Top auditors shoot Mihin Lanka to the ground

An internationally reputed audit firm has made a damning indictment of Mihin Lanka, touted as Sri Lanka's regional carrier, after examining its accounts for 2010 - 2011.

PricewaterhouseCoopers has said in the report to be tabled in Parliament that "The company had incurred a net loss of Rs. 940.49 million for the year and the company's current liabilities exceeded its current assets by Rs. 1,083.92 million reflecting a Negative Networth of Rs. 3,814.45 million. This indicates the existence of a material uncertainty which may cast significant doubt about the ability of the company to continue as a going concern."

This was whilst President Mahinda Rajapaksa announced in Parliament during his Budget speech that he had allocated US$ 50 million (more than Rs. 6,500 million) for next year for the fledgling carrier. Thrice that amount was also given to SriLankan Airlines which is also running at a massive loss.

Interesting enough, according to the annual report, the Chairman and the Chief Executive Officer (CEO) of Mihin Lanka have come up with their own response to the observation by the auditors. They both claim that the loss and Negative Net worth have been reduced compared to 2009. The loss in that year was Rs. 1,221 million and the Negative Net Worth was Rs 5,628 million.

Some highlights of Mihin Lanka's performance in the accounting year 2010 - 2011: " Mihin Lanka introduced the second aircraft to its fleet during the Financial Year, and opened services to three new destinations - Dhaka, Male and Jakarta.

" The revenue of the company was Rs. 3,142 million compared to Rs 1,700 million in 2009 - 2010.

" The operating expenditure for the year was Rs. 3,597 million, compared to previous year's Rs 2,487 million, an increase of 45 per cent.

Thus, it has become clear that Mihin Lanka is being heavily subsidised by the Government that is pumping a colossal amount of money. This is whilst continuing to give life support to SriLankan Airlines.

To overcome this state of affairs, Civil Aviation Minister Priyankara Jayaratne has directed that the airline update and implement the existing Business Plan, improve marketing and operational procedures and financial strategies. He wants the airline to reduce the losses so it could "run as a going concern."