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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Sri Lanka state carriers to get US$200mn bailout

Sri Lanka state carriers to get US$200mn bailout

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LSE

LSE
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Nov 21, 2013 (LBO) - State-run SriLankan Airlines and Mihin Lanka will be given 200 million US dollars bailout in the 2014 budget, President Mahinda Rajapaksa said.
SriLankan will get 150 million US dollars and Mihin Lanka will get 50 million US dollars.

Both entities are making record losses.

State bus services will get another 1000 million rupees in people's money to buy new buses and 500 million rupees to cover losses.

Ceylon Electricity Board has turned around and Ceylon Petroleum has cut losses

http://www.lankabusinessonline.com/news/sri-lanka-state-carriers-to-get-us$200mn-bailout/1978843177

worthiness


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Are these bail out funds for both airlines coming from public funds or foreign loans? Whatever source of funds in flowing for operational expenses, at the end of day, it will be an additional burden on tax payers' shoulders, to sustain these white elephants.

Jiggysaurus

Jiggysaurus
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Remember Emirates was happy to carry the burden but due to an excess entourage and hangers on the tax payers have to carry the white elephants now. Pride and ego can be very costly.

Kithsiri

Kithsiri
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
It would have been a Good News if the statement was " I decided to close down Srilankan and Mihin !".

Arena


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
you cant clos down entities like that. It is easy to say rather control an entity.

Same thing was said to Petrolium and electricity in last years. But now they have changed a bit. POrt authority as well but Hambanthota will be loss making untill they go for the break even.

Kithsiri

Kithsiri
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@Arena wrote:you cant clos down entities like that. It is easy to say rather control an entity.
Same thing was said to Petrolium and electricity in last years. But now they have changed a bit. POrt authority as well but Hambanthota will be loss making untill they go for the break even.
Why not ?
In the Demand & Supply market, someone will fill the gap and run it profitably and the public will be relieved much of their burden.

Jake Sully

Jake Sully
Manager - Equity Analytics
Manager - Equity Analytics
Every time i fly in the Sri Lankan its full, not a single seat is empty (most most of the times).
Then what causing it to make losses. Closing down is not an option.

Kithsiri

Kithsiri
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@Jake Sully wrote:Every time i fly in the Sri Lankan its full, not a single seat is empty (most most of the times).
Then what causing it to make losses. Closing down is not an option.
Why NOT ?
If cleaning up cannot be done for one reason or the other, an amputation is the only way to stop bleeding.

Rapaport

Rapaport
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Planes can be full but you r paying excess employees n free political trips

Rapaport

Rapaport
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Air Losses Sri Lankan Airlines lose Rs15.7bn in first half 2013 Nov 22, 2013 (LBO) - State run SriLankan Airlines had lost 15.7 billion rupees (120 million US dollars) in the first half of the 2013 financial year, a finance ministry report said.

In the six months to September 2013, the airlines had posted revenues of 54.4 billion rupees and burned up 70 billion rupees in costs.

The state has injected 12.5 billion rupees in people's money into the carrier during the year after injecting 14.2 billion rupees and 12.6 billion rupees in the previous two years.

A budget for 2014 said another 150 million US dollars will be injected to the airline this year.

Mihin Lanka, another loss-making state airline will get 50 million US dollars.

Kithsiri

Kithsiri
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
We fear closing down such entities because of the impact will be felt badly on a few.
But running such is not felt as badly on the face value as it will be shared by the entire country.
But if you quantify the effects, then running will be more detrimental to the country than not running.

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
What about a management contract??

Just as a comparison, $200m can buy a sizeable stake - keep you in the top20 Very Happy 

Qantas market cap: US$ 2.58b
Singapore airlines market cap: US$ 9b
British Airways: US$ 4b

Leon


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
There should be professionals in place for such business. We all saw what happened in CPC.

Jake Sully

Jake Sully
Manager - Equity Analytics
Manager - Equity Analytics
@Rapaport wrote:Planes can be full but you r paying excess employees n free political trips
Correct, if they shut down Sri Lankan and a new private air line comes, and do you think these politicos will leave that new air line alone?
Any air line who knows the story will come here to operate?

Kithsiri

Kithsiri
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@Jake Sully wrote:
@Rapaport wrote:Planes can be full but you r paying excess employees n free political trips
Correct, if they shut down Sri Lankan and a new private air line comes, and do you think these politicos will leave that new air line alone?
Any air line who knows the story will come here to operate?
What do you think would happened then ?
I think we should push the envelope further and see the outcome of it than just tacit acceptance, waiting for a miracle to happen.

Jake Sully

Jake Sully
Manager - Equity Analytics
Manager - Equity Analytics
We all know why Emirates went away. Hardly a foreign air line will come and help again.
A business can be discontinued when there are no more demand for the service. Sri Lankan is a different story.


Jake Sully

Jake Sully
Manager - Equity Analytics
Manager - Equity Analytics
@Kithsiri wrote:
@Jake Sully wrote:
@Rapaport wrote:Planes can be full but you r paying excess employees n free political trips
Correct, if they shut down Sri Lankan and a new private air line comes, and do you think these politicos will leave that new air line alone?
Any air line who knows the story will come here to operate?
What do you think would happened then ?
I think we should push the envelope further and see the outcome of it than just tacit acceptance, waiting for a miracle to happen.
You have to change the "Ultimate Parent Company" Very Happy 

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Aviation industry continuously face challenges. It's one of the toughest jobs in the world to run an Airline profitably.
Any government should not involve in budget airline concept. It's extremely difficult to run a budget airline profitably by a government. Especially in a developing country.

As Kithsiri rightly said I wish someone terminates the operations of Mihin Airline tomorrow.

Emirates times at Air Lanka, of course better, but to show profits they did many tricks.

Head counts is not the main reason for none profitability at SriLankan. It's the Aircraft lease terms, Age of Aircraft & fuel bill.

SriLankan Airline can be turned around to make profits. Because same as the airline, the catering side and ground handlings rights own by the same group (Government).
But to make this profitable will be a hell of a challenge.

Arena


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
agree with the point, Mihin is not a good idea for the gov........But first of all they should win the election ne................lol
MR will never quite what he started specially under his name. it is politics, not management.

I strongly believe Srilankan will have a good time if they appoint a clever head to manage the cost.

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Mihin should target muslim pilgrims who travel from Indonesia/Malaysia to Mecca


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