SriLankan Airlines recorded a net loss of $135 million between April and December 2018 despite a significant improvement in its overall performance over the nine-month period.

Notable improvements were recorded in deployment of capacity, passenger and cargo revenue, market yield and unit cost.

"The Year 2018 was a challenging year for the airline due to the adverse impact of rising global fuel prices, rapid depreciation of local and regional currencies and political instability. However, the airline showed great resilience by executing effective strategies to curb the impact of such adverse external environmental factors," the carrier said in a statement.  

During this period, SriLankan’s net traffic revenue from core airline operations increased to $746 million with year-on-year growth of 8 per cent. Overall seat capacity or Available Seat Kilometers (ASKs) improved by 6.5 per cent through effective deployment of the aircraft fleet to profitable markets.

Effective and timely management of aircraft deployment and flight frequencies on the basis of market dynamics allowed the airline to optimise revenue amidst the increased competitive climate. Flight frequencies to markets such as London, Melbourne, Dubai, Abu Dhabi, Doha and Delhi were increased to meet the seasonal demand and it proved to be an effective strategy as the performance of these routes improved significantly.

SriLankan reaffirmed its commitment to the growth of tourism by continuing with daily operations to Melbourne – Australia that saw Australia rising to the fifth highest tourist generator of 2018, ahead of some of the traditional tourist markets. In fact, Australian tourist arrivals grew by 36 per cent in the first 12 months since the launch of SriLankan’s direct flight to Melbourne.

SriLankan Airlines’ online direct sales channel achieved a significant milestone by recording an overall penetration of 14 per cent of the total network passenger revenue. This reflected the airline’s consistent investment and commitment in optimising non-traditional direct sales channels to drive the revenue up at lower incremental cost. The airline expects to double the online direct sales contribution in two years.  
 
Increase in passenger revenue would have been much higher if not for the depreciation of key revenue generating currencies which amounted to $9 million during the period under review.

Although a marginal reduction in total number of passengers carried (0.3 per cent) was reported for the nine-month period, overall seat factor (network-wide seat occupation) remained at 82 per cent of the capacity deployed. The overall passenger yield, which is measured as yield per Revenue Passenger Kilometer, improved by nearly 1.6 per cent from the previous year. Improvement of market yield without deteriorating overall seat factor, considered as a challenging proposition in the airline industry, was achieved by SriLankan through the implementation of effective pricing initiatives, which included the timely imposition of fuel surcharges to minimise the impact of rising fuel cost.

However, improvement in topline was overshadowed drastically by the increase in operating cost base owing to high fuel prices. At $902 million, the total operating cost recorded an increase of 15 per cent against the previous year. Impact due to rise in aviation fuel prices was $66 million. Further, an increase in aircraft maintenance cost and aircraft lease cost due to the addition of one A321 Neo aircraft was reported during this period.

The management of SriLankan Airlines has presented a restructuring plan to the government which focuses on progressive consolidation to bring the airline to a breakeven position in three years. This plan specifies the action required from the government to reduce finance cost, high fuel processing charges and various initiatives identified by the management to reduce the costs and improve revenue.

Vipula Gunatilleka, CEO of Srilankan Airlines, said: "The Year 2019 will be the year of consolidation for the airline and the management initiatives undertaken during the second half of 2018 are expected to show positive results. The management will continue to focus on revenue enhancement through effective capacity deployment to enhance revenue and expenditure reduction strategies to direct the Airline towards sustainable financial viability." - TradeArabia News Service