SriLankan Airlines: Flying in circles with no flight plan

By Dhananath Fernando

Originally appeared on the Morning

SriLankan Airlines (SLA) is not a new name in the country’s long list of financial headaches. It is our National Carrier, a symbol of pride when it flies, and a source of embarrassment when it falls into losses and political meddling. Governments have changed, but the story has remained the same.

Today, the situation is worse than ever. The airline is practically impossible to rescue in its current form. The previous Government invited investors to take over or partner with the airline, but not a single credible party showed interest. The reason is simple: the balance sheet is deeply negative.

Last year, SriLankan Airlines made a profit of about Rs. 7.9 billion. This year, it has reported a loss of about Rs. 2.7 billion. Some argue that the airline should remain under State control. But even if the Government wanted to divest, the question is who would want to buy an airline buried in debt.

The truth is, the problem is more serious than it appears. The saddest part is that there is no restructuring plan at all. The Government seems to have accepted the airline’s own proposals and continues to operate without a clear direction.

According to the National Audit Office, continuous Government support is required just to keep the airline running. Last year alone, taxpayers injected Rs. 20 billion into it.

Let us look at how much public money has been spent over the years:

2010: Government buys back Emirates’ 43.6% stake for $ 53 million

2011/’12: Capital infusion of Rs. 14.3 billion through Treasury bonds

2014: Treasury settles Rs. 26.11 billion owed to the Ceylon Petroleum Corporation (CPC) for unpaid fuel bills

2016: Cabinet approves absorbing Rs. 461 billion of SLA liabilities

2023–2024: Government agrees to absorb $ 510–553 million of SLA debt

H1 2024: Equity top-up of Rs. 5 billion for cash flow support

Budget 2025: Rs. 20 billion allocation for legacy debt service

Since parting ways with Emirates, we have repeatedly returned to the Treasury for help.

Even though the airline shows an operating profit, it is not enough. The load factor is around 70%, while the break-even point is about 76%. The main losses come from finance costs, which are roughly Rs. 30 billion each year — a huge amount compared to revenue.

To stay competitive, the airline needs investment to modernise its fleet and improve efficiency. But the Government has no funds, and no investor or lender will come forward without a Treasury guarantee. The new Public Debt Management Act makes such guarantees more difficult and costly.

Revenue and passenger numbers have also declined compared to the previous year, even as tourism recovers. According to the Sri Lanka Tourism Development Authority, SriLankan Airlines carries only about 27-30% of tourists, while nearly 70% arrive through other airlines. This suggests that service issues, repair delays, and stronger competition are taking away loyal passengers.

At the group level, monopoly businesses such as ground handling and catering help to cover some losses, but they also make the entire aviation industry less competitive.

Even if the airline were liquidated today, it would still need Rs. 379 billion to settle its debts. Around Rs. 90 billion is owed to State banks such as Bank of Ceylon and People’s Bank. Writing off those loans would hurt the stability of the banking sector.

Despite its financial troubles, SriLankan Airlines still operates on important routes and has an excellent safety record. The brand has emotional value for many Sri Lankans, which is why restructuring will face resistance from employees, trade unions, and politicians.

So what can be done?

Option 1: Dress up the balance sheet once and for all. Inject the required taxpayer money, absorb the liabilities, and then look for a strategic investor.

We have tried partial fixes for years, taking over some debt and hoping the airline will perform better, but that approach has failed. If we want to attract a serious investor, we must clean it up completely and find a partner with deep experience in aviation.

However, this must be done with a clear legislative direction and timeline. Otherwise, once the debt is absorbed and the airline begins to show a profit, a new debate will arise questioning the need to privatise a profit-making National Carrier. The political economy will then move quickly to block reform, forgetting that the taxpayer had already paid for the cleanup.

Option 2: Package SriLankan Airlines with other State assets such as the Mattala or Ratmalana airports to make it more attractive to investors.

This might require relocating some Air Force operations and preparing a comprehensive restructuring plan. But such an approach takes time, and time is exactly what we do not have. The longer we wait, the deeper we fall, and the more political and geopolitical interests get involved.

There is no point blaming the airline or its employees. The problem is not in the sky but on the ground. We simply have no plan.

It is time to get our act together, because a national airline without a flight plan can only keep flying in circles.

Land: Sri Lanka’s forgotten asset

By Dhananath Fernando

Originally appeared on the Morning

The headlines are full of talk about asset declarations of ministers. But while the political class debates what they own, the nation has forgotten its real asset: our land. If the forthcoming Budget is to mean anything for growth, it must finally prioritise the country’s most underutilised resource.

Sri Lanka’s land problem is not new. The Harvard Growth Diagnostics study and many others have identified weak property rights as a binding constraint on growth. About 80% of land, including forests and reserves, is owned by the State. Vast tracts lie idle in the hands of Government agencies. Even private land, though held by millions of families, is often locked away from productive use because it exists only in the form of deeds, not secure, State-backed titles.

This distinction is crucial. A deed records the history of a land transaction but does not guarantee ownership. Multiple deeds can exist for the same plot, leaving ownership contested. A title, by contrast, is conclusive proof. It is recognised by the State, cannot be disputed once registered, and gives families and businesses the security to invest, sell, or borrow against it.

The ‘Bim Saviya’ programme, launched in 1998, was meant to move Sri Lanka from deeds to titles. Nearly three decades later, out of 16 million land parcels, just over a million titles have been issued. At the current pace of around 50,000 per year, the process will take 300 years. By then, the world will have moved on, but Sri Lankans will still be queuing at banks, waiting months for loan approvals while surveyors sift through deed histories stretching back three decades.

The consequences are immense. Without secure titles, banks hesitate to lend. Businesses cannot expand. Farmers cannot unlock capital. Families remain vulnerable to fraud. As Hernando de Soto famously described, Sri Lanka is sitting on mountains of “dead capital”.

Why are we stuck? The law itself is outdated, modelled on Torrens systems that do not reflect Sri Lanka’s complex co-ownership, religious, and customary land arrangements. Institutions are fragmented, with responsibility split between the Survey Department, the Land Title Settlement Department, and the Registrar General’s Department. No single body is fully accountable.

Capacity gaps are crippling: more than half of surveyor posts remain vacant. Dispute resolution has collapsed, with only 11% of mediation boards functioning by 2023. Even where land has been surveyed and gazetted, hundreds of thousands of titles remain in limbo.

This is not simply a funding issue. It is a leadership issue. Unless the Cabinet elevates land titling to a national priority, progress will continue to crawl.

The 2026 Budget is the moment to act. Three bold steps can change the game.

First, modernise the law. A legal taskforce must redraft the 1998 act within 12 months, clarifying co-ownership, religious, and State land, and establishing a proper compensation mechanism.

Second, make conversion compulsory. Every sale, mortgage, or inheritance should automatically become a title transaction. Within 15 years, the deed registry could be phased out entirely.

Third, fill the gaps with private capacity and smart financing. Licensed private surveyors can be engaged under Government oversight. Modest registry surcharges and optional fast-track services can reduce reliance on Treasury allocations, while donor or Public-Private Partnership support can be tied to performance milestones.

These reforms would more than pay for themselves. Banks report that title-backed loans can be processed in as little as a week, compared to two or three months for deeds. That is not just about efficiency. It is the difference between a farmer missing a planting season and being able to grow, or a small business waiting months for credit versus expanding immediately.

Most importantly, titles provide ordinary citizens what deeds cannot: security, credit, and peace of mind.

While airtime is wasted on politicians’ asset declarations, Sri Lankans are waiting for their real assets, their land to be recognised and freed. Accelerating ‘Bim Saviya’ is not a technocratic exercise. It is a once-in-a-generation reform that can unlock growth, empower citizens, and give the economy the lifeline it so badly needs.

This budget should finally deliver it.

Sri Lanka’s railways can’t run on ticket fixes alone

By Dhananath Fernando

Originally appeared on the Morning

The Deputy Minister of Transport has earned much praise on social media for streamlining the online ticket booking process, especially for scenic train journeys like the one to Badulla.

The change is simple but effective. Moving forward, the name and ID card or passport number used to purchase a ticket must match the person boarding. Authentication will be checked before you step on the train.

This intervention is commendable. But in economics, problems rarely end at the surface. This ticket issue is only a symptom of something much deeper.

The root problem is a classic demand-supply mismatch. When tickets sell out within minutes, only to appear in the black market at two or three times the price, with buyers still willing to pay, the signal is clear: demand far outstrips supply. One way to fix this is to raise prices so that limited resources (in this case, train seats) are allocated more efficiently. The other way is to increase supply so that more people can enjoy the ride.

Sadly, our current system does neither. The result? A thriving black market. Even with the new rule, there is still room for ticket manipulation at the gate. Ticket checkers now have the discretion to allow someone onboard whose details don’t match exactly and when there is scarcity, that discretion can be monetised.

Consider the plight of a tourist agent. A train ride from Colombo to Ella is often a must-have in a Sri Lanka travel package. But with no forward booking option, agents can’t guarantee it until clients confirm. Tourists, being tourists, change plans. Some may decide on the ride after they land. Without flexibility in the system, we simply miss out and so do hotels, tuk drivers, and restaurants along the Ella-Badulla route.

The Deputy Minister’s action fixes a short-term loophole. A lasting fix means addressing supply. That requires running more trains to Ella, catering to different market segments with different service levels. But to do that, we must partially unbundle Sri Lanka Railways. Maintaining the track is a different skill set from operating engines, which in turn is different from managing passenger services. Station management and facilities are yet another field.

These can be run by separate entities – some public, some through public-private partnerships. Multiple operators would naturally compete to offer better booking systems, more frequency, and pricing that reflects demand. The result? Convenience for passengers and new economic activity along the line.

Sri Lanka Railways is no small outfit. It employs around 14,000 people and carries more than 300,000 passengers every single day. If the facilities were improved with faster services, cleaner stations, and reliable scheduling, that number could grow significantly. What we provide now is only the bare minimum of what is possible. With proper investment and reform, the railway could move far more people, cut road congestion, and become a competitive transport choice rather than a last resort.

And yet, we have barely touched another major opportunity: cargo transport by rail. Right now, the railway’s contribution to freight movement is minimal. This is a missed economic opportunity.

Moving goods by train is cheaper, more energy-efficient, and takes pressure off our congested roads. Properly developed, a modern rail cargo service could connect ports, industrial zones, and inland markets, cutting logistics costs and boosting trade competitiveness. It is a market just waiting to be tapped if we have the vision and the reforms to make it happen.

There is also an untapped goldmine in land assets. Sri Lanka Railways owns some of the most valuable land in the country, much of it in high-value urban and tourist areas. Train access makes these lands even more valuable. But under the current Railways Act, long-term leases are near-impossible. That means this land sits idle, locked away from productive economic use.

Meanwhile, the railway bleeds money. Between 2010 and 2020, it lost roughly Rs. 300 billion. Losses in 2023 alone were Rs. 11 billion, and in 2022, Rs. 12 billion. This is unsustainable not just for the balance sheet, but for a country already straining under heavy public debt.

This is not a story about ticket booking. It’s a story about how poor reforms, lack of competition, and outdated laws have drained resources from a sector that should be a profit centre for the Government and a vital artery for public transport and cargo movement.

If we keep patching the symptoms while ignoring the disease, the losses will keep mounting, the black markets will keep thriving, and the opportunity for Sri Lanka Railways to be a driver of growth will remain stuck at the station. The choice is ours: keep running on the same broken track, or reform the system so that our trains carrying both people and goods can finally pick up speed