People’s perception of Mihin has changed- CEO

By Sulochana Ramiah Mohan

After experiencing a huge setback, Mihin Lanka now is on the right track, said Director/CEO, Kapila Chandrasena in an interview with FEB.

Excerpts:

What is the present status of Mihin Lanka?
We can confidently say that we are on the right track. It does not mean, we are out of the woods. There are phases we have to go though; financial survival, stability and growth.
We are still in phase one. In other words, we have changed the dynamics of the business. So when we started back in January 2009, our expenses outweighed our income. So we were making a loss on a ‘profit and loss’ basis.
In August 2009, we managed to breakeven. The airline industry is fairly seasonal. Inbound and outbound passengers are very seasonal. We have certain months as high and low seasons. We try to minimize losses during low seasons. As a whole, this way if profits out do losses, you are on the right track. So, Mihin is on the right tract. September/October were low months. During November/ December we made a profit. In December, we made approximately Rs.16 million (140, 000 USD).

What are the benefits gained in the wake of peace to the island? Where does the airline go from here?
As a low cost carrier, our target market is outbound passengers; serving those who go for employment to the Middle East and religious pilgrims to India. We offer value-added services to passengers of these two segments. Furthermore, meals too are provided at low cost. This extra initiative has helped us to be different.

What are Mihin’s destinations?
Three destinations in India: Trichy, Gaya, and Varnassi (carrying Buddhist pilgrims) and Dubai.

What about bringing Buddhist pilgrims to Sri Lanka?
We have gone on road trips to Singapore and Australia. We found expat Sri Lankans and other Buddhists going in big way to Gaya. They fly to Bangkok and then to Gaya or to Delhi (from Delhi to Gaya).
Sri Lanka is second to none. There are many Buddhist sites in Sri Lanka and we intend deviating them here. We want these pilgrims to reach Gaya via Sri Lanka. About 3-4 such groups visited our country last year. Certainly we are at it and hope to expand.

Buddhist pilgrims to Sri Lanka from other Buddhist nations will increase in the future?
There is the potential for it but we are under operational restrictions. We are a low-cost airline flying only between three to four hour radius, using twin engine aircraft.

What is the capacity of Mihin Lanka?
176 seats

Is the company purchasing new aircraft?
Yes. We will have an airbus end of March, on an Operational lease (dry lease).

From where do you intend buying the new aircraft?
Proposals of four companies are under study. Selection is presently done.

What will be the cost of the new aircraft (the lease)?
Well,.... I cannot comment on it now. We are still working on it. We do it in a commercially acceptable manner. Certainly you cannot see a monthly profit with airlines. We look at industry changes.

What about the aircraft possessed now?
We purchased the present aircraft four months ago from Bangkok-China Aviation Leasing Company on a three year lease beginning last December. Prior to that, we were leasing from SriLankan on a wet lease.

How was the 2009 financial year? What is the profit/loss made?
The 2009 financial year is not over yet. We usually go from April to March. We are hopeful it would be a good year, because January (2010) has been good for us. We are on track with our target. As we resumed operations last year, the idea was to gain a certain level of exposure before targeting profits.

Explain the 2008 - 2009 financial year.
From January to April there was a loss.

Was it Rs. 3 bn?
That was the outstanding amount. There was a temporary suspension of service and restarted in 2009 January. Till April we were considering a time frame to establish our credibility. It was not possible to make profit.

Possessing a single aircraft...........such a huge loss?
If you look at the journey line, the environment is pretty much up there. So, we are now in the process of scaling up, with caution.
We must select right destination to make the right revenue.

Any new destinations after the new aircraft?
Planning to service Dhaka, Maldives and few more destinations in India.

Why not places like Bombay?
Certainly it’s not a miss. We will start with the main places in the region.

Any assistance from the government?
Minin Lanka is 100 % government-owned. It also receives funds and assistance from the market.

What about SriLankan? Does it help Mihin?
Our relationship with SriLankan is very good.

Are you using their pilots? How many of them?
Yes, we use them for current schedules. It’s a pool arrangement. They have a common pool by which we operate. It is maintained by Sri Lankan.

How do you work with SriLankan?
We don’t want to capitalise on SriLankan market. We are not on a commercial agreement to work like that but we work with an understanding.

What’s Mihin’s annual expenditure?
We have direct and fixed operation costs. We were able to increase our revenue by 300% from January 2009 to December. In January 2009, our revenue was 450, 000 and USD 1.8million in December.

What about January 2010?
We made the target of USD 1.6 million. We managed to reduce expenditure by 15%.

Now that Mihin is on the right tract, what are the expansion plans?
Our staff is 114 and have not hired anyone lately. We are trying to maintain the current staff level and increase capacity. We are productive and our focus is on the market. People’s perception on Mihin Lanka has changed. Credibility has been recognised. Now it’s about scaling.

When you took over from Sajin Vass, the outstanding debt was huge. Any comments?
We had an understanding to service that, when we took over. The amount was 3 billion. Those were overdraft facilities from the state banks and all that has been settled. There are few others pending. But like any other business venture, we are servicing those balance payments.

Being a low-cost airline, we feel Mihin is little bit ‘sleepy’. What’s your opinion?
Not sleepy. All newspapers and radio stations do promote our airline services. Yet, there is a budget. We don’t want to over do things and face similar consequences again. It is pointless going with a big bang

Future plans for Mihin Lanka?
Like I said, establish our regional presence. Complimentary to SriLankan vis a vis. We look forward to cater the travel needs of the masses and focus on sustainability.

Any setbacks so far?
Mihin Lanka is facing the same challenges what others do. The global survey says that many people are not willing to sacrifice their leisure travel and in fact looking for more value for their purchase. We are quite optimistic about the future, and cautious at the same time.