Massive fraud at SriLankan Airlines

There are suspicions that commissions amounting to several millions of US dollars have changed hands in the cancellation of the leasing agreement reached with the International lease Finance Corporation (ILFC) by SriLankan Airlines to obtain four A 350-900 on long-term lease during the Rajapaksa regime, say government sources.

The cabinet paper 2017/2 dated 08-02-2017 and submitted by state enterprise minister Kabir Hashim confirms that as the subject minister, he had not received any detailed information at any time about the agreement to cancel the deal with Aercap. Later, he stressed that had this deal not been cancelled, SriLankan would have suffered a loss of 205 million USD in the next 12 years.

He said certain false information had been added to media reports with the intention of creating clashes between the state enterprises and finance ministries. The aircraft could have been obtained on a monthly lease of 950,000 USD, but the Rajapaksa regime had signed the agreement to obtain at a rate of 1,425,000 USD, he said.

With the cancellation of the deal, Aercap had demanded 154 million as compensation, but the talks SriLankan had under cabinet approval enabled to bring that figure down to 98 million USD, Hashim went onto say. After making that statement, the minister went overseas, and was not available to obtain further details.

However, reports reaching us say the cabinet paper 2017/2 had stressed a different story. It says the cabinet approved a restructuring plan on 24-06-2015 to make SriLankan a profit-earning state enterprise. That plan dropped the leasing agreement for the A 350-900 aircraft.  That is because that would have come in the way of achieving the projected targets and also that Nyrasiy Skyworks consultancy firm has noted the agreement would result in an annual loss of 30 million USD. That prompted the government to cancel the agreement.

Also, SriLankan was to receive four A 350-900 aircraft by October and November 2016 as per the leasing agreement with ILFC on 27-09-2013. The economic management ministerial committee on April 2016 approved the cancellation of the agreement to obtain the fourth aircraft, and a 17.7 million USD compensation was to be paid. SriLankan had not submitted any document to the state enterprise ministry to show that the cabinet had approved such a payment. Therefore, the deal went ahead and SriLankan had reached an agreement, the minister’s cabinet paper says.

Later, cancelling the agreement for the three remaining aircraft was discussed by the economic management ministerial committee on 07-09-2016, and a decision was taken to pay a compensation of between 75 and 85 million USD. The committee empowered SriLankan to reach agreement accordingly. That decision was placed before  the cabinet for approval and at its 27-09-2016 meeting, the cabinet only approved a discussion on the related agreement.

In the meantime, SriLankan and Aercap had a discussion and agreement was reached on a 98 million USD compensation, the cabinet was told and the ministerial subcommittee informed about it on 21-09-2016.

However, the finance and state enterprise ministers insisted the compensation amount was too high, and the maximum compensation that could be considered, as agreed previously, was only between 75 and 85 million USD. On a decision by the economic management ministerial committee, the finance minister discussed this with Aercap representatives on 28-09-2016. There, Aercap agreed to bring down the figure to 98 million USD, but only if SriLankan agreed to obtain an additional A 330-900 on lease, extend the leasing period for an aircraft leased by Mihin Lanka and presently being used by SriLankan and on another condition. The finance minister told SriLankan that the attorney general be consulted for advice and also to see if cancelling the leasing agreement was consistent with the IMF laid down conditions for Sri Lanka.

In his cabinet paper, Hashim has said the leasing agreement for three aircraft was with ILFC and that he was unaware of the grounds for having talks with Aercap. He also said that the finance minister had got an adviser of his to have discussions with Aercap on 01-10-2016 and agreed to pay the compensation it had sought.

In the meantime, the public enterprise development ministry had received reliable information that SriLankan had reached agreement to cancel the leasing agreement. The ministry secretary on 20-10-2016 wrote to SriLankan inquiring about it, but instead of replying to that, the airline had submitted a cabinet paper on 28-10-2016 seeking approval for the agreement. Hashim’s cabinet paper 2017/2 notes that too, had not been submitted through the subject ministry, which is his. The ministry secretary again wrote to SriLankan on 27-12-2016, asking about its failure to reply to the previous letter and several other matters. SriLankan in a reply on 28-12-2016 only made reference to the letter it had received on 27-12-2016. It said an agreement was signed on 04-10-2016 to cancel the leasing agreement on the basis that the finance ministry had raised no objections and that it has received the prime minister’s approval. The airline had not sent a copy of the agreement or further details to the ministry.

The cabinet paper also says the ministerial committee on economic management, at its meeting on 24-10-2016, had not received a copy of the said agreement reached on 04-10-2016. Hashim says he has nothing to do with this matter, excepting the cabinet paper submitted on a presidential order on 08-02-2017. The question raised here is as to why Hashim only mentioned the plus points of the agreement, and did not make any reference to the contentious issues.

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