Air Pocket

July 17, 2007 (LBO) – Sri Lankan Airline's consolidated after tax profits dived 50 percent to 862.1 million in the year ended March 2007 the carrier said, as tourists shied off the war ravaged island and fuel costs climbed . . "The largest single factor that affected the airline’s bottom-line was the return to hostilities in Sri Lanka’s internal conflict," SriLankan's managing director Timothy Clark said in a statement.

"The resultant travel advisories against visiting Sri Lanka brought very serious consequences on traditional markets such as Japan, the United Kingdom, Germany and France."

Fighting between Tamil Tiger guerillas and the military flared over 2006 culminating in air raids near the international airport this March.

Clark also heads Emirates which manages the airline on a 10-year agreement and is also the largest shareholder after the government of Sri Lanka.

The airline says "discussions are continuing" with the government over the future of the agreement.

The airline is complaining that the uncertainty over the extension of the management deal with Emirates ,which expires on March 31, 2008 is making it difficult to implement long term plans.

Mitigating

Chair