Civil Aviation Authority 10

පගති වාර්තාව 2012 nray; Kd;Ndw;Wif 2012 Progress Report 2012

සිවිල් ගුවන්ෙසේවා අමාතාංශය rptpy; tpkhdNritfs; mikr;R 2012 Ministry of Civil Aviation

Contents

• Ministry of Civil Aviation 01

• Civil Aviation Authority 10

• Airport & Aviation Services (SL) Ltd 17

• Sri Lankan Airlines 30

• Mihin Lanka (PVT) Ltd 35

• Shipping & Aviation Information and Research (PVT) Ltd 40

Ministry of Civil Aviation

Vision

“To Develop Sri Lanka with the most competitive and user friendly Civil Aviation Hub in the South Asian Region”

Mission

“Formulation of a more appropriate policy framework and efficient mechanism which lead to offer Competitive & Qualitative Aviation Services in order to fulfill the Local and International requirements in the field of Aviation”

Objectives

1. To implement the National Policy in Civil Aviation. 2. To identify the programmes come under the purview of the Ministry and Facilitate, Co-ordinate, Monitor and Supervise the implementation of such programmes by the respective Institutions. 3. To provide competitive aviation service in compliance with respective safety and security standards of International level. 4. To promote Air Passenger & Cargo Handling facilities. 5. To promote the Domestic Air services. 6. To negotiate on bilateral/multilateral air service agreements with Aeronautical Authorities of other countries. 7. To continue on inter-relationship with other Ministries when providing services on Aviation Sector.

Performance and achievements from 1st January to end of 30th September

2012

9 Preparation of the aviation policy in order to conduct the activities related to the field of aviation uninterrupted and in an orderly manner in compliance with international standards and contributing and guiding for the implementation of the Policy.

9 Conducting bilateral air services negotiations in order to expand air services connections with other countries which in turn will contribute to transform Sri Lanka to an aviation hub. o Example: Conducting negotiations with Japan (March), Indonesia (May), Vietnam (July)

9 Contributing and guiding work related to the construction of Mattala second international airport, efficiently and productively.

9 Maintaining co-ordination with local and international institutions related to aviation in order to obtain necessary contributions from relevant allied services(Department of Immigration & Emigration, Sri Lanka Customs, Road Development Authority, Sri Lanka Tourism Development Authority, Urban Development Authority etc.) methodically and uninterrupted, which will facilitate commencement of services and operations of Mattala second international airport.

9 Providing guidance and maintaining necessary co-ordination for construction of new domestic airports and development & expansion of existing domestic airports.

9 Coordinating foreign loan facilities for commencement of construction work of the Stage II Phase 2 of the Bandaranaike International Airport.

9 Guiding the institutions operating under the Ministry to conduct business methodically in compliance with Government economic, fiscal and development policies.

9 Providing necessary capital to the National Carrier, SriLankan Airlines and the Budget Carrier, Mihin Lanka Limited to competitively enter in to regional and international air services and guiding & coordinating for maintaining air services in a proper order.

9 Making awareness in rural younger generation and school children on civil aviation through the institutions operating under the Ministry and inspiring them to take up the aviation educational and occupational opportunities.

9 Facilitating educational and occupational training opportunities related to the field of aviation through the institutions operating under the Ministry.

Civil Aviation Authority

Vision

“To be a prime catalyst to the growth of the National Economy”

Mission

To facilitate through strategic planning and effective regulation, the operation of a safe, secure and efficient national civil aviation system that conforms to International Standards and Recommended Practices.

Objectives

1. Fulfillment of the State’s international obligations in the field of civil aviation and constant implementation and enforcement of international Standards and Recommended Practices 2. International recognition of the civil aviation system of Sri Lanka which is free from embargoes/restrictions 3. Ensuring safety, efficiency and regularity in civil aviation and personnel security 4. Making optimum use of Sri Lanka airspace for the well-being of the public 5. Economic development of the country 6. Prevention of economic waste caused by unreasonable competition 7. Improving access and mobility of people and goods 8. Provision of dependable services in Civil Aviation 9. Education in the field of Civil Aviation 10. Promotion of development of all aspects of civil aeronautics 11. Protecting and promoting public health 12. Ensuring environmental sustainability

Progress of 2012

The main activities performed by the Civil Aviation Authority for the year 2012 was basically focused on the implementation of aviation International Standards and Recommended Practices in the Country.

International Civil Aviation Organization conducts under Universal Security Audit Programme regular audits on Member States to ascertain the degree of conformance to the Standards and Recommended Practices on aviation security. The most recent aviation security audit on Sri Lanka was conducted from 24th -31st May 2012. The Audit results shows a significant performance of Sri lanka in aviation security oversight activities, with 85% of compliance with security related SARPs as against the worlds (global) average of 67% for 145 States, which have been audited hitherto.

Cabinet approval has also been taken to ratify the Montreal Convention which will regulate the liability of international carriage of persons, luggage or goods performed by an aircraft for reward.

One of the main parameters to ensure aviation safety is the process of issuance of personnel Licenses to those categories of personnel who engage in critical aviation safety tasks, after completion of the required training courses, examinations and tests. During the period of under review , a total of 1722 personnel Licenses and certificates inclusive of 155 Student Pilot Licenses, 94 Private Pilot Licenses, 264 commercial pilot Licenses, 414 Airline Transport pilot Licenses, and 44 Air Traffic Controller License have been issued.

The Civil Aviation Authority also performs the task of certification of airline operators, registration of aircraft and maintaining surveillance of such airlines operators. Initial approvals for ten (10) aircraft maintenance organizations were granted after conducting the required evaluations. Thirty four (34) foreign, base & line maintenance organizations and eight (08) domestic maintenance organizations were renewed for

11 the year 2012. During the period under review, the CAASL granted initial registration for six (06) aircraft and renewed the Certificate of registration of fifty one (51) Aircrafts.

100% of the annual Surveillance Work Programme on Airline Operators, Approved Maintenance Organizations and Flying Training Schools has been completed.

The Civil Aviation Authority has also commenced the regulatory matters in respect of the Second International Airport being built at Mattala. As a Start the master plan of the Mattala Airport has been approved. Zoning Regulations for Mattala Airport has been issued.

Necessary action has been taken to the develop domestic Airports. Basic steps are already been taken to develop Baticaloa airport and to expand Trinco and Ampara domestic airports in this year.

Promulgation of Aircraft Accident and Incident Investigation Regulations and issuance of new guidance for Accident investigation have been completed. A Training Programme on Accident Investigation delivered by two International experts was conducted in Sri Lanka, in January this year. Bilateral Co-operation arrangements have been signed for the Accident Investigation with Air Accident Investigation Bureau of Singapore and France. Such arrangements are also being worked out with Australian and British Aircraft Accident Investigation Boards.

During the period under review, The Civil Aviation and Education programme has covered 05 educational Zones (Anuradhapura, Kekirawa, Tambuttegama, Galenbidunuwewa, Kebithigollewa) in Anuradhapura district in parallel to the Deyata Kirula 2012 National Exhibition. The quarterly education Magazine ‘Guwansara’ published by the CAA with the view to enhance the knowledge of school children in the field of aviation is being distributed on complimentary basis, to 2800 schools which conduct G.C.E (A/L) classes.

Sri Lanka passed the significant milestone of completing of one hundred years of aviation in 2012. In commemoration of the hundred years of aviation in Sri Lanka, under the direction of the Ministry of Civil Aviation the Civil Aviation Authority organized series of events at national level. These events included publishing a book titled “A Centenary Sky” on the history of aviation in Sri Lanka, producing a audio/video Jingle, producing Video Documentary on the history of aviation, issuing four commemorative stamps, organizing a Arts competition amongst school children & general public and to conducting publicity programs through mass media. The main programme was held at the Temple Trees on 07th December 2012 with His Excellency the President Mahinda Rajapaksa gracing the occasion the Chief Guest and around 1500 participants attending the occasion.

Several activities important for the progress of the organization are also been addressed in the year under review. As a priority item, a proposal for restructuring of the organization has been completed. To undertake duties and responsibilities of the organization efficiently and effectively, necessary steps are being taken to construct a CAA Head office at Katunayake.

Present welfare Activities

CAASL continued with its Medical Insurance Scheme as a welfare facility offered to employees and their immediate family members. • A total of one hundred and twenty six (126) employees enjoyed the medical insurance indoor facility worth Rs.1,277,065.71./- and Out Door facility worth Rs. 2,541,819.04/- during the period commencing from May 2011.

• The Accident Insurance Policy was renewed with Ceylinco Insurance PLC as they agreed to offer special coverage to Civil Aviation Inspectors, who sometimes may have to face potential situations harmful to their health, safety, and security.

• As a helping hand to the staff, the CAASL granted a sum of Rs. 3,705,886/- as Distress loans for twenty eight (28) employees and Rs.5,145,500/- as property loan for four (04) employees during period under review. Besides this, sum of Rs.8,794,610/- was granted as loans to purchase Vehicles and Motor bikes in 2012. A Three Wheeler loans was granted amount to a sum of Rs.380,700/- for one employee.

Human Resource Development Activities

A total of Rs.36,928,683.25 was spent on Local and Foreign trainings, seminars, workshops, meetings, conferences for the staff of CAASL during the year. The training requirements, as identified in the Programme Budget 2012 and the Training Programme 2012 were facilitated within the annual budgetary allocation.

In all, eighty (80) human resource development activities were carried out which includes foreign trainings, seminars, workshops, meetings and conferences opportunities offered to Executives and Civil Aviation Officers respectively. A total of one hundred seventeen (117) local activities which includes trainings, seminars, workshops, meetings and conferences opportunities were offered to Executives and Action Officers respectively. Accordingly, a total of one hundred ninety seven (197) trainings, seminars, workshops, meetings and conferences opportunities were offered during the year under review.

Future Project Plans - 2013

Preparation of the National Civil Aviation Development Plan in line with the new Civil Aviation Act. ¾ Certification of the Mattala International Airport. ¾ Expansion of the Civil Aviation Education Programme aimed at School Children. ¾ Construction of Head Office Building for CAA. ¾ Construction of a Sub Office Building at Mattala International Airport. ¾ Conduct of the routine duties on a planned work programme.

Income Statement

For the year ending 31st December 2012

2012 2011

INCOME 866,672,820.23 744,057,943.73

Operating Income - 742,874,886.89

Non- Operating Income - 1,183,056.84

EXPENDITURE 309,637,419.62 315,160,216.69

Staff Expenses 137,597,420.28 124,865,660.45

Meetings, Seminars & 25,748,591.60 18,970,807.98 Workshops

Training 19,833,149.50 21,141,335.26

General Operating Expenses 21,696,614.77 33,078,312.66

Miscellaneous & Other Expenses 2,669,788.08 4,788,781.90

Common Expenses 85,859,068.39 88,066,576.19

Depreciation 16,232,787.00 24,248,742.25

PROFIT FROM ORDINARY 557,035,400.61 428,897,727.04 ACTIVITIES BEFORE TAX

INCOME TAX 155,969,912.17 120,091,363.57

NET PROFIT AFTER TAX 401,065,488.44 308,806,363.47

Provision for Income Tax under 77,201,590.87 section 61© of the Inland

Revenue Act No: 10 of 2006

Provision for Accident 200,000,000.00 Investigation Fund

NET PROFIT AFTER TAX & 401,065,488.44 31,604,772.60 PROVISION

PROFIT & LOSS A/C 67,670,857.58 393,807,855.87 BROUGHT FORWARD

Profit & Loss Account at the 459,394,877.00 634,152,304.21 Beginning of the Year

Prior Year Adjustment (41,724,019.42) 9,655,551.66

Grants to the Treasury 350,000,000.00 (250,000,000.00)

PROFIT CARRIED 468,736,346.02 425,412,628.47 FORWARD

Source – Internal Statistics – Civil Aviation Authority

Airport &Aviation Services (SL) Ltd

Vision

To be the most Efficient and Friendliest Premier Aviation Hub in the Asian Region.

Mission

We will strive to provide Competitive Aviation Facilities and Services with Best Practices while ensuring Stakeholder Satisfaction.

Long Term Corporate Objectives

1. Make BIA a passenger transit hub of Asia Region by increasing the transit passengers to total passengers ratio to 1: 4 by 2016 from existing ratio of 1:6 2. To establish infrastructure capacity to cater for 12 million passenger handling by 2016. 3. To reduce the cost of service provision to landing aircraft by 13% by 2016. 4. To increase passenger numbers to 9 million by 2015. 5. To achieve a 40% of Transit cargo out of total Aviation cargo (of BIA & HIA) by 2015. 6. To maintain a 10% growth in the regional participation at the CATC. 7. To maintain an upward trend in airport performance in the regional ranking. 8. To maintain a downward trend in the contribution towards aircraft incidents. 9. To ensure the safety of international civil aviation as specified in ICAO document 8973. 10. Pursue service, value and operational excellence in corporation with all airport partners by maintaining a minimum score of 20% for the customer perspective as well as for financial perspective measures in the Corporate Dashboard

Progress of 2012

AASL marked remarkable, historical achievement in 2012 encouraging with clear signs of upsurge in operational level and its consequent revenue and earnings which have a strong correlation to the air traffic indicators.

While the movements of air traffic statistics are shown below, the overall financial performance shown under 6 in this report will reflect how these operational statistics are reflected in key financial indicators of the amalgamated financial statements which consist of company accounts, Voted fund accounts & Retained Revenue accounts.

Movement in air traffic statistics (Air craft, Passengers and Cargo movements)

During the year 2012, BIA handled 48,416 aircraft (46,484 scheduled aircraft, 1932 non-scheduled aircraft) recording an increase of 11% compared to the year 2011.

The Airport was used by 7,079,920 during 2012 (3,565,272 departing passengers and 3,514,648 arriving passengers) including 1,296,495 Transit passengers recording an increase of 15% compared to the year 2011.

The total cargo handled during the period was 186,618 MT (116,207 MT of export cargo and 70,411 MT of import cargo) indicating an increase of 11% compared to the year 2011.

Aircraft Movements 2012 2011 January 4,156 3,480 February 3,876 3,178 March 4,048 3,644 April 3,832 3,544 May 3,922 3,578

June 3,874 3,546 July 4,094 3,746 August 4,232 3,740 September 4,000 3,570 October 4,190 3,872 November 3,994 3,632 December 4,198 3,924 Total 48,416 43,454

Analysis of Aircraft Movements (2008 ‐2012) 4500

4000

3500 Aircrafts

No. 3000

2500

2000 January February March April May June July August September October NovemberDecember Months 2012 2011 2010 2009 2008

Passenger Movements 2012 2011 January 602,010 511,488 February 558,826 462,367 March 595,441 504,324 April 579,872 512,548 May 561,350 473,328

June 570,231 468,430 July 611,582 553,022 August 647,589 582,509 September 569,427 506,047 October 590,627 511,123 November 554,095 473,711 December 638,870 586,635

Total 7,079,920 6,145,532

Analysis of Passenger Movements ( 2008 ‐ 2012) 700000

650000

600000

550000 Pax 500000 of

450000 No. 400000

350000

300000

250000

200000 January February March April May June July August September October NovemberDecember

Months 2012 2011 2010 2009 2008

Cargo Movements 2012 2011 January 13,906 13,838 February 14,156 12,534 March 17,051 15,827 April 15,050 13,479 May 15,875 13,340

June 16,005 13,392 July 17,242 14,752 August 15,945 14,190 September 15,056 13,651 October 15,556 14,535 November 14,869 13,864 December 15,905 15,175 Total 186,616 168,577

Analysis of Cargo Movements (2008 ‐ 2012 )

18000

17000

16000

15000

14000 Tonnes

M. 13000

12000

11000

10000

9000

8000 January February March April May June July August September October NovemberDecember Months 2012 2011 2010 2009 2008

Source – Internal Statistics – Airport & Aviation Services SL Ltd.

Progress of the Bandaranaike International Airport (BIA) expansion Project

BIADPII -2 is to be conducted with the assistance of the Government of Japan (GOJ). Accordingly the GOJ has pledged JPY 28,969Mn; the sum required to fund the BIADP II-2 through Japanese ODA loans. The loan agreement was signed in March 2012.

As per Cabinet Decisions arrangements have been made for the following with the concurrence of JICA.

I. To cancel the on-going bidding process and consultancy services of BIADP II- II. To invite fresh bids for the construction of a terminal to handle 9 million passengers per annum on a “Design and Build” basis. III. To appoint a Supervision Consultant

Arrangements also shall be made for the selection of a Consultant for the preparation of a Master Plan for Airports in Sri Lanka as per the same Cabinet Decisions.

Under the BIADP II-2, the proposed Terminal 2 is to be located to the West of the existing Terminal Building which will continue to function as the Terminal 1 of the BIA. Terminal 1 has the capacity to handle 6 million passengers per annum and the Terminal 2 shall have the capacity to handle 9 million passengers per annum.

Upon completion of the new terminal, the total accumulated capacity of the BIA would be 15 million passengers per annum.

The upper floor of the two tiered new Terminal building would be used exclusively for departures while the lower level would be for arrivals. The departure level would be equipped with a separate access way and include facilities to meet the specifications of differently able passengers.

Current Status of construction of Hambantota, Mattala International Airport

Hambantota, Mattala International Airport Development Project is one of the Key Projects under the ‘Mahinda Chinthana’ five hubs concept mentioned in the Hon. President’s manifesto. The HIA will strengthen Sri Lanka’s infrastructure and logistics chain by eliminating the competitive disadvantage of a single international airport. Hence, 800 Hac. of land was obtained for the development of the Airport and a further 1200 hac has been reserved for any future development. The entire project is strictly supervised by the AASL management team allocated specifically for this purpose. A monthly progress report is filed with the Ministry of Civil Aviation and

22 from there on to the president. The progress is frequently observed and monitored by full time executive directors. In addition a board meeting was held onsite at the HIA to enable the non-executive directors to evaluate the progress.

A number of onsite briefing meetings and discussion forums were held at with the external stakeholders including Airline Operators Council and the Sri Lanka Freight Forwarders Association, with the intention of developing a business strategy for the new airport. AASL signed an agreement with M/s. China Harbour Engineering Co. Ltd. in November 2009 for the Construction of Stage I of the HIA at an estimated contract value of US$209 million. At present, the project is progressing according to plan and is commercial operations are declared to be opened on 18th March 2013.

Progress of construction work as follows:

* Date of Mobilization at site - 16th March 2010 * Total project duration - 36 months

* Progress as at 31st December 2012: Overall physical progress - 95%

• Runway and associated works - 98%

• Apron - 98% Earthwork nearing completion

• Taxiway - 98%

• Air Traffic Control Tower - 99%

• Passenger Terminal - 95%

• Cargo Terminal - 96% complete • Fire and Rescue Building - 98% complete

Stage I was to target an annual passenger volume of 1,000,000 and an Annual Cargo throughput of 45,000MT. Upon completion of Stage I, Hambantota International Airport will be equipped with following:

¾ A Runway of 3500m in length and 75m in width, ¾ Two stub taxiways, ¾ An apron to facilitate 9 to 11 aircraft, as per the configuration ¾ Terminal building covering an area of 10,000 sq.m ¾ The ‘State of the Art’ cargo Terminal covering an area of 5000 sq.m and equipped with all modern facilities, including Ground Navigational services and Fire and Rescue facilities.

The HIA business strategy aims at providing a greatly enhanced cargo handling service at the HIA Cargo Terminal in comparison to that of the BIA. Accordingly, the cargo terminal would comprise of a variety of facilities and amenities including, Customs, Airlines and Quarantine facilities. The logistical requirements to accomplish these operational aspects would also be streamlined to accommodate the diverse business needs. Within this context, it was decided to construct a dedicated cargo apron and taxiway in addition to the scope dictated by Stage I of the project. The Cargo Apron would be able to accommodate two Code ‘C’ A320 Aircraft at any given time. However, all the facilities will be designed using Code ‘F’ (A380) Aircraft as a basic parameter.

Considering the future growth of the Aviation industry and the business potential of the region, the capacity rich HIA is projected as a critical driver of the southern development programme in Sri Lanka.

Accordingly, Stage II of the Development work is scheduled to commence shortly and includes following infrastructure:

a. Parallel Taxiway and Stub connecting taxiway

b. Terminal building to facilitate 5 million passengers c. Enhancement of cargo operations area and logistic facility d. Apron expansion

Stage II is expected to commence in 2013 and with a target completion timeline set for is 2017. Stage II would require the utilization of the additional 1200 hac. of land reserved for Airport Development in addition to present 800 hac.

Revision of airport charges

Airport entry ticket charges have been increased from Rs 200 to Rs 300 with effect from 1st June, 2012. Other charges have not been revised during the year 2012.

Future Development Plans

1. Airport Hotel project The need to have an easily accessible hotel to cater for airport passengers due to scarcity of high quality Airport hotels in the vicinity of the BIA is identified as a measure of increasing passenger comfort and satisfaction. Accordingly, the construction of a hotel consisting of minimum 100 five star level luxury rooms expandable upto maximum 500 rooms located along the main access road to BIA within one kilometer distance from the passenger terminal building is in the pipeline to be built on Built Operate and Transfer (BOT) basis. The RFP document is submitted for the approval of the SCAPC approval at present now according to the procurement procedures to be followed.

2. Domestic terminal Building It is proposed that an existing building at the BIA will be modified and converted as a terminal exclusively to serve LCCs (Low Cost Carriers) and to facilitate as a boarding gate during peak hours. It will also serve to mitigate the congestion at the existing terminal by serving as an interim international terminal until terminal 2 is opened upon completion of BIADP2-II. The structure earmarked for this project was previously used by Sri Lankan Catering Service (Pvt) Ltd. It is designed to

handle for 800,000 ppa (passengers per annum). The construction contract would be awarded getting cabinet approval.

3. Runway Overlaying and widening The runway, which is 3,350 m length and 75 m width shoulders on both sides built and commissioned in 1986 is due to be overlaid. The Ministry of Civil Aviation will call for proposals from prospective bidders based on the Request for Proposal for the widening and overlay of the runway. The existing runway and taxiways to be widened in order to receive new large aircraft like Airbus A380.

4. Tax Free Internal Trade Zone Plans are also underway to acquire a BOI land extent of 7 acres with factory buildings abandoned by an investor in close proximity to the Terminal Building. It is expected to develop a trade zone and operate as a Duty Free Shopping complex and a Tax Free shopping mall. The total estimated cost (TEC) of the initial phase is estimated as Rs. 1,000 Mn.

Any other developments

Marketing of Hambantota, Mattala International Airport

After the commencement of the marketing division at AASL, many initiatives are taken to market the HIA. Many stakeholder parties visited as a result and they were facilitated to see the on-going physical progress at site as well as the plans for the airport to synchronize with the greater Hambantota Project and other major projects in the country. Among the parties visited during the year, Airline Operators Committee, Sri Lanka Association of Airline representatives (SLAAR), Travel Agents Association of Sri Lanka (TAASL), Expo Lanka Airline team, representing 05 Airlines – Air Astana, Air France-KLM, Virgin Atlantic, Royal Jordanian and Regent Airways, Sri Lanka Shipper's Council, Sri Lanka Airline Cargo Association, Media group from Washington DC, Members of British Parliament and, Sri Lankan Heads of missions abroad consisting of a group of 70.

At present the marketing team is spearheading the team of AASL who is organizing the opening ceremony of the second international airport which is declared to be opened on 18th of March, 2013.

A recently concluded marketing event was the BIA Christmas shopping festival 2012. The programme spans a two month period from Dec-2012 to Jan - 2013. A record number of outlets participated in this promotion with a galaxy of prizes ranging from cars to cash prizes and daily instant prizes. The similar kind of event took place in the previous year as well and concluded in 2012 January.

Corporate Jet Operations

The Rathmalana domestic airport was converted into a city airport by accommodating international corporate flights commencing on 14th September in 2012. It was a vital step to manage the air traffic at BIA and flights fallen into the ICAO “2B” category could be accommodated by Rathmalana airport now. Plans are underway to further improve the navigational aids required for these operations from the current status.

First ERP launch

AASL complete the first milestone ie: the documentation of the existing system in its milestone plan in its launching of its first web-based Enterprise Resource Planning (ERP) system in FY2012. It is planned to implement all modules in the system prior to the end of the FY 2013. The ERP system is the outcome of the need to have a well integrated IT solution to provide a solid operational backbone. The Requirement analysis for the ERP was established following intense discussions with the identified users in the designated areas. Tenders were called and a contractor was identified through a Cabinet Appointed Procurement Committee (CAPC). The total contract value was Rs 250Mn. The “Oracle” ERP system will be integrated with the “Airport 20:20” billing module to cater for the unique requirements of the aviation industry. This international aeronautical billing software is expected to simplify the collation

27 and billing of all flight and non-flight related revenue while effectively integrating with the Oracle ERP system.

INCOME STATEMENT

For the Year 2012 2012 2011

Unaudited Audited

Rs. Rs.

Revenue 8,623,395,332 7,168,016,440

Other Income 713,140,562 498,723,104

9,336,535,894 7,666,739,544

Staff Cost -3,506,765,416 -3,106,384,728

Repairs and Maintenance -209,108,985 -242,362,996 Expenses

Administration and -1,156,821,251 -1,197,238,634 Establishment Expenses

-4,872,695,652 -4,545,986,358

Profit Before Tax 4,463,840,242 3,120,753,186

Income Tax Expenses -1,041,944,235 -748,473,247

Profit for the year 3,421,896,007 2,372,279,939

Earnings Per Share 17,109.31 11,861.28

Source – Internal Statistics – Airport & Aviation Services SL Ltd.

SriLankan Airlines Limited

Vision

“To be the most preferred airline in Asia.”

Mission

“We are in the air transportation business. We provide our customers with a reliable and pleasant travel experience. We provide our business partners with a variety of innovative, professional and mutually profitable services. We meet Shareholder expectations of profitably marketing Sri Lanka and contributing towards the well- being of Society. We are a competent, proactive and diligent team. Our contribution is recognized and rewarded”

Policies & Objectives

1. Facilitating growth of the country’s economy by closely supporting the policies of the Government of Sri Lanka and promote Sri Lanka and SriLankan around the world. 2. Developing Sri Lanka into a Hub for Aviation, Commercial activities and Knowledge, as per the vision detailed in the Mahinda Chinthana Idiri Dakma programme 3. Acting as a catalyst for the growth of the country’s tourism industry 4. Supporting the country’s air cargo industry, including both imports and exports 5. Supporting the activities of other Government institutions, including the Ministry of Economic Development, Sri Lanka Tourism, and Airport & Aviation (Sri Lanka) Ltd 6. Providing service standards comparable with the best in the industry 7. Building a sustainable global route network for operations 8. Provide ground services and catering services to the International Airlines operating to Bandaranaike International Airport 9. Increasing employee productivity and Evaluate Service Excellence

10. Maintaining and continuously enhancing the Airline’s global reputation for caring, warmth and friendly service.

The decision by the Cabinet to invest a sum of USD 500 million in our National Carrier will be utilized towards the future development and expansion of the Airline.

Subsequent to the dawn of peace in the country and the established political stability it is expected that tourism will flourish in the future, thereby providing the airline with increased passenger numbers for travel.

The weak economic condition in Europe along with the volatile fuel prices of the world market poses an issue to the airline. Further the increased capacity of competitor airlines is a threat to the market share of our airline.

Progress of 2012

1) One World Alliance – The Company has been successful in gaining entry as a member elect of the world renowned “oneworld” airline alliance. This would enable the Company to expand its global presence by being linked to 824 new destinations worldwide, flying alongside some of the biggest and best bands in the airline business to support the airline’s growth strategy. The Airline is required to align its Passenger Servicing Systems to meet the standards of the Alliance to facilitate seamless travel for passengers travelling on member airlines and also for frequent flyer members of each Airline to travel on other member Airlines.

2) Route Rationalization - measures have been taken to rationalise the current routes and frequencies with a focus to maintain the optimal level of services to Europe. Fewer flights to London (reduced from 12 flights weekly to daily except during the high season) from April 2012. Flights to Zurich and Milan to cease from the 3rd quarter onwards with focus on increasing frequencies to China and Middle East destinations.

3) Funding – (i) Equity investment by the Government: 1st tranch of USD 500 million equity was received in the form of a 5 year Treasury Bond to the value of Rs 14.2 billion in February 2012. Need to borrow using the bond as security. (ii) 5 year Loan from Mashreq Bank for USD 175 million out of which USD 100 million was paid to CPC and USD 36 million to BOC in settlement of short term facilitates. The balance is utilized for working capital.

4) Aircraft Leases - Brand new A320 narrow-body aircraft delivered in April 2012. A330 wide-body aircraft delivered in March 2012.

The fleet consists of 21 aircraft for international air transport and 2 Air taxis. A340 – 6 A330 – 7 A320 – 8 (4 are brand new)

The average age of the fleet is 9 years (narrow body- 4years, wide body- 13 years)

5) Aircraft cabin refurbishment – New entertainment system and lie flat seats are being installed in 7 aircraft under the cabin refurbishment program costing USD 18.6m. Two aircraft (one A340 and one A330) have being leased with lie-flat seats already installed.

Refurbishment of 3 x A330, 1 x A340 aircraft have being completed and 2 x A330 and 1 x A340 have been completed by December 2012.

6) Narrow body Hanger - A dedicated hanger for A320 aircraft is being set up at BIA to cater for the increased fleet and for third party work. Design of the hanger and fire systems have been completed and the Tenders have been awarded for the construction (Fentons) at a cost of Rs 312 m to be completed by January 2013.

7) Ground handling and cargo services at HIA (Mattala) – Procurement of equipment is in progress and building construction is underway.

8) Upgrade of Ground and Cargo Services Equipment at BIA - Procurement of equipment is in progress.

SriLankan Airlines has the following plans mapped out for the year 2013

1) A330 Flight Simulator - To provide Simulator training for SriLankan Airline pilots and other Airlines in the region thereby generating an additional source of revenue to the airline.

2) Aircraft Lease - 2 narrow-body aircraft - To replace aircraft which have completed the lease period.

3) Engineering Equipment - Engineering equipment that is required to carry out maintenance functions on the fleet.

4) Ramp & Cargo Equipment for BIA - To provide Ground Handling Services to SriLankan Airlines and other Airlines.

5) IT/Communication Hardware/Software - IT Hardware and Software including IT equipment, upgrading of software etc.

6) Hambantota, Mattala International Airport Operation - To provide Ground Handling Services to SriLankan Airlines and other Airlines.

Income Statement

Quarter ended 31st December 2012

2011/12 Oct-Dec 12 Apr-Dec 12

Audited Rs. M Rs. M

Rs. M

90,544.22 Revenue 29,454.51 87,417.85

(99,395.48) Cost of Sales (32,644.72) (97,168.70)

(8,851.26) Gross Profit / (Loss) (3,190.21) (9,750.85)

421.70 Other Income and Gains 2,450.53 3,778.04

(7,479.93) Sales and Marketing Cost (2,528.36) (7,283.44)

(2,501.41) Administrative Expenses (516.77) (1,333.24)

(1,462.20) Finance Cost (643.23) (2,486.73)

197.68 Finance Income 403.63 1,156.57

(19,675.42) Loss Before Tax (4,024.41) (15,919.65)

(3.29) Income Tax Expense - -

(19,678.71) Profit / (Loss) for the Year (4,024.41) (15,919.65)

2,656.72 Net Income of SriLankan Catering 505.04 1,549.70

(150.00) Inter-Company Transactions (2,250.21) (2,325.21)

(17,171.99) Net Profit / (Loss) of the Group (5,769.58) (16,695.16)

Source – Internal Statistics – Srilankan Airlines Ltd.

Mihin Lanka (Pvt) Ltd

Vision

“To be the second best airline in the region having synergetic network with National Airline”

Mission

“Continue profitability & growth value based customer services and cost-effective operations with high safety standards”

Objective

To provide and promote affordable air travel to customer, complimented by an efficient and professional service.

Progress of 2012

With the introduction of its 03rd Airbus Aircraft Mihin Lanka currently operate schedule flights to 09 destinations with 35 frequencies per week and also code sharing SriLankan Airlines flights in the Far East, Middle East and Indian Subcontinent.

During this year Mihin Lanka suspended its flights to Kuwait due to the introduction of direct flights to Kuwait by SriLankan Airlines and has made arrangements to code share these flights.

At present Mihin operates to Dhaka, Jakarta, Dubai, Sharjah, Bahrain, Trichy, Madurai, Gaya and Varanasi.

With the escalating fuel prices during this year and whilst competing with other low cost carriers in the market, Mihin has been able to offer affordable fares to its

35 customers and has concentrated in achieving profitability on several routes of its network.

Important Events and Achievements in 2012

• Increased Dhaka flights from 4 to 5. • Increased Jakarta flights from 4 to 6. • Increased Sharjah flights from 3 to 4. • Commenced 05 flights to Bahrain from 01st Sep 12 • Have maintained an overall cabin factor of 74%. • Increase air passenger growth by 4% in 2012 compared to 2011. • Increase in revenue growth by 20% in 2012 compared to 2011. • Training School for Pilots – 36 cadets were trained and 32 passed out with pilot license. 12 out of the passed out pilot were recruited by Mihin Lanka as fist officers whiles the other have obtain employment in other airlines. Cost involving the whole process of training was borne by the cadets. Four remaining cadets are to complete their training in due course. • Introduced the Third aircraft, Airbus A320 from 27th November 12 • Increased Bahrain flights from 05 to 06 from 07th Dec 12. • Commenced 03 flights to Madurai from 07th Dec 12

Salient Features in the Progress Achieved

• Providing round the clock assistance (24X7) the customers via Mihin Lanka call center and ticket office. • Special attention and hospitality offered to our all passengers. • Facility to purchase tickets online. • Team spirit in dedication of the MJ staff

People Friendly Innovations

Provisions to purchase tickets to travel to India (Gaya & Varanasi) and Trichy (Velankanni) for –

• Retired senior citizens • Officers in public service • Disabled soldiers • Dependents of soldiers who sacrificed their lives. on the basis of making payments in 6 and 10 installments respectively. Tickets are issued once the first installment is paid and the remaining installments have to be paid within 5 and 9 months respectively. Every pilgrim is provided with a booklet of pirith containing stanzas (gathas) free of charge.

Future Plans for the year 2013

• Increasing the passenger movement up to 85% during 2013. • Commencement of new destination Delhi from 02nd Feb13. • Increasing the number of frequencies per week from present 35 to 40. • Increasing the number of Destinations from 9 to 10

Source – Internal Statistics – Mihin Lanka (Pvt) Ltd.

Shipping & Aviation Information and Research Pvt (Ltd)

Vision

“To provide a most effective, efficient and productive support to the shipping and aviation sector in Sri Lanka”

Mission

“Collecting data and information relating to shipping & aviation services and providing research and training for the betterment of these sectors”

Objectives

1. To collect and distribute data and information in relation to import and export by sea and air, analyzing and do research on the same and do the business of promoting such activities and functions as are assigned to the company from time to time by the Minister in charge of the subject of Port & Aviation. 2. To collect and distribute data and information in the relation to traveling by sea and air, analyzing and do research on the same and do the business of promoting such activities and functions as are assigned to the company from time to time by the Minister in charge of the subject of Port & Aviation. 3. To collect and distribute data and information in relation to traveling, import and export by sea and air on profit basis. 4. To do or undertake the research in relation to ports, Shipping and Aviation trade on profit basis. 5. To do the business of trainer’s education provider and consultants in related to import and export and connected fields. 6. To carry on the business or providing training, lectures, seminars, workshops, and human resources development programmers in connection with the above objects.

7. To collect and distribute data and information in relation to Academic, commercial/ non- commercial industrial or scientific activities of any Governmental or non- Governmental organization. 8. To do or undertake researches/ conduct feasibility studies in relation to any other fields of activities such as agriculture, education, financial services, engineering, insurance industry or in any other commercial/ non- commercial or welfare activities carried out by any Governmental or non- Governmental Agencies beneficial to the entire citizenry of Sri Lanka.

Achievements

1) Conducting feasibility studies & researches in the Aviation and Maritime sectors in order to improve the service standards of these sectors.

2) Carrying out studies and researches of other commercial and non- commercial sector Government organizations.

3) Conducting researches in the private sector organizations.

4) Organizing lecture programmes, workshops, seminars and other training courses in the maritime and aviation sectors in association with the University of Colombo

Progress of 2012

1. Measuring service quality at Bandaranaike International Airport. Client : AASL This study deals with the development of Bandaranaike International Airport (BIA) in Sri Lanka and its efforts at increasing customer satisfaction and operational efficiency. This study is important not only in considering the utility service providers’ aim to increase customer satisfaction, but also how to face the challenge of increasing their operational and economic efficiency. The report also analyzes the results of the survey findings to determine passengers’ perception on service quality at BIA. At the end of this research report, it identifies the current strengths and weaknesses, the current facilities that need to be improved and expanded, discover new opportunities within the Bandaranaike International Airport as well as to provide recommendations to sustain its quality where it can maximize customer satisfaction.

2. Quality evaluation of Sri Lankan Airline Client : Sri Lankan Airline This study aims to evaluate the service quality of Sri Lankan airlines using the mean values of satisfaction and fuzzy measures. Service quality is a composite of different attributes; among them many intangible attributes are difficult to measure. Factor analysis is initially used to extract some independent common factors and fuzzy measures were calculated to evaluate the performance of inter-dependent attributes in each common factor. The study also examines the positioning of Sri Lankan Airlines relative to three other airlines. The analytic hierarchy process was adopted to determine the relative weights between each factor to position the three Airlines.

3. Promoting value added tourism in Sri Lanka With peace taking root in the country it is believed that the stage is set for several years of strong growth in tourist arrivals and tourism revenue. This study aims to investigate the areas that could be improved in the course of adding value to the tourism industry in Sri Lanka. The research uses “Michael Porter’s Value Chain

Model” and basic statistical techniques in the analysis. The research results are as follows. Majority of the tourists who visit Sri Lanka are satisfied with the current level of services and facilities rendered by government and other private entities. High level of interest has been shown in preference for local food and artifacts and a willingness to spend on these aspects. In addition, almost all of the tourists agree that they would recommend Sri Lanka as a holiday destination. However, the research reveals many aspects affecting adversely on the tourists overall spending. For example, over priced goods and services and locals’ lack of concern for their private space and freedom. The research emphasizes ways to address these issues and to enhance the retained revenue earned through tourism. It also recognizes the importance of a sustainable tourism industry.

4. Study on the visitation to Heritage sites Client : Sri Lanka Tourism Development Authority This study was conducted to understand real time implications on pricing and promoting of tourists’ attraction sites that would enable maximum utilization of the opportunities of Sri Lanka Tourism.

Ongoing Business Activities

01) . Workshops and seminars in relation to handling and transportation of hazardous chemicals. Dr. Rohan Perera (University of Colombo) has conducted a workshop on prevention of accidents and minimizing such accidents and courses of action that should be implemented in an accident that may occur in sea and air transportation and distribution of dangerous goods. This workshops focus on educating the government and private sector officials/ employees those who involve in handling and transportation of hazardous chemical. This ensure to minimize the danger associated with transportation and handling of hazardous chemicals.

02). Distribution of the handbook of Identification and protection from hazardous chemicals. A hand book for this purpose has been accomplished. Presently the steps have been taken to distribute among universities and higher educational institutes. This was the first time that a hand book of this nature has been issued to the public. • Planning to distribute this handbook among the schools which are having G.C.E. O/L and G.C.E. A/L classes with the consensus of the Ministry of Education. • Planning to conduct seminars on chemical handling and distribute this handbook among armed forces, Sri Lanka Police and Sri Lanka Civil Security Force.

03). A study to identify the ways and means to utilize man power of prisoners into national development. Funding Source: Ministry of Rehabilitation and Prison Reforms

Activities of the project 1) Appointment of Lecturer /Lecturers to commence the researches. 2) Selection of Research Assistants. 3) Design the questionnaires. 4) Forward for the approval from the Secretary, Ministry of Civil Aviation. 5) Produce the project proposals and seek the agreement from the relevant parties. 6) Seek the approval for Project Proposals & Budget from the Ministry. 7) Collection of data (first round) 8) Check the accuracy of questionnaires. 9) Collection of Data (1st round) 10) Check the accuracy of questionnaires 11) Start to collect data (2nd round) 12) Data analysis 13) Present the final report

50% of the project is completed. The rest will be completed as discussed after preparation of the short film by the Ministry of Rehabilitation and Prison Reforms.

04). Preparing the corporate plan – 2012/2016 Preparation of Corporate Plan for the Ministry of Civil Aviation for 2012/13 – 2016/17 was assigned to SAIRI and completed by the end of the January 2013.

05). To prepare a Disaster Management Plan for Katunayake International Airport & Colombo Harbor. (In collaboration with National Authority Chemical Weapon Convention & University of Moratuwa) Proposed and not yet commenced.

Activities of the project 1) Appointment of Lecturer /Lecturers to commence the researches. 2) Selection of Research Assistants. 3) Design the questionnaires. 4) Forward for the approval from the Secretary, Ministry of Civil Aviation. 5) Produce the project proposals and seek the agreement from the relevant parties. 6) Collection of data (first round) 7) Check the accuracy of questionnaires. 8) Start to collect Data (second round) 9) Data analysis. 10) Present the final report.

06).Commencing of Certificate/ Diploma courses which are leading to the degree of Transport and Logistics Management in collaboration with the University of Colombo. Activities of the project 1) Determine the demand for such programme through distributing a questionnaire among relevant institutions.

2) Ask for the approval of syllabus from the University.

3) Commencing of one year Diploma (SAIRI/IHRA)

Proposed New Projects for Future

Proposals for the following projects have been prepared and forwarded to relevant organizations for approval.

1) Study to Identify the Feasibility to Promote Domestic Air Transportation in Sri Lanka According to 2012 budget proposals three domestic airports were proposed to construct in order to strengthen and widen the domestic air transportation in Sri Lanka.

Some of the key objectives of enhancing domestic airport network that were looked into are to encourage domestic air passenger and air cargo movements within the country and to stimulate the growth of tourism industry in Sri Lanka.

2) Identified Research Areas in Relation to Housing and Urban Development Sector a. Research to identify the need in the housing market in segments of Urban & Rural Housing industry is a critical aspect of a stable economy with potential influence on the election of a government. All the members of the society demand housing facilities based on their own socio-economic and cultural aspects with sectorial variations for urban & rural areas. Therefore political appreciation from the public is much higher for the governments with strategic innovations towards housing provisions for the needy. Empirical evidences in the past in Sri Lanka also suggest it as true.

b. Research on the Relocation Process Adapted in "Sahasa" High Rise Project in Baseline Road, Colombo 09. The “Sahasa” as it was built to relocate squatter families, selected from 16 under- served settlements in the heart of Colombo, has been opposed with certain critics regarding the achievements of the project. It is said that majority of the dwellers of “Sahasa” Relocation project have been sold or rented out their residences and moved back to slums and shanties, where they were used to live. Since an actual evaluation of the project hasn’t been done, it is really hard to state the applicability of the relocation process adapted for similar scenarios in the future. Therefore a sound and scientific evaluation had to be performed covering all the dwellers including those who already left “Sahasa”. A study to evaluate the relocation process at “Sahasa” should be coined with the following objectives. • Identification of actual occupation ratio of the original dwellers of “Sahasa” accordance with the time line. • Analysis of social, economic, political and psychological factors affecting the success of the relocation process of squatter families in Colombo city: case study at “Sahasa”. • Recommendations and proposals leading to design a better relocation process.

3) Mattala Development Projects a) A study to Develop the social factors of the people living in the vicinity of Hambantota, Mattala International Airport (Ministry of Civil Aviation)

Objectives of the study- • To identify the benefits to the locals from Hambantota, Mattala International Airport before and after the erection. • To analyze the socio-economic environment affected by Hambantota, Mattala International Airport before and after the erection.

• Recommendations to produce substantial solutions to identified issues.

b) Development model for Hambantota, Mattala International Airport (Case studies) (Ministry of Civil Aviation) Hambantota, Mattala International Airport was planned to promote air passenger movements, decrease the pressure in peak hours at BIA and expand the export market promoting air cargo movements. It is essential to identify the possible issues and challenges that might pop up in the operations in the long run.

Objectives of the study- • To identify immediate and gradual issues and challenges of latest International Airport Developments in Asian region and other regions. • To identify the solutions used to rectify those issues. • To evaluate the factors considered in the investment process, size and structure of the investment, receiving/ received benefits. • To examine the immediate, mediate and long run contribution offered to the development of the respective country and the people by those airport development projects.

c) A study to strength the economy of the locals in Mattala (Ministry of Civil Aviation) Hambantota, Mattala International Airport Project would be a catalyst for the local economy and the infrastructure development. Therefore vast number of economic opportunities will rise which later will enhance the quality of life of the locals. It is trust worthy to examine the near future and expand the readiness of the locals to meet the requirements of those opportunities.

Objectives of the study-

• To identify the market oriented opportunities through an economic evaluation. • To identify and categorize direct and indirect employment opportunities and complementary requirements for those jobs. • To develop a mechanism to produce innovative entrepreneurs.

4) To study about the Public transportation system of Sri Lanka and its influence over the day today life of the people. • To identify the issues of the passengers of public transportation system. • To identify the challenges faced by the Private owners, Administrators and Managers of public transportation system. • To identify the issues faced by the ground level service providers (ex; drivers, conductors, etc…) of public transportation system. • To propose strategies and solutions to overcome and resolve those challenges and issues.

5) To study about the success of the govt. Development programmes in the agriculture sector. • To identify whether all the proposals, regarding the development of Agriculture sector, presented in “Mahinda Chinthana Vision For future” policy frame work are implemented. • If not what are the reasons for not yet being implemented. • To evaluate the success of the already implemented projects and to identify the people’s perception regarding those programmes. To identify the issues and challenges faced by the farmers.

6) To study about the Public perception on Economic Centers • To evaluate the success of achieving set goals of the establishment of Economic Centers.

• To identify the challenges and issues faced by the customers, vendors and producers at Economic Centers. • To identify the sectors to be developed and to be upgraded in Economic Centers. • To identify the areas to establish new Economic Centers. • To propose strategies and solutions to overcome and resolve those challenges and issues.

7) To study the process of conveying government message to public regarding present development activities. Funding Source: Department of Government Information Objective is to identify the issues regarding conveying the messages of government development initiatives to the public.

8) Examining the present gaps in tourists’ accommodation facilities and future requirement in Polonnaruwa District Funding Source: Sri Lanka Tourism Development Authority • A Gap analysis between the demand and supply for the tourist accommodation facilities in the district • Develop a data base for the existing tourist accommodation facilities in Polonnaruwa district. Site selections for the proposed resort development in Polonnaruwa district

9) Public Perception Survey about Civil Aviation in Sri Lanka Funding Source: Civil Aviation Authority Public perception about following aspects is to be investigated. • Employment structure in Aviation. • Economic benefits by Aviation • Social benefits by Aviation. • Perception about Government Aviation policy. Private sector participation in the opportunities in Aviation.

Financial Statement of Income & Expenditure

(From 01.01.2012 to 31.12.2012)

Rs. Rs.

Income

Fixed Deposit Interest Income 3,131,840.28

Net Project Income 490.118.00 3,621,958.28

Total Income 3,621,958.28

Expenditure

Salary Staff 1,434,907.92

Allowance Management staff 806,300.00

Directors Allowances 608,000.00

Audit Committee Allowances 27,500.00

Donations for Gov. programs 250,000.00

EPF & ETF payment 183,902.93

Communication Expenses 121,233.80

Building Rent 554,322.58

Vehicle Rent 480,000.00

Purchasing Stationeries 120,595.90

Petty Cash Expenses 114,067.73

Repairing office equipments 46,204.00

Financial Expenses 36,027.18

Office Maintenance & Other Expenses 79,115.21

Travelling expenses 32,120.00

Total Expenditure 4,894,297.25

Surplus/Deficit (1,272,338.97)

Source – Internal Statistics – Shipping and Aviation Information & Research (Pvt) Ltd.