Air Ceylon was established in 1947 as state-owned flag carrier airline. In 1947, the government purchased three DC-3s, which were named after queens Sita Devi, Viharamaha Devi, and Sunethra Devi.

On 10 December 1947, with Captain Peter Fernando at the controls and a complement of 16 passengers, Sita Devi took off from Ratmalana runway soon after 8 am, inaugurating the Air Ceylon commercial flights, and headed for Palaly. After a brief stop there, the Dakota proceeded to Madras, returning to Colombo by the same route later that day.

Madras-Jaffna-Trichinopoly Douglas C-47 Skytrain services to London with two Douglas DC-4s leased from Australian National Airways (ANA) commenced in summer 1949, after ANA acquired a 49% stake in Air Ceylon earlier that year.^[3][4] Flights to Sydney in co-operation with ANA were started on 20 July 1950 via Singapore and Darwin.^[5]

In 1949, Australian National Airways (ANA) owned a 49% stake in Sri Lanka's countrywide service. Air Ceylon discontinued all long-haul fights and gave up its partnership with ANA in September 1953 after BOAC had introduced the de Havilland Comet between London and Colombo.^[6][7] The 49 percent stake held by ANA was taken over by KLM in 1955. In 1960s KLM's shareholding reduced to 25%.^[8]

Flights to London were commenced again on 21 February 1956 using a Lockheed 749A Constellation leased from KLM.^[9] The aircraft was replaced by a Lockheed L-1049 Super Constellation in 1958, followed by a KLM Lockheed L-188 Electra that was leased until the partnership with KLM ended in November 1961.^[10] A Comet from BOAC allowed the relaunch of flights to London in April 1962. The aircraft was replaced by a leased Vickers VC10 in November 1965.^[11]

From 1964, the Hawker Siddeley HS 748 became the aircraft mainly used on Air Ceylon's short-haul routes to Madras and Bombay, along with the Aérospatiale N 262 that was bought in 1967. When Bandaranaike International Airport was completed in 1967, Air Ceylon opened its hub there. A Hawker Siddeley Trident jet airliner was purchased in 1969, and it was operated on regional routes until it was withdrawn in August 1979.^[12][13]

In 1972, Union de Transports Aériens (UTA) became Air Ceylon's partner, selling one Douglas DC-8 to the airline and giving technical support. UTA ended the partnership in September 1976, leaving Air Ceylon without a European aide.^[14] In 1979, Air Ceylon was shut down by the Sri Lankan government due to bankruptcy, and Air Lanka was established as new national carrier.

During that period, Air Ceylon offered multiple-stopover flights, which were leaving Colombo on three routes - to Europe, to Australia, and a regional one to India. KLM was the important partner airline, serving as general sales agent for Air Ceylon.^[15][16]

Due to more modern aircraft with a longer range, fewer stops were required on the long-distance routes, reducing travel time. Air Ceylon passengers could reach additional destinations (in Europe and towards Australia) with co-operative BOAC or Qantas flights.^[17]

The co-operation with BOAC and Qantas was reduced at that time, instead a codeshare-like agreement was signed with Indian Airlines. As a consequence, Air Ceylon relaunched services to Australia and expanded its European network.^[18][19][20]

Before ending operations in 1979, Air Ceylon had one Hawker Siddeley HS 748 and one Hawker Siddeley Trident.

Over the years, Air Ceylon operated these aircraft types:

• On 21 December 1949, an Air Ceylon Douglas C-47 Dakota (registered VP-CAT) was damaged beyond repair in a crash landing at Tiruchirapalli Airport following a scheduled passenger flight from Jaffna. The 21 passengers and three crew members survived the accident.^[21]
• On 7 September 1978, an Air Ceylon Hawker Siddeley HS 748 (registered 4R-ACJ) was destroyed by a on-board bomb and subsequent fire while parked at Ratmalana Airport. Two pilots had been carrying out predeparture checkups.^[22]