SL
Airlines makes profit despite crisis
Emirates passenger loads gain on SriLankan
turbulence ?
SriLankan Airlines has reported post-tax profits of Rs. 1.4
billion for the year to March 2002 as against a net loss of
Rs. 5.8 billion in the previous financial year, according to
the latest available figures obtained by The Sunday Times Business.
The
loss from transportation activities for the year to March 31,
2000 was about Rs. 6.6 billion compared with some Rs. 11 billion
in the year-ago period, the company's latest financial figures
indicate - thanks to the termination of aircraft leases which
resulted in gains of close to Rs. 6.3 billion.
But industry
sources allege that the cost-cutting exercise in the past
financial year has led to gains at Emirates which recently
reported a 13 percent rise in profits despite the Sri Lankan
crisis and the September 11 terrorist attacks in the US which
crippled the air travel industry. Emirates has a 40 percent
stake in the Sri Lankan carrier and management control.
The local
airline's latest figures were reported as a government team
led by Aviation Minister Tilak Marapana prepared for talks
tomorrow in Colombo with Emirates officials over re-negotiation
of some of the clauses in the earlier agreement. Marapana
told reporters last week that the government would like to
hand over segments like ground handling and catering to other
companies while charter flights to sectors like Frankfurt
were being considered.
Industry
sources said that despite SriLankan's fleet being cut by half
due to the Tamil Tiger attack at the Katunayake airport and
major staff cuts here and compensation payments following
the closure of offices in Frankfurt and Rome, administration
costs for 2001-2002 fell only marginally to Rs. 1.3 billion
from Rs. 1.4 billion in the earlier year. VSS (Voluntary Severance
Package) payments to staff - as part of a staff-downsizing
programme - totalled over Rs. 500 million.
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Airline
responds
SriLankan Airlines, responding to queries from The Sunday
Times on the figures relating to Emirates, Business
plan and the commercial department, said it did not
wish to comment on these figures.
"With
regard to forecasts made in 1999, these would have been
based upon prevailing market conditions and factored
to take into account industry trends and economic predictions.
The events in Sri Lanka over the past three years, the
impact on the world economy post 11 September, have
thrown the whole aviation industry into turmoil. One
wonders what the business plans of such well known airlines
as Swissair and Sabena, would have forecast for 2002/3
back in 1999. SriLankan Airlines has recently undertaken
a market survey to establish the viability of returning
to Germany and Italy this winter and we hope to be able
to announce our decision shortly," the statement
said..
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While
there have been growing appeals to the government from the
travel industry and UNP parliamentarians to re-negotiate the
management contract, industry officials and insiders at SriLankan
Airlines question the prudence of the airline pulling out
of Frankfurt and Rome, two of the most lucrative sectors.
They have requested that flights to these two destinations
be resumed.
The Tourism
Ministry has also asked the airline to resume flights to these
sectors. SriLankan Airlines pulled out from these two destinations
citing losses and has denied any other reason for the pullout.
The airline is requesting a subsidy payment from the government
if flights are to resume.
Germany
is Sri Lanka's biggest tourism market after Britain where,
however, a large segment of the passengers are Sri Lankan
expatriates. Trade sources allege that there was a variance
in SriLankan's business plan presented by Emirates in 1999
and the local airline's financial evaluation report by the
Commercial Department issued in March 2002.
While
the Emirates' business plan projects a surplus of about $1.2
million on the Colombo-Frankfurt sector and a surplus of about
$1.2 million on the Colombo-Rome sector in 2002/03, the commercial
department's evaluation report shows a projected deficit of
$5.3 million and $2.0 million for the same year, presumably
if flights are resumed.
"Is
the commercial department trying to justify the closure of
the routes so that Emirates becomes the beneficiary by carrying
all passengers to and from these sectors?" one trade
source asked. Latest figures from the Tourist Board show that
Emirates' passenger load to Colombo increased by 30.4 percent
in January-March 2002 while Cathay Pacific also gained by
11.4 percent. All other airlines including SriLankan recorded
negative growth figures.
Trade
sources also claim that the loss from the Colombo-Frankfurt
sector would be much less than some other sectors like for
instance Colombo-Zurich which has reportedly shown losses
of more than $3 million and a loss per flight of more than
$43,000.
Emirates
officials were not immediately available for comment on allegations
that the airline was benefiting at the expense of SriLankan
Airlines.
Oil
refinery for Hambantota
The Board of Investment is evaluating proposals from two foreign
companies to build an oil refinery in Hambantota under an
integrated development plan for the southern region, BOI officials
said.
A large
Chinese firm called Sino-Pacific Holding Ltd. based in Beijing
has submitted a proposal to build a refinery with a capacity
of refining 165,000 barrels of crude oil per day.
he other
proposal is from the Regional Co-operative Petroleum Refinery,
based in Hong Kong, to set up a refinery with a capacity of
75,000 bpd. The refinery proposals are connected with plans
to build a deep-water port in Hambantota because of the need
to provide access to unload large crude oil tankers, officials
said. The proposed refinery will supply petroleum products
to the local market as well as for export markets.
The government
has said it wants to liberalise the petroleum sector and plans
to privatise the Ceylon Petroleum Corporation (CPC).The CPC
itself has been considering plans to expand its refinery at
Sapugaskande which has a capacity of 55,000 bpd.
Previous proposals to set up new oil refineries in the island
were shelved because of the uncertain investment climate and
also because of excess refining capacity in the region.
RPC
expands tyre re-treading plant
Richard Peiris and Company plans to expand its tyre re-treading
operation and improve its retail business by building more
Arpico 'Supercentres', Ian Peiris, the company's deputy chairman
and managing director, said.
"We
plan two more 'Supercentres' by next year to strengthen the
company's retail business," he said in an interview.
"We need a huge space - about 40,000 square feet."
The company, a diversified enterprise making tyres, rubber
and plastic products, and with interests in plantations, retailing,
financial services and real estate development, now has one
Arpico 'Supercentre' in Battaramulla and another in Dehiwela.
These centres are slightly more than supermarkets and sell
merchandise from general household utility items to food.
Peiris
said the company, which is almost synonymous with rubber ("We
made our name in rubber"), intends to expand its tyre
re-treading plant to include radial tyres.
"They are becoming increasingly popular, particularly
for vans, because of their better road holding characteristics,
" he said. "We feel there's a void in the market
which we want to fill."
The proposed
investment would not be substantial because the company already
has the building and the compounding facility, he said. It
should add another 100,000 tyres to its existing production
capacity.
Peiris
said Dr. Sena Yaddehige, a Sri Lankan living in the UK who
recently acquired a 27 percent stake in RPC and became one
of its new directors, will help promote the Arpico brand overseas.
"Dr.
Yaddehige wants to work very actively and closely with us,
particularly to develop export markets and to help us establish
the Arpico brand on a world-wide basis," Peiris said.
"Arpico is a very strong brand in Sri Lanka," he
added. "It is our ambition to make Arpico a strong brand
abroad."
Dr. Yaddehige
has experience in polymer science and engineering and runs
a firm in the UK called Precision Varionics International
Ltd which makes very specialised components for the automobile
industry. The whole RPC group consumes about 8,000 tonnes
of rubber a year - about 10 percent of the local production
of natural rubber.
Richard Peiris and Co. (RPC) has regionalised its tyre re-treading
operations with the aim of overcoming transport difficulties
and now has plants in Kurunegala, Weligama and Pallekele.
It claims
a 40 percent share of the market for retreads which is about
800,000 tyres.
"Competition is severe," Peiris said. "We also
compete with cheap imported Chinese tyres."
The company
is also thinking of expanding natural foam rubber products
which are exported to Europe and the US.
Are
Eelamists eyeing local conglomerates?
A recent attempt by rich Tamil expatriates to accumulate shares
of a blue chip conglomerate caused some alarm in local business
circles because of fears the investors could be linked to
the Eelam movement.
Alarm
bells rang when a so-called "high-net worth individual",
a former employee of a local accountancy firm now living in
the United States, acquired up to one percent of the shares
of the conglomerate, operating through a local stockbroker.
The amount of stock acquired was too small to be considered
a "raid" and the company itself appears confident
of being able to ward off any hostile take-over bid, just
as it did some years ago when a cash-rich local group moved
aggressively to buy into the conglomerate.
The latest
move has raised fears in business circles that members of
the Tamil Diaspora sympathetic to the Eelam movement, who
have made good abroad, could be trying to buy into and take
control of local business houses, especially those they see
as being owned by the Sinhalese community.
No
lifeline for TSG Lanka Payphones
By Hiran Senewiratne
The Lanka Payp-hones network operated by TSG Lanka Limited
(TLL) is no longer functioning as the company has halted all
commercial operations owing to a financial crisis after its
American parent firm went bankrupt.
"Our
company got affected when funding for the local operation
was stopped," TLL acting CEO, Ranjan Guruge told The
Sunday Times Business a few days before be resigned from the
firm last week.
The company
had already informed all its outlets not to sell pay phone
cards, he said.
The parent firm, TSG Network in the United States, unexpectedly
crashed three months ago resulting in it abandoning interest
in the local operation, company sources said.
TTL had more than 2,400 pay phone booths throughout the country
with 80 employees at the time it ceased functioning. The salaries
of employees were being paid from revenue earned in the past
until funds ran out last week when the firm couldn't pay electricity
bills and phone lines were disconnected.
The company
came into commercial operation in early 2000 after acquiring
Lanka Payphones Limited with an initial investment of $3.4
- 4 million, Guruge said. The US parent company still hopes
to resume its commercial operations in Sri Lanka as soon as
it recovers because it believes that Sri Lanka is a market
with potential in the South Asian region, Guruge said.
The present
management has no plans to sell the company, he added.
R. D. Somasiri, the Director General of the Telecommunication
Regulatory Commission (TRC), said that they have not received
any complaints from the public against any service provider.
But TTL
was bound to refund customers who have bought payphone cards
and cannot use them because the network is no longer functioning,
he said.
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