelled deals
When contacted, Sri Lanka Nidahas Sevaka Sangamaya (SLNSS) SriLankan Airlines Branch General Secretary Janaka Pathirathna told The Sunday Morning that a schedule had been published by SLA and that there was a shortage of the required minimum number of aircraft in order to operate said schedule. The reason for the shortage is cited as the lack of arrangement for purchasing or leasing to fill the shortfall left by one of the cancelled airbus deals.
“Following the cancellation of the agreements, no steps have been taken to replace those deals while rectifying the issues in the previous deal. There is no issue with regard to the type of the aircraft; the issue is the amount. The solution should be to purchase new aircraft at the right price, but nobody has made any attempts to do so,” he stressed.
Even attempts made by the current CEO had been prevented by the Committee on Public Enterprises (COPE), Pathirathna said, adding that the Government should have made the right decision and executed the purchase properly. “Instead, the Government blocked it,” he noted.
However, he denied the allegations raised over safety concerns, stating that all aircraft were up to international requirements.
Grounded flights
In a backdrop where the airline is operating amidst a shortage of aircraft required to execute its schedule, concerns have been raised over five aircraft that are said to be grounded and awaiting spares.
It is alleged that five Airbus A320neo aircraft are currently grounded due to an absence of engines due to a global shortage. However, concerns have been raised that the absence of these five new aircraft is adding a further burden to the operational fleet.
However, issuing a media release last week, SriLankan Airlines clarified the circumstances of the five grounded aircraft. This was in response to certain “recent misleading news items” as stated in the airline’s press release that was published on the subject.
“The aircraft, belonging to the Airbus A320neo family, are currently awaiting engines after shop visits as the global industry faces a shortage of engines and long lead times for engine repairs for this type of aircraft as a result of a technical reliability issue,” stated the press release.
It is further stated in the release that SriLankan Airlines is currently working with its suppliers to work out a solution and the global supply of engines is also expected to improve in the months ahead. SriLankan Airlines therefore confirmed that the aircraft were grounded owing to a global shortage and not because of a lack of finances as incorrectly stated in some news reports.
Fleet additions
According to SriLankan Airlines, in 2011/’12, SLA took delivery of four Airbus A320 aircraft, two Airbus A330 wide-body aircraft, and one Airbus A340 wide-body aircraft under an operating lease agreement. The Cabinet approved an equity investment of $ 500 million by the Government in order to recapitalise the airline.
In 2012/’13, the company took delivery of one Airbus A320 aircraft under an operating lease agreement, commencing international flights from Mattala International Airport.
In 2014, the company entered into the ‘oneworld’ alliance and also the company took delivery of three brand new A330-300 aircraft in October 2014 and March 2015 respectively, as part of a wide-body aircraft re-fleeting programme.
In 2015, the company took delivery of four brand new A330-300 aircraft in August and November and two aircraft in December 2015, as part of the wide-body aircraft re-fleeting programme.
In February 2017 and March 2017, two A320neo aircraft – the first two A320/A321 family new engine option aircraft – joined the fleet and SriLankan launched services to 11 new destinations – Lahore, Jakarta, Dhaka, Calcutta, Madurai, Varanasi, Bodhgaya, Muscat, Bahrain, Seychelles, and Gan Island.
The company took the delivery of three brand new Airbus A321-200neo aircraft in June 2017, October 2017, and December 2017 accordingly as part of the aircraft fleet.
The company then took delivery of another brand new Airbus A321neo aircraft in July 2018, which completed the induction of the neo fleet.
As learnt by The Sunday Morning, since the delivery of A321neo aircraft in 2018, there have been no new additions made to the airline fleet to date.
Losses
As highlighted in the Annual Report of SriLankan Airlines in 2020/’21, the company recorded a loss of Rs. 45,231.46 million (2020 – Rs. 47,197.86 million) with an accumulated loss of Rs. 371,733.52 million (2020 – Rs. 326,341.48 million) as at 31 March 2021.
Further, the company’s current liabilities exceeded its current assets by Rs. 221,308.99 million (2020 – Rs. 211,645.13 million) and the total equity of the company, as mentioned in the Annual Report for 2020/’21, declined to a negative Rs. 289,265.27 million (2020 – negative Rs. 273,369.08 million).
The group recorded a loss of Rs. 49,704.51 million (2020 – Rs. 44,139.40 million) with an accumulated loss of Rs. 366,284.57 million (2020 – Rs. 316,477.65 million) as at 31 March 2021.
Further, the report highlighted that the group’s liabilities exceeded its assets by Rs. 214,635.95 million (2020 – Rs. 200,835.86 million) and that the total equity of the group declined to a negative Rs. 281,490.87 million (2020 – negative Rs. 261,173.54 million).
The company’s net assets were less than half of its stated capital and faced a serious loss of capital. Therefore, the company conducted an Extraordinary General Meeting (EGM) on 25 September 2020 (in addition to three previous EGMs held for the same purpose) and discussed the proposals presented by the directors in accordance with the Companies Act No.7 of 2007 Section 220, the annual report stated.
In the meantime, the Government infused new equity capital in 2020 and 2021 to support the company, which was the first capital infusion to SriLankan Airlines after 2014, in two tranches amounting to Rs. 27.7 billion in November 2020 and Rs. 18 billion in April 2021. This infusion was part of a $ 500 million recapitalisation programme approved by the Cabinet on 26 October 2020.
Further, the Government, through the General Treasury, approved the re-issue of all letters of comfort that had expired during the period amounting to $ 205.4 million and Rs. 27.6 billion, in favour of the two State banks, in order to continue with the provision of short-term loan facilities.
As stated in the report, in the year 2020/’21, based on Cabinet approval to provide Treasury guarantees, the two State banks disbursed new facilities of $ 75 million for working capital purposes of SriLankan Airlines.
Further, the Government, by way of a Cabinet approval dated 7 February 2022 and the letter issued by the Treasury Secretary on 24 February 2022, confirmed that the Government would continue to extend the required financial support to the company to continue its operations as a “going concern” until the implementation of the proposed restructuring process was completed.
However, as reported by The Sunday Morning last week, after nearly a year since the proposal was submitted, the airline is now taking steps to lease out new aircraft.
In a Request for Proposal (RFP) submitted in March, SriLankan Airlines has requested for proposals for the leasing of up to five Airbus A330 family aircraft on an operating lease basis with SriLankan Airlines for a term of 72 months.
When contacted by The Sunday Morning previously, SriLankan Airlines CEO Ashok Pathirage said: “We are going to lease operating placements which are expiring.” When asked for the precise number, he said that it would depend on the availability.