Mihin Air, Sri Lanka’s only budget airline, says it has reduced its substantial debt by 60% with income matching operational costs now and operates without new debt.
Since resuming operations 19 months ago (January 2009), the debt-ridden airline has seen turnovers rise to $2.2 million this month (so far) from $500,000 earlier, according to its CEO Kapila Chandrasena.
Speaking on the recovery of the airline, he said the government had allocated funds from the budget to settle the debt and for operational costs. Big amounts owed to Bank of Ceylon, Lankaputhra Bank and a few others, have been ‘retired’, he said.
The airline launched in 2007 and suspending operations in end 2008 owing to huge debts and aircraft leasing issues, has one aircraft and – with the tourism surge- plans to lease a second aircraft in November.
He did not give any figures of the debt situation. In August 2009, the government said Mihin Air suffered a loss of over Rs. 3 billion between March 31, 2007 and March 31, 2008.
This was through operational losses (Rs. 2.8 billion), sales and marketing costs (Rs. 268 million), administrative expenses (Rs. 275 million) and finance costs (Rs. 210 million).
Mr Chandrasena said aircraft maintenance is undertaken by SriLankan Airlines while the rest of the operations are handled by Mihin staff. “With around 60 % of the old debts settled we are on a positive growth now.
The important thing is that we are now matching our income with our expenses. We do not have any facilities with anyone; we are now going with our allocation and our operating cash flows. We are not accumulating new debt. Our old debts are settled with the operating profits. On a month to month basis we are having operating profits,” he said.
“As this business is a seasonal we have to maximize the profits on the high season to offset the low season months. We are now breaking even. With the inclusion of the new aircraft next year we should be more profitable,” he said.
The airline is hoping to capture a segment of the regional tourist market which is now growing. “We are looking at the Middle East, India. Our promotions in the Middle East have begun to show results and as we are flying down a group of Kuwaiti academics,” Mr Chandrasena added.
With the addition of the new aircraft the airline plans to fly, in addition to Dubai and sectors in India to new destinations like Jakarta, Male, Dhaka and a few other Indian destinations like Ahmadabad and Hyderabad.