Sunday, February 5, 2023

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Govt gets set to privatize Sri Lankan Airlines amidst plans to lease 11 aircraft

The Sri Lankan Government is getting set to privatize the national carrier, Sri Lankan Airlines in a bid to restructure the debt-ridden airline, faced with unprecedented economic turmoil on a national scale, can no longer afford to fund the carrier.

Sri Lankan Airlines CEO Richard Nuttall said that Sri Lanka benefited from pent-up travel demand despite global headwinds and is open to privatization

“The airline is also carrying quite a lot of debt .So if privatization provides some funding that allows us to reduce some of that debt, that also helps our ongoing operations and reduces the debt burden and makes future growth a much more realistic option,” he said.

Despite privatization efforts, Sri Lankan Airlines Chairman Ashok Pathirage revealed plans to lease up to 11 aircraft of which the lease contracts are expiring over the next year.

The Cabinet of Ministers has approved to replace of around 9-11 aircraft that are going out as per the lease agreement, he claimed.

“Based on the age of the aircraft, cost and availability, we have to analyse carefully what is good for the airline and for the country,” he explained.

As per Pathirage, lease contracts of around four aircraft are due to expire early next year from a fleet of 24 total aircraft. SriLankan Airlines had 27 aircraft before the COVID-pandemic, but it has now reduced to 24.

A decision on whether to restructure subsidiaries of SriLankan Airlines or privatize the entire entity as a single entity would be made soon by a committee, Aviation Minister Nimal Siripala de Silva said.

SriLankan Airlines official had been summoned to the committee earlier this week. The Ministry of Aviation first proposed that 49 percent of the catering unit, and 49 percent of ground-handling – which had given over to SriLankan – be sold to settle its debt. Then 49 percent of SriLankan be sold.

“There are two schools of thought,” Minister de Silva said. “At the cabinet the matter was discussed and his Excellency the President has referred the matter to the Treasury.”

Catering and ground-handling are captive profitable businesses which may represent easy money for those who buy the firms, according to some observers.

Ground-handling, which is a separate business from airline operations, however also represents easy money for the airline and can potentially bring tax revenues to the state if spun off and taxed appropriately.

Meanwhile Minister de Silva said the Chairman and Board was summoned before a Treasury Committee which is looking in to the matter.

“And they are discussing what is the best way out,” he said. “We will be guided not by a political decision but by a professional decision that will be given. So I think in one or two weeks they will consider this and given us a professional opinion.”

Sri Lankan Airlines has about a billion US dollars of debt including a sovereign guaranteed debt, and arrears to state-run Ceylon Petroleum Corporation on fuel bought before 2019.

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