By: Staff Writer
October 16, Colombo (LNW):Sri Lanka’s new government has decided to abandon plans to sell its national carrier, SriLankan Airlines, despite its financial challenges. Instead, the focus will be on restructuring the airline to ensure a more profitable future.
The decision comes after newly elected President Anura Kumara Dissanayake’s directive to maintain the airline as a state-owned entity that Sri Lankans can take pride in, according to the airline’s new chairman, Sarath Ganegoda.
Previously, the then government had initiated a plan to sell a 49% stake in the airline while retaining 51% control.
However, the process did not proceed as intended due to a lack of suitable investors. Six parties had initially expressed interest, but none were qualified to advance in the bidding process.
Anura Kumara Dissanayake, a left-leaning politician from the National People’s Power Party, won the recent presidential election with a promise to halt the sale of state assets.
His government swiftly dismantled the unit responsible for selling loss-making state agencies, including SriLankan Airlines. Ganegoda emphasized that the airline is crucial to Sri Lanka’s tourism sector, contributing to 50% of the country’s tourist traffic.
SriLankan Airlines, despite reporting an operating profit from April 2022 to March 2023, has an accumulated debt of $1.2 billion.
The airline’s accumulated losses reached Rs. 601.7 billion by March 2023, compared to Rs. 529 billion a year earlier.
However, the airline showed signs of recovery with a reduced group loss of Rs. 71.3 billion in FY23, down from Rs. 163.5 billion in FY22, and an operating profit of Rs. 43.3 billion.
The government’s shift from outright sale to restructuring includes exploring alternative options to revitalize the airline.
The strategy aims to strengthen its balance sheet and align operations with a sustainable business model. Regulations currently allow up to 49% of the airline’s shares to be transferred to another entity, but there has been minimal interest from global investors.
The International Finance Corporation (IFC) served as the transaction advisor during the divestiture process, which initially shortlisted bidders like Air Asia Consulting of Malaysia, Hayleys PLC, and Supreme Global Holdings, among others.
However, the process faced challenges due to a lack of qualified parties, leading the government to consider a potential homegrown consortium involving major Sri Lankan companies like John Keells Holdings, Hayleys, and Aitken Spence.
The government’s revised approach could involve a consortium taking majority ownership while the state retains a 49% stake, absorbing part of the airline’s debt.
This new plan aims to make the national carrier more competitive and aligned with its growth targets, including reaching three million tourists next year and five million by 2030.
SriLankan Airlines has a fleet of 23 aircraft and a route network covering 126 destinations in 61 countries. Its passenger load factor improved significantly from 49% during the COVID-19 pandemic to 77.65% in FY23.
The airline’s cargo services, contributing around 14% to its revenue, generated Rs. 51 billion in the same fiscal year.
The government’s decision to abandon the sale in favor of restructuring reflects a commitment to reviving SriLankan Airlines as a vital component of the country’s economy, particularly its tourism sector.
The restructuring efforts aim to create a sustainable and profitable future for the airline while maintaining its national identity and significance in Sri Lanka’s development strategy.
