Maldivian says air fares can't be reduced without govt subsidy
The government didn't give subsidy for last two years; that's why ticket prices had to be hiked, according to the MD of the national airline.
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By
Mariyam Umna Ismail
Maldivian, the national carrier operated by Island Aviation, will not be able to reduce the cost of domestic flights as long as the government does not provide subsidy, its managing director Mohamed Mihad said on Monday.
The company's top executives were summoned for a meeting of the State Owned Enterprises Committee of the parliament on Monday in connection with the hike in ticket prices for domestic flights.
Speaking at the meeting, Mihad said that domestic fares were reduced in 2019 under an electoral pledge. He said:
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That year, the government gave MVR 35 million as subsidy
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Despite subsidies, the company suffered a loss of MVR 126 million in the same year
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The government did not provide subsidy for last two years
"It will be very difficult for the company to continue in this manner; as long as domestic fares are controlled and no subsidy is given. We are trying to find ways to maintain the price as much as possible and provide services to the people well while also increasing our revenue," he said.
The hike in ticket prices, Mihad said, was necessitated due to the company's poor financial health and higher operating costs. He pointed out:
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Fuel prices have increased; jet fuel that was sold at MVR 12 per litre before Covid stood at MVR 22 per litre in September
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There has been an increase in the number of airports required to travel in the last four years; now Maldivian is flying to 14 airports, but the airline keeps incurring losses due to being forced to travel even if the load is not met
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Increased staff costs due to the increase in the number of destinations
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The life cycle of Dash-8 planes are 25 years; maintenance costs are high as they have now aged and are no longer manufactured, while it is extremely difficult to find spares
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Between late last year and March, the company brought in three new ATR aircraft; the company hopes to completely revamp its fleet in the next one-and-a-half years, which will also raise costs
Pointing out that the company's finances are in dire straits, Mihad said they are now exploring ways to raise revenues to tide over the crisis. He pointed out:
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Starting of refuelling services at N. Maafaru airport
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Maafaru airport runway expansion; commercial flights expected to increase in Maafaru
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Maafaru airport terminal expansion to begin soon
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Plans are afoot to expand the jet parking space at the airport
Even after Covid, Island Aviation's financial health has been on the same track. The Privatisation and Corporatisation Board (PCB), in its report on data for the first quarter of last year for state-owned companies or SOEs, said:
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The company does not have the capacity to pay short-term debts from its revenues
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The company's debt stood at MVR 529.6 million
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The long-term liabilities are higher than the company's assets
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Cash flow is not enough to meet the expenses of the company
