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Audit shows national carrier’s losses going sky high
View(s):The debt-ridden national carrier SriLankan Airlines incurred a net loss of Rs 47 billion by March 31 this year along with an accumulated loss of Rs 326 billion, while the company’s current liabilities exceeded its current assets by Rs 211 billion, an audit report revealed. The National Audit Office headed by Auditor General W.P.C. Wickramaratne carried out the audit. It pointed out that the airline experienced a net loss of Rs 47,197.86 million during the year ended March 31 with an accumulated loss of Rs. 326,341.48 million.
As of that date, the company’s current liabilities exceeded its current assets by Rs. 211,645.13 million and total liabilities exceeded its total assets by Rs. 273,369.08 million.
Considering the poor performance of the company and the mitigating factors presented by the SLA management along with the government support, the Auditor General said he considered the airline was to continue its operations as a “Going Concern” and the financial statements had been prepared based on the ‘going concern’ assumption.
On the pre-delivery payments made for four Airbus A350-900 aircraft to be delivered in 2020 and 2021 at the cost of Rs. 2,528.12 million (USD 19.21 million), the Auditor General indicated that at March 31 there was an amount of USD 207.89 million as unpaid pre-delivery payments to Airbus.
The SLA said it had been in discussion with Airbus for a renegotiation of the agreement and therefore the Board did not anticipate a loss of pre-delivery payments or penalties arising from renegotiation. However, no final decision had been taken even by July 30.
“These financial statements do not comprise other information. My opinion on the financial statements does not cover the other information and I do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated,” the Auditor General stressed.
“If, based on the work we have performed, we conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard,” Mr. Wickramaratne noted.
In its financial statement detailed in the annual report of 2019/20, the airliner said the management had already taken measures to preserve the liquidity by negotiating deferred payment plans and concessions with the Airline’s key suppliers. These included, steps taken to renegotiate with Airbus on the pre-delivery payments made for four Airbus A350-900 aircraft.
Meanwhile, SriLankan’s Chief Executive Officer (CEO) Vipula Gunatilleka pointed out that the reduction in the forecast revenue of Rs 9.1 billion was attributable to the reduced operations at BIA post Easter Sunday Attacks in April last year and further loss of revenue of Rs 9.8 billion was the result of the COVID-19 pandemic in the last quarter of the year.
The annual report also indicated that the government continued to support the carrier by granting approvals to the re-issuance of all Letters of Comfort that expired during the period. This amounted to USD 205.4 million and LKR 27.6 billion, in favour of two state banks to continue with the provision of short-term loan facilities.
“The government also re-issued a sovereign guarantee of USD 175 million in June last year which enabled the company to refinance an international bond that matured on June 27, last year. Also, subsequent to the reporting date, based on Cabinet approval to provide Treasury guarantees, two state banks have approved new facilities of USD 75 million for working capital purposes,” the report added.
Further, the government by way of a Cabinet approval dated June 17, this year and the letter issued by the Secretary to the Treasury on June 29 had confirmed that the government would continue to extend the required financial support to the Company to continue its operations as “Going Concern” until the implementation of the proposed restructuring process was completed.