SriLankan Airlines losses have surged sharply in 2025 as the weakened rupee and heavy dollar debt intensified financial pressures. A recent Finance Ministry report shows that rising forex losses overshadowed revenue improvements despite growing passenger demand.
SriLankan Airlines losses escalate as forex pressures and debt strain operations
Sri Lanka’s national carrier is once again facing intensified financial turbulence, with SriLankan Airlines reporting a steep rise in group net losses up to August 2025. According to the Finance Ministry’s latest report, the airline posted a staggering 12.6 billion rupees in group net losses, a dramatic jump from 4.2 billion rupees recorded during the same period a year earlier. Although the airline saw improved passenger numbers and higher overall revenue, these gains were overshadowed by the mounting financial burden caused by the depreciating rupee and significant exposure to dollar-denominated debt.
The airline recorded a 7 percent increase in revenue, reaching 95.4 billion rupees. This uptick came on the back of strong passenger growth, with volumes rising 22 percent. The increase helped lift load factors from 76.4 percent to a healthier 82.6 percent, marking a positive sign for operational efficiency. However, the improved performance in the passenger segment was not enough to counterbalance weaknesses in other parts of the business. Cargo revenues fell by 1.8 billion rupees, while other income declined by another 2.5 billion rupees, ultimately limiting the airline’s ability to fully capitalize on rising travel demand.
Operating expenses grew only 3 percent during the period, supported in part by falling global fuel prices. This slowdown in cost increases would typically offer some relief, but SriLankan Airlines continues to face structural financial challenges that run deeper than routine operational fluctuations. Despite managing to secure a 4.9 billion-rupee profit before accounting for forex losses and financing costs, the airline recorded a 4.1 billion-rupee loss from air transport operations alone. It was the contributions from ground handling and training services that momentarily kept the carrier above water before broader financial pressures took hold.
The most significant setback came in the form of massive forex losses totaling 8.5 billion rupees during the review period. As the Sri Lankan rupee continued to weaken, the airline’s exposure to dollar-denominated loans became increasingly problematic. The currency fell from 292.58 per dollar in December 2024 to 302.44 by the end of August 2025, and has since slipped further to around 308 rupees per dollar. This depreciation has amplified the cost of servicing debt owed to foreign bondholders and local banks, placing heavy strain on the company’s bottom line.
SriLankan Airlines’ financial troubles unfold amid broader concerns over the long-term implications of the country’s exchange rate policies. The Sri Lankan rupee has depreciated from 4.77 per dollar at the central bank’s inception to over 300 today, raising questions about monetary policy direction and the effectiveness of market interventions. Much of the steep depreciation observed in recent decades traces back to the International Monetary Fund’s policy changes in 1978, which critics argue enabled unchecked inflationary practices and weakened exchange rate stability in many developing economies.
Critics of the flexible exchange rate system contend that it remains one of the most dangerous monetary regimes because it can generate confidence shocks and sudden currency collapses even amid mildly deflationary policies. These vulnerabilities were on full display in 2022 when Sri Lanka’s rupee collapsed following a failed float compounded by aggressive interest rate cuts and the enforcement of surrender rules. That event inflicted enormous losses on SriLankan Airlines and several other state-owned enterprises with heavy dollar exposure, while also inflating the country’s national debt overnight.
According to the Finance Ministry, the airline’s accumulated losses have now reached 631.5 billion rupees as of August 2025, highlighting the extraordinary scale of financial distress. This prolonged deterioration underscores the need for urgent reforms and decisive action to restore viability. In response, the Cabinet of Ministers has approved a restructuring proposal aimed at addressing the airline’s local debt obligations. This plan includes converting or deferring selected government and state-owned bank loans, a move expected to ease liquidity pressures and support interim financial stability.
The Finance Ministry notes that these measures are part of broader long-term restructuring initiatives intended to guide the airline toward sustainability. While the immediate goal is to stabilize operations and halt the rapid escalation of losses, the long-term vision calls for deep structural reforms, potential strategic partnerships, and improved governance practices. The challenges remain immense, but policymakers believe that coordinated efforts across fiscal, monetary, and operational domains could eventually place the national carrier on a more stable trajectory.
As SriLankan Airlines navigates one of its most difficult periods, the future of the national carrier hangs in the balance. The airline’s recovery will depend on a combination of disciplined financial management, a more stable macroeconomic environment, and reforms capable of addressing the systemic issues that have long hindered its performance. Whether these efforts will be enough to reverse the rising tide of losses remains to be seen, but the urgency of the situation has never been clearer.