24 October, 2017

Mihin Lanka: Profit Any Time Soon?

By Aaqib Hussain –

Aaqib Hussain

Aaqib Hussain

The airline has been plagued by financial losses, debt, waste, corruption and other irregularities since its inception in 2007. Is this a profitable venture? I feel not, as it is the taxpayer’s money put to use for yet another prestige project. Mihin is another “White Elephant” which served no purpose since the country already had a national airline and it was also in a severe financial mess.

Mihin Lanka (MJ) was incorporated in October 2006 and began international flights in April the following year with a fleet of two wet leased Airbus A320-200 aircraft from the Bulgarian company BH Air. It was set to operate as a low cost model; a subsidiary of the national carrier Sri Lankan Airlines.

The aim of Mihin Lanka was to give an opportunity to foreign job seekers and pilgrims to fly to their destinations at a much lower cost, initially flying to scheduled destinations in South India and the Middle East, connecting its main base of operations Colombo Bandaranaike International Airport with Dubai, Trichy, Trivandrum followed by Singapore and Bangkok following the arrival of their third aircraft which was a wet-leased Airbus A321-100 from the Turkish operator Best Air.

In December 2007 Mihin was forced to ground the A320-200 serving India as the airline had not settled its lease payments. Sri Lankan also withdrew its ground handling facilities for non-payment forcing Mihin to manually push back its aircraft before takeoff.

In February 2008 Mihin lost one of its aircraft, an Airbus A321-100 (registered as TC-TUB), after its Turkish owners Best Air revoked it for non-payment of lease. In April 2008 came the biggest shock for the state owned airline, as Mihin it lost its other two remaining Airbus A320-200 aircraft, after BH Air, its Bulgarian owners took them back for non-payment of lease. Having lost all its aircraft the company was forced to suspend all operations and crash landed as a whole in April 2008.

Mihin made losses of LKR 5877 million according to official government figures during the time period between 2007 and 2010 and the losses continued to grow despite cutting its workforce by a third and changing from wet lease to dry lease. This was mainly due to a poor load factor on flights to destinations like Trivandrum in South India as well as to Dubai in the Middle East.

Minin ProfAccording to an article published in the “Sunday Leader” on 18th January 2009, the flight to Trivandrum had flown empty from Colombo on the 14th of January 2008 with the inbound flight from Trivandrum suffering a similar fate of a zero percent load factor.

Trivandrum flights from the 9th to the 16th of January had a total turnover of only 54 passengers in bound to Colombo and 39 outbound to Trivandrum and with the Airbus A320-200 clocking ten flying hours.

The current fleet of Mihin comprises one Airbus A320-200 and two Airbus A321-200 aircraft (4R-MRC, 4R-MRD and 4R-MRE).

As of July 2014, Mihin has active scheduled flights from Colombo to Medan, Jakarta, Madurai, Dubai, Bahrain, Sharjah, Seychelles, Dhaka and Delhi. Since 2010 Mihin began having a new strategy to cater to “Premium Secondary Routes” which Sri Lankan Airlines do not have frequencies to. Dhaka and Jakarta were launched in December 2010, and at the same time Sri Lankan and Mihin began code sharing. Sharjah was added in October 2011, followed by Bahrain in September 2012 which was operated for nearly four decades under Sri Lankan Airlines and thereafter transferred to Mihin because the management of Sri Lankan thought that the LCC model would be more suitable on this route. Madurai in South India followed soon after in December 2013, Medan (Indonesia) in May 2013 and, most recently Mahe (Seychelles) in November 2013.

Almost all Mihin’s new routes have no competition at all except Sharjah and Madurai which are served by to other LCC namely AirArabia and SpiceJet. Thereby the future looks good for the low cost carrier.

However, yet another blunder was made in the first quarter of 2014 where Mihin planned to add Business Class seats and also to re-fleet and switch to Boeing 737-800 aircraft. For a small airline such as Mihin, re-fleeting would be pointless as they would not only have to bear the cost of leasing and redesigning the new aircraft but they would also need to hire pilots capable of flying the new aircraft and training their cabin crew as well, let alone finding engineers and maintenance staff which are currently done by Sri Lankan. All this would be additional expenditure to the airline and would stifle its growth even further.

Business class layout is yet another fantasy as low cost carriers mainly focus on a no frills policy to bring down the cost of operations but what Mihin is attempting to do is the complete opposite. Also, Mihin is one of the only budget carriers who give free food on board and that too is an additional cost to the airline.

A transition to 737’s would make it potentially harder for a merger with the state carrier Sri Lankan Airlines. Therefore the government should re-think its strategy and consider the merger of Mihin with Sri Lankan which would be a far better decision and would undoubtedly improve the outlook of the state carrier. Another option would be for Mihin to sell its stake to budget carriers such as Air Asia and Jet Star which would end up in the airline being able to generate profit in future.

However at the rate things are going it would be more practical if Mihin shuts down due to heavy annual losses made. And the question remains, does Sri Lanka really need two government owned airlines?

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Latest comments

  • 7
    2

    I urge the authorities to appoint someone with good business acumen and ethics to make Mihin Lanka profitable in order to make the majority inhabitants fly with satisfaction as such only one name comes to mind which is none other than the one and only the evergreen hero (or zero) K A Sumanasekera (LEELA) as the CEO and the very intellient Jim Softly as MD while the ever capable Ella Kolla can be the chief pilot with Tamadoya as his co-pilot

    Not to mentione Fathima Fukushima (lorenso) as head steward and Shenali Wadduge as his assistant !

    • 4
      0

      Well Mihin should be closed down.

      The Sri Lankan airlines should be privatized to be run by a local company like John Keels, Aitken spence or pass it back to Emirates.

      MaRa should be given a budget to have Airforce one and not to interfere with Sri Lankan airlines.

      https://www.facebook.com/Awantha.artigala/photos/a.580926191924881.156537.580456651971835/939924176025079/?type=3&theater

      • 2
        0

        People who are visiting Kataragama used to visit Hambantota harbour and Mattal Airport, to see the latest Lanka developments. My mother in law did this trip recently, but she was disappointed that they were not even allowed to get closer to Mattala Airport. I am curious, have they already closed it down?

    • 3
      0

      You idiot you dont realize yet? IT SHOULD BE CLOSED DOWN. TOTALLY. WE HAVE ENOUGH LOSS BEARING SRI LANKAN AIRWAYS. THIS WHAT I SAY COUTNRY IT RULED BY BRAINLESS MONKEYS WHO JUST WANT THEIR NAME IN EVERY THING.

  • 4
    8

    Dear CT Editors..

    It is time you set reasonable editorial standards so specialized subjects like Finance,Economy, Aviation, Defense and the like are written about by qualified experts in such fields. It is laudable that we all feel the urge to write and comment about matters that heighten our interests, but it does very poor service to one’s readership. Repeating the obvious or already known information is not journalism. Unfortunately, that is what passes for reporting/journalism in Sri Lanka.

    Tolerating stupid and absurd comments about articles is a different matter because that is what freedom of speech is all about.

    • 6
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      What crap are you talking Upul ? before you wrote your crap did you try to find a out what the write does or what his profession is ?

      If DR can write about Naga’s and Yakka, this is way above those fantasies.
      CT keep up your good work, it’s forum where we can get a different view points from multitude of authors and it also gives an opportunity to express ones views.

      Constructive criticism is good not whole sale condemnations of ones work.

  • 7
    0

    Mahin had tied his ego with Mihin. Therefore if the airline is failing miserably he will keep it going, at the cost of the Sri Lankan people. His arrogance will not allow Mihin to be declared a bankrupt airline, a total loss.

  • 6
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    It is well known and yet’ it is kept as an open sectret . Now it is high time thst thisvgoveru should tell the truth. Shame on MR who wasted this public money.

  • 1
    4

    Airline industry as a whole is not doing well at the moment. And this is peanuts compared to others.

    http://www.dailytelegraph.com.au/news/losses-and-writeoffs-could-push-qantas-losses-to-1bn/story-fnkltfm0-1227011002921?nk=a6aa2db1ba7221ac82bf9857067b0b1d

    • 0
      0

      What the hell are you talking about? Do you know if any other airline is run by a OL unqualified, giggalo? Who finds it difficult to keep his prick tucked in. He has all his henchmen ,who are a little more woman savvy than the Big Mut himself, hotel owners duty shop owners etc etc. Other than free flights do you think they know how to run a profitable airline?

  • 4
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    When better managed budget airlines are having a hard time it is unlikely that Mihin Air will ever break even. The persistance of the Govt in continuing with this unprofitable venture is puzzling. Is it a cover for a mass scale smuggling operation via Mattala?

  • 0
    1

    Well, if anything I get the feeling they have spread their resources thin having a full service and an economy class carrier. Perhaps they need one moderately priced and serviced carrier.

    They also cannot afford to recruit a management board with qualified people to run the two businesses.

    Having a state owned Airline is no longer a prestige thing. It must be a viable enterprise. Singapore is one country that keeps getting things right in this regard.

  • 2
    1

    Not sure if they need two air lines . but I guess Sri Lankan should be profitable soon . May be it can be sold to some private party for good money

    Cheers

    Abhaya

  • 8
    0

    I must thank the writer Mr.Aaquib Hussain for discussing a subject of “National Importance” like the “Mihin Lanka”. I doubt very much even the people of Sri Lanka in general and the Government in particular are that concerned as regards this “white elephant” gobbling down “Billions” of tax money. It is surprising to note, even the “watch dogs” of public money; such as the Opposition in Parliament; COPE; Auditor General are observing very “religious” silence over the affairs of this “unwanted child” forced to be looked after by the tax payers. Perhaps, the observance of silence on the part of the Government members could be attributed to this whole “project” being a “pet” brought about by the President. The very name given to it suggests the “ego centered” objectives, rather than viable and economic considerations that went into the establishment of this so called “Budget Airline” to serve an “imaginary growing middle class”.

    This “huge” project from the very beginning of 2006 was fated to be a failure, because it was left in the hands of a team of people who did not have an iota of vision or experience in the field of aviation industry and did not even had the capacity to grasp what a “Budget Airline” should be. The appointment of personnel from the “Top to Bottom” to handle the affairs was a “disaster”, in that, the main criteria was nothing but to provide “opportunities” for the “favorites” and “henchmen”. Even the people in Opposition who “cry” so loud about doing away with 18th Amendment did not question the appointment of these incompetent personnel to handle a massive project at State expense.

    With all the failures, the introduction of a “Budget Airline” as a project is not bad, provided it was “handled” well and entrusted it to be run by “competent” people. A good example is AirAsia of Malaysia. AirAsia was a struggling “Budget” airline of the Malaysian Government. It was bought in Dec. 2001, by a group of investors headed by a person named Mr.Tony Fernandes, a graduate of the London School of Economic and worked with Richard Branson’s Virgin Group. AirAsia came with 250 staff, two aging Boeing 737s that flew six routes to two destinations and most notably US$ 11 million in debt. Today AirAsia has a fleet of 160 aircraft, with operating subsidies or joint ventures in Indonesia, Thailand, India, the Philippines and Japan. Today AirAsia is the second highest “Budget Airline” (the highest is Lion Air) in the ASEAN region. In 2012 AirAsia became the single largest customer when it placed a $ 9.4 billion order for 100 aircraft and currently has 400 on order to be delivered by 2026. Mr. Fernandes wealth is estimated to be about US$ 650 millions. His surname Fernandes comes from Goan heritage of his father.

    Unfortunately for us, our Government could not “FIND” people like the caliber of Mr. Tony Fernandes to manage SriLankan and Mihin. Not that we do not have such personnel, but “APE MINIHA” (Our man/my man) has to be put above all other considerations. This is what Sri Lanka is and we are compelled to live with it.

  • 4
    0

    Well Aaqib,

    Contrary to what you say re-fleeting has its advantages. Huge kickbacks to the GOSL decision makers

    Adding business class to budget carriers is needed only in Sri Lanka. They can carry the huge number of politicians (who we all know are nothing but hit men of the Junta) and their acolytes in comfort on tax payers cost. This is Sri Lanka Aaqib, we do business differently.

    With regards to any government enterprise running on a profit and loss basis – simply forget it. When things begin to bite, just simply sell off another prime acreage of real estate to the Chinese. Get huge kick backs and balance the budget at the same time. Problem solved the Sri Lankan way.

  • 6
    0

    The merger of Sri Lankan and Mihin would be suicide (for Sri Lankan).

    The best option in my humble opinion would be for Mihin to register as a charity.

  • 4
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    Haqib, good try but lot to learn, seems like you have copies some of my work on the net Evolution or Revolution of LCC , I did that 5 years ago for my MSc and also written thesis on Evolution or revolution on modern day flight training MPL as a case study.

    First Mihin was a stolen project by One individual and that business plan was stolen by that VAS G who was working for Trico. He was a Executive in Dubai doesn’t know Aviation but talks alot. I remember there are 7 private operators applied for the second operator and Mihin was no where.They obtained the EXPO Aviation F 28 to do the first flight out of BIA.That itself is a violation of ICAO Annexes. The AOC was fast tracked. I remember when they sacked the then Ops Manager who was an Ex Airline Captain with Jet Experience they employed another guy who was a retired Captain where they didnt pay him for months, then not a decent Captain couldn’t apply to become the Ops Manager since an ATPL with Airline flying hours was a must to become the Ops Manager, and eventually an Ex Air Traffic guy was made the Ops Manager. CAA the Puppets just approved everything and enjoyed their perks. Shame !!!!

    To talk about the Low cost revolution , it all started when Laker started Laker Airways way back in 70s when he started transatlantic flying. Airline business was a tough one, then again in early 90s Easy , Ryan they came up because of the deregulation in Europe. Before that the Airline which started in on a napkin at an Dinner Party in Houstan ‘ Southwest ‘ Herb Kelleher revolutionized the entire Low cost business where they again made us of the deregulation. Richard Branson, Stelios, Ryan O Niel they all went and studied the Southwest theory and worked there and came back to start their Airlines.During late 1990 s 7-8 low cost airlines wanted to start but failed because of competition in Europe, and that was the time even the Flag Cariers went out of market crashed ( Swiss Air/Air Lingus/Air France/Alitalia)SO you need some knowledge to start Airlines. What Saj Vass did was the opposite. He used the lackys Tax payers money with out and knowledge. Saj Vas was no Businessman neither an educated man.

    Mihin was just a Show off project targeted the Low income Middle eastern Domestic workers, They never had a business plan. They wet leased the aircraft, Saj Vas made some money out of the leasing and bought a Hotel in new Delhi .They were not given the best routes because they need to safeguards Sri Lankan Airlines.To become profitable you need to give cosmopolitan routes and destinations. You need to get enough traffic loads and create a hub and spoke theory type network, but with Mihins 2 X a320 you cant do that, they didnt have frequencies. they didnt pay for fuel, ground handling , they started giving meals, more baggage allowances which totally went away from Low cost theory. Wages were too much and operating cost was too much where Mihin could not pay the lease. it went bust.

    If you take the most successful Far Eastern Airline of India , Deccan used Domestic routes first.They had the geography and the population and made flying cheaper and easy within India. Capt Gopinath ( Not and Airline Captain he was an Army Captain) realsied the gap in the industry, Look at Ryan Air, they are biggest low cost carrier in the world with a fleet of more than 210 Aircrafts with a strong network of 65 destinations all over Europe. He flooded the Airline seats in Europe where they now go for Seat Sales as low as $ 2 a seat if you book in advance. Pay peanuts for Pilots, operating cost is low and people just want to fly. Look at Mihin, just imagine the business model , is it Charter? Regional ? or Low cost ? I cant think of a model and they started getting down all the redundant Pilots from Kingfisher/Jet Airways and made it a safe house with job security. or Mihins 3 X A320 how many people are working, whats the Staff ratio for Aircrafts???? more than what Cathay and BA has … same with Sri Lankan Airlines, they have a massive strength of 6000 for 20 or 18 aircraft’s ? is it feasible ?NO?

    Mix fleeting is not good for any Low cost Airlines.( Southwest/Ryan/Easy/Air Asia are top exmaples where they all used either 737 or A 320 , Lion Air from Indo was good as well but they didnt maintain) Tony fernandez who was ex LSE graduate worked for Virgin Music, then became the head of Operations for Virgin Music had the influence of Richard Branson. Stelios who was also LSE graduate had the Funds from his dad and he came to UK , Ryan family had funds and made Micheal O/leary to go and work for Southwest to learn the model and he was a Shrude Irish Charted Accountant, they all had private funds with solid experience and Educaiton, but sri lankan government used EPF , lottery board, Bank of Ceylon, and Tax payers money and made Sajin V who failed who only had O/L from Royal College with no Airline/Aviation experience to run an unsuccessful Airline. After post war the local CAA ( puppets and Idiots) let outsiders coming in to the country and picked our traffic loads by offering cheaper rates.

    The good thing happande to Mihin was having experienced Captains to run the Airline now where they Have Management Pilot experience and making some money with P2F schemes.

    More to write but Time shall tell you.

    Good Day !!!

  • 1
    0

    The president wants an airline on which he and his huge entourage can fly to destinations worldwide at a moments notice.
    He earlier dismissed Peter Hill who was running Air Lanka efficiently as the latter refused to unload passengers to accommodate him and his entourage to fly back from UK where he had gone to witness the passing out of his son from the Naval College,Dartmouth,at state expense.

    Mihinair was created and run by Sajin Vass Goonewardene who met MR for the first time,at Dubai airport.

    http://www.nation.lk/2008/03/02/newsfe1.htm

    The Auditor General’s report on Mihinair and Air Lanka was not even discussed by COPE.
    The people pay for these extravagances.

    • 0
      0

      ‘justice’ has been kind to Sajin. Many would confirm that the mellifluous Sajin has admirable social skills, alas he also dim. After getting nowhere in developing a career in SL, Sajin moved to Dubai and found his niche organising pottaniya’s for housemaids returning home. Sajins planets aligned favourably on the day he was introduced to the hungry and ambitious MR, and the opportunity to chaperone our future king around the exciting bits of Dubai was heaven sent. MR recognised an Oddjob in Sajin and the young man never looked back. Sajin adapted easily into our political life and with a benevolent sponsor, his star rose. He persuaded MR of the need for our own ‘budget’ airline, and then, single-handed, set it up and brought it down, with a spectacular bankruptcy. As a reward for his outstanding failure, MR has sent him to the EAM where the King thinks he can do no harm looking after a gaggle of sycophants and presidential hangers-on.

      Taking on the running of a state airline in Sri Lanka is never an option for a serious manager given that the first (and some might say only) option is to please your political masters. The job comes with a poisoned chalice.

      It would a shame to think that Sajin’s epitaph, when the time comes, might read ‘Here lies Sajin, a man with promise, who never took off’.
      There is still time for one bigger cock-up. Go Sajin, Go!

  • 1
    1

    why we need an air line at all, I have been living overseas since 1987 and go to sri lanka one a year , never use sri Lankan or MIhin, we don’t need any lost making aire lines , we need to spend money on education and health , these government idiots are promoting stupidity by sponsoring these loss making businesses , they promote Rubber ( never ever make any profit)

  • 0
    0

    To be lucky, It survived 3 accidents, respectively engine failure, broken wing when landing in Maldives & tyer blown out when taking off in Dhaka.

    • 0
      0

      @Lucky
      Thanks for the info.It was very timely. I had just made a reservation this morning on Mihin and was given time to pay up until the 18th of August. No guesses. Im going to book on another airline immediately.

  • 0
    0

    As a regular user(from the beginning it self when I was in UAE) of Mihin Lanka flights (in association with Sri Lankan Air Lines) I am very happy to hear that MIHIN LANKA going to make profit while providing good services. Particularly Colombo -Dhaka up & down services. Also other destinations such as Dubai etc.. If not Mihin Lanka services available most of our money go to other countries(Air Lines).First beginning Mihin Lanka faced very critical situation but due to restricting (something like)with Sri Lankan Air Line day by day Mihin Lanka reduced its losses & near feature it will make profit.I remain by wishing good feature to Mihin lanka.

    • 2
      0

      Dr. D.A.H.Gunaratne
      I also remain by wishing good feature to Mihin lanka. But I like to know who gave you the doctor title. Becos I also don’t mind having one.

  • 0
    0

    Dear Mr. Pon Fonseka,
    Comments given by me refer to MIHINLANKA. But you want clarifications about my TITLE. Moreover I wish to inform you that I am a Chartered Quantity Surveyor & Engineer. I obtained several professional grade memberships from world recognized professional QS & Engineering institutions/Universities. Also I obtained D.Sc (Doctor in Science) and Ph.D. Now I am 63 years old still working with a International Consultancy Co. Totally I have 40 years experience in Construction Industry. If you have any doubt/information about my TITLE please do not hesitate to write me.
    But you must use this link refer to subjected matter(MIHIN LANKA). You must select correct link if you want to know about my self if you are normal in a normal position.

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