From recording a profit of Rs. 4.9 billion in 2008 to accumulating losses exceeding Rs. 630 billion over the years, SriLankan Airlines continues to grapple with financial difficulties, with rising fuel costs and geopolitical tensions adding further pressure on the national carrier.

SriLankan Airlines is facing a severe financial crisis amid the ongoing conflict in the Middle East, instability in West Asia and rising global fuel prices, according to the Ministry of Finance.

The concerns were highlighted in the Ministry’s Mid-Year Fiscal Position Report, which states that the national carrier recorded a loss before tax of Rs. 35.6 billion during the first three months of the 2026/27 financial year.

According to unaudited management accounts submitted to the Ministry, the airline generated revenue of Rs. 82.8 billion during the period, compared to Rs. 62.6 billion in the corresponding period of the previous financial year.

Despite the increase in revenue, expenditure surged by 40.4 percent, rising from Rs. 67.8 billion to Rs. 95.2 billion.

The report identifies a 93 percent increase in aviation fuel costs, driven by the conflict in the Middle East, as the primary reason for the sharp rise in expenditure.

Higher fuel costs and foreign exchange-related pressures contributed to an estimated operating loss of Rs. 12.5 billion during the quarter.

The Ministry further highlighted persistent structural weaknesses, liquidity constraints, high maintenance costs and the airline’s substantial debt burden as major challenges affecting its financial sustainability.

The Government has also had to intervene to address the airline’s financing requirements. Following the restructuring of a 175-million-dollar loan, a restructured banking liability of 126.5 million dollars was transferred to the Government’s debt stock on March 20. A further 30 million dollars was provided to meet the airline’s short-term financing requirements.

However, the airline’s current financial difficulties are part of a much longer history of losses and controversy.

In 2008, when the Government took control of SriLankan Airlines, the national carrier had recorded an annual profit of Rs. 4,899 million.

The circumstances surrounding the takeover became controversial following allegations that a powerful politician had pressured the airline to delay a scheduled flight from London to Sri Lanka to accommodate his return journey. The airline reportedly refused to comply.

Following the takeover, SriLankan Airlines entered a prolonged period of financial losses.

The airline recorded losses of Rs. 9,996 million in 2009, Rs. 6,034 million in 2010 and Rs. 202 million in 2011. The losses subsequently increased, reaching Rs. 17,208 million in 2012, Rs. 26,857 million in 2013 and Rs. 31,365 million in 2014.

The airline continued to record substantial losses in subsequent years, including Rs. 41,700 million in 2019, Rs. 44,139 million in 2020 and Rs. 49,704 million in 2021.

The financial situation deteriorated further in 2022, when losses reached Rs. 163,583 million, followed by Rs. 71,306 million in 2023.

The cumulative losses incurred by the airline over the years have exceeded Rs. 630 billion.

Management appointments and allegations of irregularities have also remained central to questions surrounding the airline’s decline.

Following the Government takeover in 2008, Nishantha Wickremesinghe, the brother of Shiranthi Rajapaksa, wife of then President Mahinda Rajapaksa, was appointed Chairman of SriLankan Airlines.

Allegations subsequently emerged concerning the management of airline resources and financial decisions during his tenure. Legal proceedings are currently underway over alleged losses associated with that period.

Another key figure who came under scrutiny was Kapila Chandrasena, who was appointed Chief Executive Officer in July 2011.

The J.C. Weliamuna report and audit reports raised concerns about his conduct and financial irregularities within the airline. He was removed from his position following the change of Government in 2015.

However, Chandrasena was reappointed to SriLankan Airlines during the 52-day Government that began on October 26, 2018, when Mahinda Rajapaksa returned as Prime Minister.

The reappointment raised questions given the allegations and concerns that had previously emerged regarding his tenure.

The controversial Airbus deal also became a major issue in investigations into the airline’s financial affairs.

During court proceedings relating to the deal, allegations were presented concerning a payment of Rs. 100 million to Namal Rajapaksa, who is currently in remand custody. The related matters remain subject to legal proceedings.

With losses exceeding Rs. 630 billion over the years, the latest figures once again highlight the financial challenges facing SriLankan Airlines.

While the current crisis has been intensified by rising fuel prices and geopolitical instability, the airline continues to face longstanding structural weaknesses, debt obligations and questions surrounding its management.

The Ministry of Finance’s latest assessment underscores the continuing difficulty of making the national carrier financially sustainable, with the burden of its financial challenges extending beyond the airline itself to the Government and, ultimately, the public.

The Ministry’s report also highlights the wider financial exposure arising from the airline’s difficulties, with continued Government assistance raising concerns about the burden on public finances.

Sri Lanka is preparing to reapply for trade concessions under the European Union’s Generalised Scheme of Preferences Plus (GSP+), with the government aiming to secure continued preferential access to the EU market beyond 2027 under a revised 10-year framework.

Deputy Minister of Finance and Planning Prof. Anil Jayantha Fernando disclosed this in Parliament today (05), responding to a question raised by Member of Parliament Ravi Karunanayake under Standing Order 27(2).

According to the Deputy Minister, the European Union’s renewed Generalised Scheme of Preferences (GSP) framework is scheduled to come into effect on January 1, 2027, and will remain in operation until December 31, 2036.

Under the new framework, countries currently benefiting from GSP+ concessions will be required to submit fresh applications to continue receiving preferential access to the European market. However, existing beneficiaries will be granted a transitional period until the end of 2028 to complete the reapplication process.

Sri Lanka is planning to submit its application within the period from January 1, 2027, to December 31, 2028, with the government working towards meeting the requirements necessary to retain its GSP+ status, the Deputy Minister confirmed.

GSP+ benefits and eligibility requirements

The GSP+ is a special incentive arrangement under the EU’s Generalised Scheme of Preferences designed to support vulnerable developing countries by providing preferential access to the European market in return for commitments towards sustainable development and good governance.

Under the arrangement, beneficiary countries must ratify and effectively implement 32 international conventions covering human rights, labour rights, environmental protection, climate change and good governance.

The revised framework will continue to require beneficiary countries to demonstrate their commitment to these international conventions, including maintaining their ratification, ensuring effective implementation and meeting relevant reporting obligations.

To qualify for GSP+, countries must also meet the EU’s vulnerability criteria relating to a lack of export diversification.

Under this requirement, the value of EU imports from the seven largest sections of GSP-covered product categories must account for more than 75% of the EU’s total GSP-covered imports from the respective country over a three-year period.

Duty-free access to approximately 66% of EU tariff lines

One of the key advantages of GSP+ is the substantial reduction in import duties on eligible exports to the European Union.

Beneficiary countries receive complete suspension of customs duties on products covering approximately 66% of all EU tariff lines, including sensitive products, subject to specified exceptions.

These concessions provide preferential market access for eligible exports and are particularly relevant to developing countries seeking to strengthen their international trade and export competitiveness.

Monitoring and compliance under the new framework

The European Union monitors the effective implementation of the 32 international conventions and compliance with related reporting requirements by GSP+ beneficiary countries.

The monitoring process includes engagement with national authorities and relevant stakeholders, as well as monitoring missions to beneficiary countries.

The EU also considers reports from the International Labour Organization (ILO) and the United Nations, together with information gathered through engagement with civil society organisations.

The findings are presented in a joint report by the European Commission and the High Representative of the Union for Foreign Affairs and Security Policy to the European Parliament and the Council. These reports are published every three years.

Under the renewed framework, greater emphasis will be placed on effective implementation and continuous progress in meeting international commitments.

For GSP+ beneficiaries, this will involve structured engagement and action-oriented monitoring aimed at encouraging sustained reforms.

Furthermore, countries applying for GSP+ status will be required to submit a forward-looking action plan outlining how they intend to implement the 32 relevant international conventions.

Graduation from the GSP+ arrangement

The revised framework also sets out conditions under which a beneficiary country may cease to receive GSP+ benefits.

Unlike countries receiving Standard GSP benefits, GSP+ beneficiaries are not subject to the graduation mechanism that removes preferential treatment for specific product groups.

However, a country will leave the GSP+ arrangement if it obtains an agreement providing preferential market access or exceeds the World Bank’s definition of a low-income or lower-middle-income country for three consecutive years.

Government explores long-term trade arrangements with EU

Meanwhile, the government is expected to examine longer-term options to strengthen the country’s access to the European market through deeper economic cooperation or a possible trade agreement with the European Union, the Deputy Minister of Finance and Planning, Prof. Anil Jayantha Fernando said.

The government is therefore working towards securing continued GSP+ eligibility under the revised framework while also considering alternative arrangements to strengthen Sri Lanka’s long-term trade relationship with the EU.

The new 10-year GSP framework, which takes effect on January 1, 2027, will provide the basis for the next phase of preferential trade arrangements between the European Union and eligible developing countries.

For Sri Lanka, successfully completing the reapplication process and meeting the updated eligibility and compliance requirements will be important in maintaining preferential access to the European market and supporting the country’s export sector., the Deputy Minister added.