Public Enterprise Development Minister Kabir Hashim replying to allegations the Joint Opposition (JO) said yesterday the continued use of the A350 aircraft would have cost SriLankan Airlines a loss of US$ 1 million per month, compared to the total loss of US$ 98 million for its cancellation.
The Joint Opposition on Wednesday lodged a complaint against Hashim with the Bribery Commission and the CID accusing the government of accruing a loss of US$ 98 million due to the cancellation of three A350 aircraft.
“In 2008, when Emirates had a 40 percent stake in SriLankan, the net profit for the year stood at US$ 4.4. million. After they were kicked out, between 2008-2014, they had accrued a loss of Rs 32 billion,” the minister said
Minister Hashim was addressing a media briefing at the Ministry yesterday. “In 2015, the new administration had also inherited a debt of Rs 150 billion,” the minister said.
“We could have built another one and a half Southern Expressways with that debt,” he said.
In 2016, the losses suffered by the airline had been brought down to Rs 1,600 million.
Hashim also explained that due to increasing loses, they had to also make the decision to scrap four A350 aircraft that had been ordered by the previous regime.
The agreements signed, according to the minister had no ‘exit’ clauses and thus they had to re-negotiate terms of exit, “After discussions, we paid US$ 17 million for one, and US$ 98 million for the other three”, said Hashim.
“The four A350 planes were taken under long term leases for a period of 12 years. We estimated that by the end of it, we would have paid over US$ 600 million for them,”Hashim said. “Contrary to what the Joint Opposition says, there was no business plan for them. They just a report from a firm called Seaburry asking whether the A350 planes were better than Boeing 747,” he added.
The A350s were purchased through the leasing company Aircap for a lease rate of US$ 1.4 million per month per aircraft when the market lease rate at the time stood at US$ 950,000, revealed the minister. The previous regime had also taken a lease on an A330 at a lease rate of US$ 450,000 per month when the lease rate in the market was US$ 350,000.
The ministry however has chosen to extend the A330 lease with a new rate and has also taken out a new lease for another A330.
In June last year, SriLankan Airlines also cancelled its routes to Frankfurt, Paris and Rome and the Minister explained that these routes were accruing a loss of US$ 2.4 million loss per month and only ran at a load factor of 82 at most. “The Airline is to concentrate on more regional flights,” he said.
“We can’t even make it with a lease of US$ 450,000 (A330), we would not be able to survive if we used the A350 with a lease of US$ 1.4 million. The A350s also can fly non-stop for 17 hours but our longest flight to London is just 11 hours. So it just didn’t make sense to keep these A350 planes,”reiterated the minister.
Another four A350s which were ordered directly via Airbus and scheduled to arrive in 2020 will also be cancelled, the minister said, and insisted that all decisions were made according to proper procedures.
“I believe we have taken the right decision to save the company,”he said.
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