SriLankan starts paying ‘long outstanding debt’
The focus of the SriLankan Airlines Board and Management is to achieve ‘profitable operations’ and to commence paying ‘long outstanding debt’. The airline is on its path to achieving and has recorded a Group Operating Profit in US Dollar Terms for the January – March Quarter of 2022 which was the first profitable Quarter (in USD terms) after 6 Years. It is also the first fourth-quarter profit (in USD terms) since 2006
Operating Profit during December 2021 and January to March 2022, has been achieved through a two-pronged strategy – Cost Restructuring and Opportunistic New Revenue Capture based on new routes and adapting capacity to demand both passenger and cargo traffic, a release from the airline said.
Cost Restructuring at SriLankan is based on several phases and the Initiative to Rebase the Cost of Leases to Current (favorable) prices is a critical phase moving forward.
“The Airline has over a long period, accumulated an unsustainable level of debt which currently stands at USD 878 million.”
Significantly, and notwithstanding the Operating Profitability achieved in US Dollar Terms, the carriage of USD Debt would, due to the recent devaluation of the LKR by over 50% result in the recording of a non-cash exchange loss (due to revaluation of debt) of circa LKR 146 billion in the LKR statutory financial statements.
A majority of this debt is held by the State Banks and the Ceylon Petroleum Corporation (CPC). Other significant debt includes a Government Guaranteed USD Bond for USD 175 million reissued in 2019.
Over the Past Year, based on enhanced operating profitability and Foreign Exchange Cash Flows, the Airline has commenced paying down debts to CPC, in addition to ensuring timely servicing of other long-term debt.
Commenting on the Impact of the Pandemic on the Global Industry and SriLankan Airlines in particular the airline said that it resulted in 26 Airlines entering restructuring and 37 Airlines being shut down.
“Relative to the global industry, SriLankan has fared reasonably well, with a post-pandemic operating structure that provides a foundation for profitable operations.”
The airline attributed this to sacrifices made by the employees of the Airline, a majority of whom took deep salary cuts over an extended period and also an Equity injection by the Shareholder of LKR 45.7 billion in 2020.
Successful Cost Restructuring (which brought down operating costs by USD 100 Million during the pandemic) and Exploitation of Market Opportunities – Cargo Services, Repatriation Services, New Demand Capture – for example between India and Australia also attributed to this.
Commenting if the airline should be Shut Down? Sold? Liquidated and restarted it said: “The critical issue which constrains the Options available in the fact that insolvency or bankruptcy at SriLankan would have a serious impact on the State Banks and CPC which hold a bulk of the historical debt.