SriLankan Airlines, the national carrier of Sri Lanka, has been a subject of financial controversy and operational inefficiencies for years. It has often been identified as one of the most loss-making state-owned enterprises in the country. While the previous government had initiated steps to privatize the airline to mitigate its continuous financial losses, the current administration under President Anura Kumara Dissanayake reversed that decision in December 2024, opting instead to restructure the airline and attempt to restore its profitability.
Despite facing ongoing allegations of mismanagement, flight delays, and a staggering financial burden, SriLankan Airlines has continued to receive multiple international accolades. According to its official website, the airline has secured 29 awards between 2020 and 2024, with nine of them being won in 2024 alone. However, a deeper analysis of the 2023/2024 financial statement released by the Auditor General reveals a more complex picture, one that includes significant financial concerns, ongoing operational challenges, and a massive penalty claim by Rolls-Royce totaling Rs. 11,837 million.
The financial statement issued by the Auditor General indicates that SriLankan Airlines reported a profit of Rs. 7,925 million for the 2023/24 fiscal year. This marks a significant improvement compared to the staggering Rs. 71,307 million loss recorded in the previous year. The increase of Rs. 79,232 million, however, does not necessarily indicate a strong revenue boost for the airline. Instead, the report attributes this financial turnaround primarily to cost-cutting measures rather than an actual increase in revenue. Among the key contributors to the profit were reductions in aviation fuel costs, net finance costs, and exchange losses, which decreased by Rs. 40,440 million, Rs. 78,721 million, and Rs. 26,692 million, respectively.
However, the report also highlights that revenue from key operational areas, such as passenger services, cargo transport, excess baggage, and postal revenue, dropped by Rs. 37,680 million compared to the previous financial year. Meanwhile, expenses in other areas, including employee salaries, short-term aircraft leases, and spare engine rental costs, saw a significant increase of Rs. 5,708 million, Rs. 10,219 million, and Rs. 2,040 million, respectively. This suggests that despite the airline’s reported profit, its operational model remains fragile, with mounting costs and declining revenue sources raising concerns about long-term sustainability.
Adding to SriLankan Airlines’ woes, the Auditor General’s report has flagged severe operational inefficiencies, particularly concerning flight delays. Between April 1, 2022, and September 30, 2023, the airline experienced 548 flight delays, with some delays lasting up to 56 hours. These delays resulted in financial losses amounting to US$ 784,000. The main reasons cited for these delays included the airline’s inability to secure replacement aircraft on time, the grounding of unserviceable Neo engines, long lead times for aircraft spare parts, and overall cash flow issues affecting maintenance schedules. Such disruptions not only increased operational costs but also tarnished the airline’s reputation among passengers.
One of the most pressing financial issues highlighted in the report is the Rs. 11,837 million penalty imposed by Rolls-Royce due to a breach of contract. In 2015, SriLankan Airlines entered into an agreement with Rolls-Royce for the maintenance of seven A350 aircraft engines, comprising three leased engines and four outright purchases. However, due to SriLankan Airlines failing to receive these aircraft as planned, the agreement was breached. In an effort to mitigate financial losses, the airline subsequently negotiated a revised agreement that transferred some maintenance obligations to its A330 aircraft engines. Despite this, Rolls-Royce pursued compensation for financial losses incurred as a result of the breached contract. On January 25, 2024, the SriLankan Airlines Board of Directors approved a provision of Rs. 11,837 million (approximately US$ 33 million) to settle the claim filed by Rolls-Royce. The Auditor General’s report warns that such financial mismanagement places the airline in an increasingly precarious position, making financial recovery even more challenging.
Beyond the Rolls-Royce penalty, the report highlights a concerning issue regarding SriLankan Airlines’ uncollected debts. As of March 31, 2024, the airline was owed Rs. 19,373.5 million from various debtors, with Rs. 1,410.3 million outstanding for more than five years. Among the major debtors listed in the report are Mihin Lanka Limited, which owes Rs. 1,012.8 million, the Presidential Secretariat, which has an outstanding balance of Rs. 113.6 million, and the Ministry of Foreign Affairs, which owes Rs. 8.7 million. Additionally, Pakistan International Airlines is required to pay Rs. 58 million. In a controversial move, SriLankan Airlines’ Board of Directors has approved the writing off of Rs. 72 million in unpaid debts, including Rs. 9 million owed by the Ministry of Foreign Affairs and Rs. 63 million owed by Pakistan International Airlines.
Although SriLankan Airlines has reported a profit for the 2023/24 fiscal year, the findings from the Auditor General’s report suggest that the airline’s financial stability remains uncertain. The massive penalty paid to Rolls-Royce, combined with uncollected debts, frequent flight delays, and rising operational costs, all contribute to an increasingly difficult path to recovery. With the government choosing to abandon privatization efforts, the airline now faces the daunting challenge of restructuring its operations while ensuring financial discipline. Whether SriLankan Airlines can navigate its way out of this crisis without further burdening taxpayers remains an open question. The future of the national carrier hinges on whether it can implement effective reforms, improve operational efficiency, and regain public trust while maintaining profitability.
