Sri Lankan doubles profit on cost control

28th Jun 2006

SriLankan Airlines Group nearly doubled its profit in the financial year
2005/06 on the strength of new market strategies and greater emphasis on controlling costs, in the face of volatile global fuel prices and increased competition.The Group reported a Nett Profit After Tax of Rs. 2,041.18 million, an
increase of 48.33% from the previous year’s Rs. 1,376.07 million.

“This was yet another challenging year for the Group. While we are still
recovering from the devastating effects of the Tsunami, we faced new
challenges such as the drastic rise of jet fuel prices and the
deteriorating security situation in the country which significantly
affected our business,” said D.H.S. Jayawardena, Chairman of SriLankan
Airlines Group.

The Group consists of SriLankan Airlines Limited and its fully owned
subsidiary SriLankan Catering (Private) Limited. The Government of Sri
Lanka owns 51.05% of the Group’s shareholding, with Emirates having
43.63%, and others including employees own 5.32%.


SriLankan Airlines Limited achieved an impressive Profit After Tax of
Rs. 797.93 million, a growth of 10,317% over the Rs. 7.66 million of the
previous year.



“Achieving these results after the devastating effects of the Tsunami,
deteriorated security situation in the country and skyrocketing global
fuel prices is a significant achievement, clearly signifying the
commitment and the capabilities of our staff,” said Tim Clark, the
Group’s Managing Director.


The Group’s won several more international awards for the year including
the Travel Trade Gazette Award for Best Airline in South Asia; the
Skytrax Award for Best Cabin Staff in Central Asia; the Silver in
Corporate Social Responsibility at the Community Leadership Awards; the
Galileo Indian Express Award for Best Eastbound International Airline in
India; the Silver Award at the Asia Travel & Tourism Creative Awards;
eleven medals for SriLankan Catering at Culinary Art; and three Freddie
Awards for Skywards (the frequent flyer programme of Skywards and
Emirates) including Programme of the Year.


“I am pleased to say that our staff once again proved their mettle, and
carried the airline through another difficult year. The focus on better
control of costs did not in any way compromise our commitment to
providing the finest service,” said Peter Hill, CEO of SriLankan


The Group’s Operating Revenue was Rs. 62,489 million, up 14.20% from the
previous year, and the Airline’s Operating Revenue was Rs. 61,160
million, up 13.66%. The Group’s Operating Expenditure increased by
11.77% to Rs. 60,581 million, and the Airline’s Operating Expenditure
increased by 10.59% to Rs. 60,399 million.


The Company’s Fuel Cost increased by 39.73%, on the back of a 33.58%
increase in average fuel prices and a 4.68% increase in consumption
required by the Airline’s expansion in the last financial year. In real
terms, an increase of one US cent per gallon translates into an added
expenditure of US 1 million per annum for SriLankan.


Passenger Revenue increased by 16.26% constituting 79% of the Group’s
Revenue, and Passenger Carriage grew by 24.38%. Revenue Passenger
Kilometres grew 11.15% to 9,050.44 million.


The airline launched services to Beijing and increased frequencies to
many existing destinations such as Kuala Lumpur, Singapore, Bangkok,
Dubai, Kuwait, Riyadh, and Indian cities. It also focused on the vast
marketing possibilities of the Internet through its Internet Booking
Engine, and is well on the way to converting its entire operation to
paperless ‘E-ticketing’, providing significant cost savings.


SriLankan’s strategic activities focused on enhancing the image of the
airline and the country, positioning Colombo as the gateway to India.
SriLankan played a prominent role and invested Rs. 400 million in the
country’s biggest promotional campaign - Rediscover Sri Lanka - in
partnership with Sri Lanka Tourism and the tourism industry.


The airline’s tourism arm SriLankan Holidays launched a series of
initiatives to promote inbound and outbound tourism, and services of its
domestic arm SriLankan Air Taxi increased. Facilities and services at
the Bandaranaike International Airport were greatly enhanced, including
the commissioning of a new Business Class Lounge that has drawn much
praise from passengers.


Cargo operations capitalized on the growth of India’s economy, including
the launch of a new freighter service to Coimbatore, and achieved a
Revenue of Rs. 8,152 million, up 9.64%, which constituted 13% of the
Group’s Revenue. Meanwhile SriLankan Engineering began aggressively
pursuing lucrative opportunities of providing Third Party Maintenance
Services to other airlines in Asia, the Middle East and Europe.


SriLankan Catering once more achieved a record setting performance, with
a growth in revenue of 40%. More than 4 million meals were produced
during the year, at a record average of 11,020 per day.


The Group’s increased efficiency was evident with Revenue Per Employee
growing 10.05% and Value Addition Per Employee by 5.84%.


The Group intends to continue expanding cautiously in the year ahead
while consolidating in its present markets, with the launch of services
to Goa (its 50th destination), the commissioning of SriLankan Catering’s
new Flight Kitchen, and the expected growth of the Cargo Centre in


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