Airlines cut seat capacity by 53% to Sri Lanka over fund repatriation issues and jet fuel shortage

Driven by the jet fuel shortage and fund repatriation issues as a result of the foreign exchange crisis, airlines have halved air seat capacity to Sri Lanka by 53 percent over the past couple of months presenting another challenge for the country’s struggling tourism industry.

Speaking to Mirror Business, a local representative of a leading airline revealed that airlines were forced to undertake these reductions in frequencies while a few airlines have pulled out of the country.

According to Aviation Worldwide Limited’s Airline Frequency and Capacity Trend Statistics Report, air seat capacity to Sri Lanka declined by 27.6 percent YoY to 313,358 seats in June.

Due to the shortage of foreign exchange in the market, he noted that local airline representatives have been struggling to remit funds collected via ticket sales owed to their principals through banking channels over the past six months, which have grown to US$ 150 million as of now.

As a solution to this issue, airline representatives have requested the government to provide two percent of export proceeds collected by the Central Bank to source required forex to remit funds to their principals. 

Further, they have urged the government to allow airlines to pay ground-handling charges, which remain one of the highest in the region, in rupees until further notice. 

However, the government is yet to positively respond to these suggestions.

Meanwhile, jet fuel shortage which came into surface in May has been another factor for airlines to cut their flight frequencies. From 28th of last month onwards, the Civil Aviation Authority (CAA) requested airlines to carry fuel for their return journeys as the jet fuel stocks had dried up.

“This is impacting the profitability of airlines. By carrying full stock of fuel, airlines have to cut down number of seats offered to passengers while limiting cargo, in addition to incurring additional costs for making fuel stops on the route. Airlines are worried,” he said.

If the current challenging environment prevails, airlines will be forced to cut their frequencies drastically with some completely pulling out from Sri Lanka.

“This will result in further reduced air connectivity to the country with lasting impact on tourism. It takes 6-12 months to convince an airline to re-reroute, once they exit,” the airline representative said.
(NF