Maldivian, the national flag carrier starts making profits after 3 years
Island Aviation Services (IAS), the operator of the Maldivian national flag carrier airline, is celebrating a significant turnaround in its financial performance this year. After three years of losses, the company has bounced back into profitability, posting a net profit of MVR 10.74 million in the first quarter of 2023.
The encouraging news was revealed in the first quarter financial statements released by the Privatization and Corporatization (PCB) this week, signaling a positive shift in the financial fortunes of the national airline.
The key factor contributing to this newfound profitability was the remarkable increase in revenue during the first three months of the year. IAS reported total revenue of MVR 557.60 million, marking an impressive 17% growth compared to the final quarter of the previous year and an astounding 27% increase over the first quarter of the previous year. This revenue boost was largely attributed to higher income generated from domestic flights, regional flights, and seaplane services. Additionally, there was an 88.9% surge in flights landing at IAS-operated airports, while ground handling revenue saw an astonishing 218% increase.
One factor that significantly contributed to the profit surge was a notable reduction in expenses during the first quarter of 2023. IAS trimmed its expenses by MVR 16.54 million, marking a 16% decrease. This was achieved primarily by reducing the costs associated with chartering aircraft and other expenses related to flight operations. Moreover, the company reduced marketing, promotion, and public relations expenses. However, administrative expenses and salaries for employees and directors saw an increase during this period.
Despite these promising developments, IAS remains financially fragile, as indicated in the PCB report. Several financial indicators still raise concerns about the company’s financial stability. For instance, the quick ratio, which measures the company’s ability to pay short-term debt with cash, improved but remains at a low level, increasing from 0.38 to 0.47. The cash ratio, which assesses the company’s ability to pay short-term debt with cash on hand, improved from 0.02 to 0.01 but is still insufficient to cover outstanding debts. The current ratio, which evaluates the company’s ability to pay its debts using hard assets, increased from 0.44 to 0.53, but the financial situation remains challenging.
IAS’s outstanding receivables from ticket sales and other services on credit stand at MVR 663.8 million, while the company has debts totaling MVR 2 billion owed to various parties. These figures underscore the financial pressure the company is still under.
Critics have pointed out that IAS heavily relies on government subsidies, which has allowed them to compete with private airlines offering airfares at subsidized rates. Private airlines in the Maldives have been running without government support, raising questions about the fairness and sustainability of IAS’s current operating model.
While the latest financial results demonstrate a much-needed improvement in IAS’s performance, continued efforts to address its financial viability are essential for the long-term success of the national airline.