By Adolf
Sri Lanka’s national carrier is once again at the centre of controversy — not merely because of losses, but because of what increasingly appears to be a serious conflict of interest at the highest level of governance. For several months, the most profitable route for SriLankan Airlines has been Australia. The airline operates near full capacity to Sydney and Melbourne, often running double daily frequencies during peak periods. Demand is strong. Load factors are high. Yields are robust. By every commercial measure, Australia has become the airline’s top-performing long-haul market. In any commercially run airline, the response would be straightforward: add capacity, increase frequencies, optimise fleet deployment, and lock in market share.
That proposal, notably, did emerge from within the airline itself. However, Chairman Sarath Ganegoda reportedly rejected calls to expand Australian operations. Instead, strategic focus was diverted toward launching direct services to a different destination — a move that industry observers say carries higher risk and uncertain returns. While SriLankan hesitated, a competitor moved decisively.
The Entry of Jetstar
This week, the aviation industry confirmed that Jetstar Airways will commence direct flights between Melbourne and Colombo from August 27, 2026. The logic behind the move is clear: strong, unmet demand between Australia and Sri Lanka. Jetstar’s entry is not speculative — it is demand-driven. Where capacity gaps exist, markets respond. And in this case, the gap was left open by SriLankan Airlines itself.
Under normal competitive circumstances, this would simply be market dynamics. But the surrounding governance context raises troubling questions.
The Hayleys Connection
The General Sales Agent (GSA) for Jetstar’s Sri Lankan operations is Hayleys Aviation, part of the Hayleys Group controlled by businessman Dhammika Perera. Being a GSA is not a minor administrative role. It is commercially powerful. A GSA:
• Sells tickets and manages local distribution
• Earns overriding commissions (ORC)
• Typically holds ticket revenues before remittance
• Provides crew services and logistical support
• Benefits from ancillary commercial arrangements
Every seat sold on the Jetstar route generates revenue streams for the local agent. Given expected demand, this is potentially a multi-million-dollar annual business. Here lies the critical issue: Sarath Ganegoda, Chairman of SriLankan Airlines, also serves on the board of Hayleys. This dual position creates the appearance — at minimum — of a significant conflict of interest.
Governance Breakdown
Jetstar is entering precisely because SriLankan did not expand to meet demand. The national carrier left revenue on the table. A private competitor has now stepped in. And the commercial beneficiary of that competitor’s local operations is a company whose board includes the sitting Chairman of SriLankan Airlines. Even if all actions were technically compliant, governance is not only about legality — it is about fiduciary duty and perception. A Chairman’s primary obligation is to maximise value for the entity he leads — particularly when that entity is state-owned and funded bymassive grants from taxpayers. When strategic decisions appear to benefit a private affiliate over the national carrier, serious questions arise. Did SriLankan forgo expansion because of fleet constraints? Were formal conflict disclosures made? Was the Board fully apprised? Did the shareholder — the Government of Sri Lanka — review the implications?These questions demand transparent answers.
The Commercial Risk
Jetstar is a low-cost carrier. Its reported introductory fares of around AUD 339 significantly undercut SriLankan’s pricing. While product positioning differs, price elasticity on migrant and leisure traffic is substantial. If Jetstar captures a meaningful share of the Australia–Sri Lanka market, SriLankan’s yields will compress. Load factors may fall. Revenue could decline on what has been one of its strongest routes.This comes at a time when the Government has already injected approximately LKR 20 billion in budgetary support, with additional assistance under discussion. Taxpayer exposure remains significant. If the airline loses its most profitable corridor, recovery becomes far more difficult.
Capitalism or Cronyism?
True capitalism rewards efficiency, innovation, and prudent risk-taking. It does not rely on influence within state institutions to manufacture commercial opportunity. Markets function best when competition is transparent and merit-based. However, when public assets appear to be weakened while parallel private interests stand to benefit, the line between healthy competition and cronyism becomes dangerously blurred.
SriLankan Airlines is not merely a balance sheet entry or a struggling state-owned enterprise. It represents national connectivity, skilled employment, tourism access, bilateral air service rights, and a measure of sovereign aviation presence. A national carrier carries more than passengers; it carries economic strategy and national branding.If governance standards at board level are compromised — whether through conflicts of interest, weak oversight, or misaligned incentives — no restructuring plan, financial engineering exercise, or operational turnaround strategy will succeed. Governance is the foundation. Without it, even the strongest routes and most capable management teams cannot deliver sustainable results. The Australian route, by most industry assessments, has been one of the airline’s strongest-performing sectors in recent times. In a competitive aviation environment, profitable long-haul routes are strategic assets. They should be strengthened, frequency-optimised, and commercially leveraged — not diluted or surrendered through questionable strategic decisions. Any shift in route strategy must be justified transparently on clear commercial grounds, not obscured by opaque decision-making.The issue is not competition. Sri Lanka benefits from greater connectivity and increased international carrier presence. The concern arises when policy decisions, regulatory discretion, or governance failures create asymmetric outcomes that weaken the national carrier while advantaging select private interests.With British Airways set to operate direct services to Sri Lanka — reportedly with local support from Hayleys PLC — competitive pressure on SriLankan Airlines will intensify further. Competition in itself is not the problem; indeed, it can stimulate efficiency and service quality. But if the national carrier enters such competition structurally weakened due to internal governance failures, the outcome may not be market-driven efficiency — it may simply be decline. What remains to be seen is whether regulators, shareholders, and Parliament will examine this matter with the seriousness it warrants. The stakes are not ideological. They concern accountability, transparency, and the integrity of public institutions.Sri Lanka must decide whether it wishes to uphold genuine capitalism — where success is earned through performance — or tolerate a system where influence shapes outcomes. The difference will determine not only the future of SriLankan Airlines, but also the credibility of economic governance in the country. Before irreversible damage is done to the national carrier, that distinction must be confronted clearly and decisively. The President needs to wake up and look at this problem with a fresh lens . Start by appointing an Independent Chairman with no conflicts .