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NT Bureau
Chennai, July 23:
 

        Both Sri Lankan Airlines Ltd and Sri Lankan Airlines Group achieved significant profits during the last financial year, despite a sharp downturn in Sri Lanka's tourism industry and a steep rise in the price of aviation fuel.

        Tourist arrivals slowed down as foreign governments issued travel advisories against visiting Sri Lanka, following the escalation of hostilities in the country's internal conflict, which placed the country and its capital under security threats.

        The average price of jet fuel reached $82 per barrel in 2006, as against $71 in 2005. As a result, the annual fuel bill of the company increased to $ 224.9 million from $190.5 million in the previous year, an increase of $34.4 million or 18 per cent.

        D H S Jayawardena, chairman, Sri Lankan Airlines said: 'This financial performance was made possible by the tireless efforts of the management and staff of Sri Lankan Airlines and Sri Lankan catering to mitigate the impact of adverse factors through innovative and efficient business strategies and stringent control of costs. The financial year under review was so far the most challenging year for the airline in its twenty-seven year history.'

        The group achieved a net profit of Rs 862.18 million for the financial year 2006-07, down 50 per cent from the previous year. It was the fifth year in succession that the group, which consists of Sri Lankan Airlines Limited and its fully owned subsidiary Sri Lankan Catering (Private) Limited, recorded a profit. The company, Sri Lankan Airlines Ltd, made a profit of Rs 568.04 million, an increase of Rs 91.51 million over the previous year's Rs 476.53 million (restated).

        Tim Clark, managing director, said: 'The largest single factor that affected the airline's bottom-line was the return to hostilities in Sri Lanka's internal conflict. The resultant travel advisories against visiting Sri Lanka brought very serious consequences on traditional markets such as Japan, the United Kingdom, Germany and France.'

        Peter Hill, CEO, said: 'The Sri Lankan Airlines group has now been profitable for seven of the nine years since privatization. The management decision taken several years ago to develop Colombo as a hub, focused on developing passenger and cargo traffic to and from South Asia has been the key to our success. SriLankan would indeed have been in dire straits had we relied on the earlier more traditional traffic flows to and from Colombo.'

        Sri Lankan used its position as the most frequent foreign carrier into India, where it now has 95 flights per week to 10 cities, to connect global travellers to the Subcontinent through Colombo. But the National Carrier also continued to be one of the most active supporters of tourism into Sri Lanka, and invested heavily in the country's promotional campaigns.

        Despite these challenges, the airline continued with its expansion plans, launching services to Goa and Jeddah and doubling frequencies to Mumbai. Direct flights were reintroduced to Paris, Frankfurt, Bahrain, and Doha, providing greater passenger convenience, and capacity was increased to Kuwait, Abu Dhabi, Doha, Bahrain, Bangalore and Calicut.

        Sri Lankan Catering commissioned its $25 million (Rs 2.5 billion) state-of-the-art Flight Kitchen, a considerable investment in the future of Sri Lanka. Sri Lankan Cargo set yet another record for tonnage handled at the BIA Cargo Centre, on the strength of positioning Colombo as a hub for India's rapidly growing economy.

        Sri Lankan also played a leading role in enhancing services at the Bandaranaike International Airport (BIA). The airline diversified its revenue streams by re-launching its leisure arm SriLankan Holidays, expanding maintenance services for other airlines, and launching the International Aviation Academy. It also invested in some of the latest innovations in the industry such as E-ticketing and the use of the Internet for marketing purposes.

        Passenger and cargo revenues recorded growth rates of 10.67 per cent and 15.24 per cent respectively against the previous year, and the airline's overall yield increased by 6.72 per cent. Passenger Traffic increased by 5.7 per cent.

        The group's operating revenue was Rs 68,903.70 million, up 10 per cent from the previous year, and the Airline's operating revenue was Rs 67,963.76 million, up 11 per cent. The group's operating expenditure increased by 14 per cent to Rs 69,192.17 million, and the airline's operating expenditure grew by 14 per cent to Rs. 69,403.25 million. Unit cost increased by 7.12 per cent, mainly due to the increase in the price of fuel.

        Passenger revenue increased by 10.67 per cent, and growth was seen in Mail (13.41 per cent ), and Air Terminal Services (8.74 per cent).

        However, the uncertainty surrounding the management of the airline is affecting its ability to implement future growth plans, as well as casting a cloud over the job security of its staff. Emirates' 10-year management contract is due to end on 31 March 2008, and discussions are continuing with the Government of Sri Lanka with regard to its future.