By: Saurabh Sinha
NEW DELHI: Financially-strapped could soon initiate a move to divest stake in some state-owned companies, including SriLankan Airlines which has substantial access to India and is a major player for flying people between India and rest of its global network via the hub Colombo.
And thanks to the Modi government’s consistent policy of not easily increasing flying rights for foreign countries so that Indian airlines can grow their wings, state-owned SriLankan’s likely divestment may see significant interest from some cash-rich mega carriers of nearby hubs (mainly Gulf and West Asia) that have for years been in vain trying to get more flights to India. An Indian carrier with deep pockets is also being seen as a potential bidder, along with investment funds.
“The Sri Lankan government has appointed a ‘State-Owned Enterprise Restructuring Unit’ to help privatise or restructure such organisation. Their decision (for SriLankan) is awaited.
India is a huge market for SriLankan. Pre-Covid we had 120 weekly flights to 14 Indian cities and are currently at 70 weekly flights to nine Indian cities,” SriLankan Airlines CEO Richard Nuttell told TOI recently. The state owns 99% of the airline, with the remaining 1% being with ex-employees.
Directorate General of Civil Aviation (DGCA) data for January- March 2020 shows SriLankan as the ninth biggest airline in terms of flying passengers in and out of India with a 3.1% share of the pie (same as Oman Air at the eighth spot). A significant number of passengers from India transit via Colombo to London and Paris in the west to Tokyo and Sydney in the east.
“We have three different kind of traffic flows — the Sri Lankan diaspora; inbound tourists for which India was the biggest source market and transit traffic between India and rest of our network,” he added. In pre-covid FY 2018-19, 49% of passengers from India would transit via Colombo. In April-December 2022, this number rose to 60%, said the CEO.
While historically SirLankan used to see transit traffic essentially between south India and the Gulf, at the moment it is witnessing a shift in the opposite direction, especially Australia.
A sale is likely as SriLankan can’t borrow money because the island nation defaulted on its external debt repayment. It is running on its own cash generation. Ironically weakening of the Sri Lankan has helped the airline whose revenue is essentially in US dollars. The exchange rate has fallen from 188 Sri Lankan Rupees to a dollar in January 2022 to about 370 now.
If privatised, partially or fully, SriLankan will come a full circle. The government had in 2010 acquired the 44% stake Emirates had in SriLankan for $53 million. The Dubai-based carrier had in the late 1990s bought this stake.
“Pre-Covid we used to have 27 aircraft. Right now we have 24 — 12 Airbus A330s and as many A320s. We have issued a request for proposal to dry lease 10 aircraft (five narrow and as many wide bodies) to bring fleet size back to 27 as some planes will be returned to lessors,” the CEO said.
