The Treasury plans to assist national carrier SriLankan Airlines to settle its long overdue debt to Ceylon Petroleum Corporation (CPC), another state-owned enterprise, by issuing a treasury bond, The Sunday Morning Business learns.
CPC Deputy General Manager – Finance Varuna Nilanga Weerasooriya told us that this decision was taken by the Treasury recently, considering SriLankan’s large outstanding payments to CPC, which has been weighing on CPC’s financial performance over the years. “SriLankan Airlines currently owes CPC Rs. 48 billion. Since April, we have not received any payments from them due to the prevailing situation and its impact on the aviation industry. But they have been flying repatriation flights; for that we are supplying Rs. 2 million worth of fuel, monthly, since April,” Weerasooriya added.
SriLankan Airlines’ monthly CPC bill alone was about $ 14 million, with only $ 6 million out of it being paid each month before the local Covid-19 outbreak. Weerasooriya stated that the Treasury is yet to communicate to CPC the debt amount that will be settled by the treasury bond. When we asked SriLankan Airlines Chairman Ashok Pathirage to confirm this and whether the bond will settle SriLankan’s debt to CPC completely or partially, he stated that there are some developments, but that he can neither confirm nor deny them.
Meanwhile, when contacted by The Sunday Morning Business to find out when the bond will be issued and when the payment will be made to CPC, Treasury Secretary S.R. Attygalle stated that “it is a Cabinet decision” and did not provide any further information. SriLankan has been a loss-making airline for over 10 years. The airline recorded a loss of Rs. 40 billion in the financial year (FY) 2017/18, the highest annual loss since Emirates’ departure from its management in 2008, when it was a profit-making entity.
According to a recent audit report, during the first quarter of 2020, SriLankan Airlines incurred a net loss of Rs. 47 billion along with an accumulated loss of Rs. 326 billion. The company’s current liabilities exceeded its current assets by Rs. 211.64 billion and total liabilities exceeded its total assets by Rs. 273.36 billion. SriLankan owes about $ 220 million to Bank of Ceylon while to People’s Bank it owes about $ 187 million. It is learnt that interest is being paid on time while the capital payments are being dragged on for years. These long-standing debts to state banks are hindering SriLankan’s development plans, while on the other hand, state lenders too are facing difficulties when loans that are unlikely to be serviced in the near term occupy their loan books.
Following the closure of the Bandaranaike International Airport (BIA) on 18 March, SriLankan Airlines had to remain on the ground apart from a few cargo flights. Few days after, SriLankan began operating rescue flights that brought in stranded Sri Lankans from around the world. In addition to this, SriLankan operated rescue flights for several other countries, bringing their nationals back home. Meanwhile, the seven-week islandwide lockdown necessitated by the local outbreak of Covid-19 has resulted in CPC recording a net profit of Rs. 830 million in the first three quarters of this year, following a loss of Rs. 9 billion in the same period last year.
According to CPC, this was mainly due to less fuel pumping during the corresponding period this year coupled with a tax on fuel prices. Restricted travel during the lockdown period and less movement around the country, even after the removal of the lockdown, made CPC cater to a reduced demand at its current price point, the profit component of which is a question.
“When a profit-making business sells more and more products, it brings them more profit. But when a loss-making business sells more products, it creates more losses. In our case, we have been pumping less, so our losses came down and turned into a net profit in fact,” Weerasooriya told us two weeks ago.
(The Morning)