Colombo Telegraph

Sri Lankan Airlines: Over Rs. 712 Million Duty Free Total Loss In Last Three Years & Still Continues

A group of airline professionals have confirmed that the loss Sri Lankan Airlines has incurred due to the ‘fraudulent’ duty free deal signed between the airline and its supplier Phoenix Duty Free Services exceeds way over Rs 712 million as opposed to the findings as highlighted by the Board of Inquiry into the misappropriations of the airline and headed by Lawyer J.C. Weliamuna and his team.

The panel headed by anti-corruption advocate and senior lawyer J. C. Weliamuna has said; “There is a major difference in the original draft agreement forwarded by M/S Phoenix when compared with the agreement SLA actually signed with M/S Phoenix. This difference caused a significant loss of revenue that SLA would otherwise have received”.

However a group of airline professionals who wished to remain anonymous revealed that the besides the contract being amended in 2013 to write off over US $ 2.5 million in the first three years of its operation, the airline failed to factor the fuel cost to carry the weight of duty free on board.

On the 14th of April 2015 ‘Colombo Telegraph’ exposed part of that loss pertaining to a sum of US $ 2,596,398 or Rs. 338 million in its story titled “Sri Lankan Airlines Rs 338 Million Fraud: In Flight Duty Free ‘Day Light Robbery’ Still Continues”.

The Board of Inquiry revealed in their concluded report that the Sri Lankan Airlines had also lost out a monumental amount of US $ 1.8 million as well in the first two years since the operation began due to the formula that the guaranteed payments were worked out.

This is due to the fact that the initial agreement forwarded by Phoenix Duty Free Services to Sri Lankan Airlines stated a fixed rate to be paid to the airline. This as explained in Weliamuna’s report was subsequently changed to an agreement which was signed highlighting that US cents .84 would be paid per passenger carried in the initial year and increased every year to reach US $ 1.03 in its fifth year.

“With the third year now concluded and with an average percentage of that figure taken, it could correctly be said that a sum totaling approximately US$ 2.7 million plus the writing off of the earlier reported sum of US $ 2.596, 198, totals to a gigantic figure in the region of US $ 5.2 million or Rs 712 million in its first three years of operation” the Airline professionals told Colombo Telegraph.

According to them, the carriage of the said duty free and the subsequent fuel burn had not been taken into consideration by the airline and that figure of carrying nearly half a ton of the duty free weight inclusive of several carts and air larders on long haul sectors alone.

The national airline operates over 1440 flights per month and the time the airline’s fleet of aircraft spends in the sky burning this excessive fuel for the carriage of such duty free goods makes the airline incur such a severe cost that rightfully it would nullify any profit margins if ever there was.

According to an Engineer of the Sri Lankan Airlines it is estimated that on a single trip from Colombo to London and back, a colossal amount of fuel is required to burn off the 500 kilos of duty free that needs to be transported on a 22 hour round trip.

“The airline should have taken this fact into consideration when deciding on the guaranteed payment Phoenix Duty Free Services had to pay the airline, as not calculating this vital piece of information means that with the fluctuation of fuel prices the national carrier has now incurred a loss even before this operation ever began” said the qualified Engineer who is barred from speaking to the media.

The former CEO Kapila Chandrasena in his annual report for the year ending 2012/2013 highlighted the fact that the airline saved millions by removing the flight deck manuals and introducing iPads in the cockpit instead. The weight of those manuals is minimal compared to the weight of the full length carts and containers that carry duty free goods on board.

‘Colombo Telegraph’ reliably learns that the deal on the part of the airline’s duty free supplier Phoenix Duty Free Services has also violated basic agreements it had signed into with Sri Lankan Airlines.

“What baffles many is as to why even after the revelations of Lawyer Weliamuna and his team, the loss making national carrier has not suspended its contract with the duty free supplier Phoenix Duty Free Services as it continues to be robbed in broad daylight.” a member of the Pilots’ guild told Colombo Telegraph.

The panel headed by anti-corruption advocate and senior lawyer J. C. Weliamuna has observed that in September/October 2011, M/S Phoenix approached the former Chairman Nishantha Wickramasinghe and the former CEO, Kapila Chandrasena, and submitted a proposal to outsource the Duty Free Services at SLA to M/S Phoenix. The BoI also noted that the Srilankan airlines has never contracted with M/S Phoenix before.

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