Air Taxi operations launched without govt.’s written consent, feasibility study

Published : 10:57 am  April 8, 2015 | No comments so far |  | 

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By Chandeepa Wettasinghe

The Weliamuna Report has revealed that the Air Taxi operation of SriLankan Airlines—re-launched in 2010 but discontinued later—was carried out without written government consent and a feasibility study establishing its viability.

The report noted that former SriLankan CEO Manoj Gunewardena, immediate past CEO Kapila Chandrasena, COO Druvi Perera nor any other official at SriLankan have been able to furnish the Board of Inquiry (BoI) with either original or a photocopy of the purported directive from the government.

The BoI opined that SriLankan should have requested written consent from the government, considering the significant resources that had been utilized in the operation. Further, the report said that an Independent Assessment Report on the project was compiled by Brian Knusten, who was the former Chief Pilot of SriLankan during the previous Air Taxi operations.

He had recommended that two 40-year old aircraft be “wet-leased” from Canadian company Kenn Borek Air Limited along with staff. However, the report said Knusten cannot be considered independent, since he had had previous dealings with Kenn Borek and functioned as Regional Manager, Sri Lanka for Kenn Borek Air and the Chief Pilot of the company’s air taxi operations in Sri Lanka.

 

“The report added that prices for the 18-seater flights had been determined on an ad-hoc manner, despite higher costs, and no effective marketing or promotional efforts undertaken”

 

Prior to operations, SriLankan had found that Air Taxi operations would result in a net loss of approximately US $ 900,000 in the first year of operations at a seat factor of 80 percent and a return fare of US $ 204 net to the airline, the report noted.
SriLankan had also ignored interest shown by Hemas Limited in the project, despite to Knusten recommending exploring the possibility of entering a joint venture or a working relationship with them, who had the capital to expend.

Following commencement of operations in 2010 December, fishermen at Negombo lagoon,  where the aircraft were based, had complained, and the Central Environmental Authority had pressured for a feasibility study in 2011, which was conducted in 2012.
 
“It is interesting to note that this feasibility study cautions SLA on the fact that, SLA should implement the project only after detailed discussion with the local community, including fisheries cooperative societies and community-based organizations,” the report said.

However, by the time these recommendations were made, the project was already underway.
Meanwhile the report noted that the two aircraft leased for the project were 40-years old though Civil Aviation Authority’s rules say aircraft older than 15 years cannot be registered in Sri Lanka.

The wet lease rental for the aircraft was an exorbitant US $ 1360 per hour with minimum of 80 hours per month per aircraft.
Chandrasena in 2012 had written a document saying that the Air Taxi service was not financially-viable on a wet lease.
Saffron Aviation, owned by a consortium led by MMBL Holdings, John Keells Holdings and Phoenix Ventures, who took over the Air Taxi operation from SriLankan, consequent to a code-share agreement, decided to launch their operation on a dry lease using an amphibian aircraft.

The report added that prices for the 18-seater flights had been determined on an ad-hoc manner, despite higher costs, and no effective marketing or promotional efforts were undertaken.  Even charter flights would only recover 75 percent of the flight’s costs.

The report concludes that the former CEO, Gunawardena, COO, Druvi Perera, Pulathi Jayasinhe (Manager Flight Operations) and Sajeewa Jayatilleke (Manager Air Taxi) were responsible for the sourcing and operation of Air Taxi.

“It is clear that COO, Druvi Perera was well aware of Brian Knusten’s connection to Kenn Borek and the Conflict of Interest. They were lax in conducting the required feasibility studies. Therefore, these persons should be held responsible for the failure and massive losses of the Air Taxi Operation,” the report said.

 

 

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