March 06, Colombo (LNW):The closure of the request for proposals regarding the divestment of SriLankan Airlines, initially scheduled for March 5, has been extended by an additional 45 days, as announced by Shipping and Aviation Minister Nimal Siripala De Silva.
The extension is attributed to concerns over delays faced by tourists and passengers, coupled with the airline’s substantial debt, reaching approximately USD 1.2 billion. These factors may pose challenges for potential investors considering taking over the airline.
Minister De Silva highlighted the difficulties faced by the state in maintaining the airline, emphasizing the jeopardy of over 6,000 jobs if the airline were to shut down. In response, President Ranil Wickremesinghe has proposed injecting over USD 500 million into the airline, aimed at reducing its debt by almost half.
The proposed financial injection involves absorbing the airline’s aviation fuel bill, settling dues owed to state banks (Bank of Ceylon and People’s Bank), and addressing obligations to the Treasury. Additionally, cost-cutting measures, such as restricting foreign tours and holding bi-weekly reviews to control salary increases, will be implemented.
Minister De Silva explained that these measures, combined with reinvesting government capital for urgent maintenance, aim to make the airline more appealing to potential investors. The anticipated proceeds from the divestment, exceeding US$ 500 million, will be utilized to repay state banks, settle outstanding debts, and prioritize employee welfare.
By divesting the airline, the government aims to ensure that the burden does not fall on the taxpayer, drawing attention to the contrast with the past privatization to Emirates airline. During that period, the airline operated profitably with no job cuts, but mismanagement and corruption after government takeover led to substantial debt, necessitating regular taxpayer-funded support.
