The Sri Lankan Government has announced plans to privatize part of the national carrier, SriLankan Airlines. The bid to restructure the debt-ridden airline comes as the government, faced with unprecedented economic turmoil on a national scale, can no longer afford to fund the carrier.
According to the country’s aviation minister, Nimal Siripala de Silva, the government is looking to sell a 49% stake in each of SriLankan Airline’s catering and ground handling operations. 51% of each will remain under state control.
Earlier this year, the Sri Lankan Government toyed with the idea of privatizing SriLankan Airlines. The move gathered momentum after the country’s new president, Ranil Wickremesinghe, called for much-needed reforms at the airline, and the selling of its catering and ground handling operations shows that the government is still keen to push ahead with the privatization.
Sri Lanka’s struggling aviation industry
Sri Lanka’s ongoing economic crisis has left millions struggling to buy food, medicines, fuel, and other essential items. The shortage of fuel is also severely impacting the island’s aviation industry, with long-haul flights having to make a refueling stop in the Southern Indian cities of Trivandrum, Kochi, or Chennai.
Shorter flights have been carrying extra fuel for their next flight – a process known as tankering. Tankering fuel greatly increases the weight of an aircraft, limiting the amount of cargo it can carry. According to SriLankan Airlines’ chief commercial officer, this is costing around $7 million per month in lost revenue. That said, the airline did report a $1.2 million profit earlier this year – its first profit since 2006.
However, it will take significantly larger profits to pay off SriLankan Airlines’ debt, which currently totals over $1.2 billion. The sale of the airline’s catering option is estimated to raise around $80 million according to the aviation minister – a mere drop in the ocean compared to its mountain of debt.
SriLankan Airlines – a brief history
Sri Lanka’s national carrier was founded in 1979 as Air Lanka. As part of its strategic partnership with Emirates, the airline was rebranded to SriLankan Airlines in 1998. The carrier was subsequently taken back under state control in 2007, and went on to join the oneworld alliance in May 2014.
From its base at Colombo Bandaranaike International Airport, the airline today operates an all-Airbus fleet of 24 aircraft, including four Airbus A321neos and seven Airbus A330-300s.
Times remain extremely challenging for Sri Lanka and its national airline, and only time will tell what the next few months will bring. As other nations see a boom in post-pandemic travel, the country’s economic woes are keeping tourists away from Sri Lanka.
There are, however, glimmers of hope on the horizon – the country is on the cusp of finalizing a bailout deal from the International Monetary Fund (IMF), which may help to get its economy back on track, and despite massive debt, SriLankan Airlines has made its first operating profit in 16 years.
Delhi: Billionaire investor Chamath Palihapitiya’s life is meant to be a movie — a rags-to-riches saga from his early childhood in Sri Lanka, to hard-scrabble poverty as a ‘refugee’ in Canada, and then on to Silicon Valley stardom, and mega bucks.
Or perhaps it could be a corporate drama showcasing the 45-year-old’s meteoric ascent at Facebook despite early failures, lucrative and then not-so-lucrative Wall Street gambles, a fluctuating reputation, and expletive-laden wisecracks. If he played himself, he could flaunt his ripped abs on screen, rather than just on Twitter for his 1.5 million followers.
Whether he’s going up or down, Palihapitiya has a polarising effect on his audiences, which he constantly seeks out on social media to promote himself and dole out wise dispensations on life, love, and how to get The Money. Some fans think he should run for Governor of Californiaor even President of the USA — although as a naturalised citizen who wasn’t born there, he’s ineligible for the presidency, just like Arnold Schwarzenegger. Critics, however, dismiss him as a snake oil salesman, a purveyor of dodgy get-rich-easy schemes.
Until a few months ago, Palihapitiya was relentlessly peddling the money-making power of special-purpose acquisition companies (SPACs) — shell entities that raise funds in initial public offerings (IPOs) with the aim of acquiring companies in a sector.
The idea is that the heavily funded shell company will get on board an operational firm with a product that will benefit from merging with the SPAC to then become a listed company in a jiffy. If such an acquisition doesn’t happen, funds need to be returned to investors.
Palihapitiya has a convincing style. He’s a man who speaks with his whole being, bug-eyed with excitement, fingers splayed out, his accent very occasionally lapsing into sing-song Sri Lankanness. He is sure he’ll be the next Warren Buffet — rich enough to mould the world to his liking (“without capital, you’re irrelevant” he has said more than once).
Like Buffet, he brims with advice, but with more comedic flair, surprisingly vulnerable asides about his dysfunctional childhood and dealing with the imposter syndrome, and a peppering of F-bombs.
Of late, though, Palihapitiya has been under a cloud. SPACs saw a boom in valuations in 2020 and 2021, but right now things don’t look so hot. The bubble has burst, reports say.
The stock prices of SPACs were down in general as the frenzy around them fizzled and five Chamath Palihapitiya SPACs that merged with other companies were trading below the starting price of US$10, it was reported in August.
A few months before, in February, Palihapitiya had stepped down from the board of Virgin Galactic, which his SPAC platform, Social Capital Hedosophia, had taken public. He and Virgin Galactic co-founder Richard Branson both faced an investor lawsuit soon afterwards for allegedly covering up flaws in spacecraft and making money by dumping shares.
In 2012, Bloomberg had extolled Palihapitiya and his investors as a “league of extraordinarily rich gentlemen” who were making money and also saving the world.
In August 2022, the same publication pooh-poohed him and his “shrivelling empire”. “The SPAC king has gone silent”, the headline said.
But maybe it spoke too soon.
Days after Bloomberg’s dismal take on his SPACs, Palihapitiya tweeted that one of his SPACs has merged with a digital medicine company.
Fans and detractors had plenty to say in the comments, ranging from “ready to load up my bags for you, king” to “the scammer is back”.
But, either way, the man is risk-on. And for many South Asians, he remains an aspirational “brown brother from another mother” who beat odds like his “unpronounceable” name —“Chamath Phlaplaitlatlalyaysas or whatever…”— to make it big in the west.
Humble, ‘dysfunctional’ beginnings
If you want to understand Chamath Palihapitiya, go through the books he recommends. One of them is Adult Children of Alcoholics by Janet Geringer Woititz, a self-help book about growing up with emotional scars wrought by a substance-abusing parent. In this case it was Palihapitiya’s now-deceased father, Gamage.
Palihapitiya was born in Sri Lanka in 1976, and moved to Canada with his family at the age of five when his civil servant father was posted to the Sri Lankan High Commission in Ottawa.
When the posting ended in 1986, his father applied for refugee status and stayed back to give his children a better education, and also because he thought he’d be killed by the Liberation Tigers of Tamil Eelam (LTTE).
But life in Canada wasn’t easy. His father was unemployed for long periods of time and money was tight.
“I grew up in a very kind of dysfunctional household on welfare. And that compounded a bunch of shit in my life that was not great. We were very focussed on money. It was a huge point of pressure and tension in the family. It created massive depression in my father, drinking. Just, it was very dysfunctional,” Palihapitiya said at a 2017 chat at Stanford University.
Chamath Palihapitiya as a young boy | Twitter/@chamath
A clue to how Palihapitiya overcame these odds is on another book he recommends: René Girard’s Mimetic Theory by Wolfgang Palaver. According to Palihapitiya, “the idea is that you’re born without preferences and you kind of just copy what’s around you”.
It’s an idea he elaborated upon in the Stanford conversation: “I just copied… a lot of my life, quite honestly, is just copying the things that I see…Be around high-functioning, high-quality people and just copy the shit that they do. Observe the shit that’s kind of crappy and then don’t do that stuff. It’s not a fucking complicated formula.”
It’s clearly something Palihapitiya has given much thought too, especially in view of another recommended read: The Great Mental Models: General Thinking Concepts by Shane Parrish, which sets out nine mental models to fashion better decision-making by emulating greats like Socrates.
For Palihapitiya, who managed to earn a degree in electrical engineering despite financial constraints, a major role model was tech magnate Terry Matthews. The young Palihapitiya held one of his first jobs at Matthews’ organisation Newbridge Networks in Ottawa, as an IT help desk worker.
“He was a billionaire. And I was like, what the fuck is that word?…this guy was risk on. And I was like, I want to be this guy. I want to be this mega-compounder, swashbuckling around, trying to do really cool shit in the world”, he said at Stanford.
Above all, in Palihapitiya’s book recommendations, you see his intense desire for money, power, winning, and admiration for intelligence and cunning. For instance, there’s Michael Lewis’ Liar’s Poker, a riveting read with bits about Wall Street’s biggest bond traders wagering millions of dollars on poker.
Palihapitiya himself is a poker player who has collected over 100,000 dollars in poker earnings.
But that, of course, isn’t the only way he managed to earn hundreds of millions by his early 30s.
A money-maker for Facebook
In the early 2000s, Palihapitiya decided to follow his girlfriend and future wife Brigette Lau (they divorced in 2018) to California, where he excelled at AOL and then followed it up with his first venture capital at Mayfield Fund.
But the big break, as it were, came when a struggling startup founder called Mark Zuckerberg, whom he’d met while exploring a tie-up with AOL Instant Messenger (AIM), offered him a job in 2007.
In his book Facebook: The Inside Story, author and journalist Steven Levy details how Palihapitiya had a less than stellar start at Facebook since he was associated with its controversial purchase-tracking programme, Beacon. Levy writes that even Palihapitiya felt he should be fired, but instead Zuckerberg gave him another chance.
This time, Palihapitiya shone as the ideas and execution guy for how Facebook could grow its monthly active users. During his stint, he was both admired and considered a bully, Levy writes, but the results of his work left no room for doubt.
When Palihapitiya started at Facebook, the platform had under 50 million users, and by the time he left in 2011, the number was 750 million.
The numbers in Palihapitiya’s bank balance were also impressive — Facebook had made him a centimillionaire. In 2011, he set up a VC firm called Social + Capital (later rebranded to Social Capital), which invested in companies like workplace messaging platform Slack.
For seven years, Palihapitiya’s company seemed to be going strong. As he put it in an interview with Vox, he was “a billionaire at 32” and “owned a sports team at 33 or 34”, but he wasn’t “happy” and was going through an “identity crisis”— something that he realised when looking back at his 2017 Stanford interview.
That’s around when, he claims, that he decided to change the game in a self-professed quest to live a more “authentic” life and “make a difference”. By the next year, he had a new partner, the Italian pharma heiress Nathalie Dompé, and a rejigged business.
The big switch to SPAC
Mid-2018 was a period of huge churn for Social Capital, with some commentators writing its obituary, citing the cause of death as an “ego-fuelled collapse”.
The symptoms included Palihapitiya deciding that his company would no longer raise funds like a usual venture capital firm, and two co-founders and several senior executives quitting as a response.
In a Medium post in September that year, Palihapitiya announced wryly that “reports of our death have been greatly exaggerated” but that going forward Social Capital would no longer be accepting outside capital; instead, it would “become a technology holding company that will invest a multi-billion dollar balance sheet of internal capital only”.
Chamath Palihapitiya co-hosting his popular All-In Podcast | YouTube screengrab
In effect, Social Capital switched from the traditional venture capital model — which looks to sell its stake in the investee startup as fast as possible to profit quickly — to a more permanent model of investing, where investors take a more long-term approach to building and nurturing the company into a sustainable business. The new approach would be closer to what Warren Buffet’s Berkshire Hathaway does.
Since 2018, Social Capital has launched two SPAC platforms, Social Capital Hedosophia and Social Capital Suvretta, to give companies another way to go public. Social Capital now invests in areas like climate science, the life sciences, crypto/ decentralised finance, and deep tech.
Boom and bust?
So far, Palihapitiya has been part of 18 SPAC deals.
Through his tweets, his CNBC appearances, by backing the retail investors on Reddit’s WallStreetBets group against established Wall Street investors, Palihapitiya built legions of support for himself and his causes, like the SPACs.
There was a time when stock the price of Virgin Galactic, Palihapitiya’s first completed SPAC deal, was up a whopping 172.9 per cent.
Soon afterwards, as investors realized the markets were going cold on SPACs and that the Palihapitiya charm on the SPAC stocks was fading, some started writing his business obituary yet again.
Others questioned his integrity. As one Bloomberg profile noted, tongue in cheek, Palihapitiya was doing “just fine”, buying himself a US $75 million Bombardier Global 7500 jet, even if the SPAC bubble was bursting.
The profile claimed that with his outspoken and blunt style, he seemed “like the kind of guy who’d take pleasure in calling BS on current stock market hype — if he wasn’t the one behind it.” In other words, that he operates rather like a highly sophisticated confidence trickster.
This August, an Insider breakdown of Palihapitiya’s SPAC track record came with a warning of “double-digit losses” for investors.
As for Palihapitiya, he doesn’t seem to be too broken up about the write-offs, perhaps on account of having already survived a round back in 2018.
He still appears to be going about his life, tweeting, announcing deals, and doing podcasts with three of his “besties”— David Friedberg, an ex-Googler who later started up and sold his firm for a billion dollars; Jason Calacanis, a reporter turned entrepreneur and investor, and David Sacks, who sold his company to Microsoft for $1.2 billion.
The four talk about everything from startup fundings, to world politics and climate. One episode even talked about Sri Lanka when the country was facing its political and economic crisis. Palihapitiya shared how he and Google tried to introduce a free internet service via ‘Google Loon’ in Sri Lanka but they eventually backed out after (apparently unfounded) allegations that they were trying to steal spectrum.
Meanwhile, late this month, Palihapitiya’s SPAC jumped nearly 200 per cent in after-hours trading after his deal with the digital medicine company Akili.
As for the credibility of SPACs in general, potential investors would be well-advised to remember that everything is subject to market risk, so due diligence can never be delegated. Not even to your brown brother from another mother.
Chairman of the Sri Lanka Podujana Peramuna GL Peiris made a special statement today and announced that 13 MPs including himself will sit in the opposition in Parliament. With the decision of this group, the government has lost its majority power.
In the last general election, the Sri Lanka Podujana Peramuna won 149 seats and the number of seats held by the ruling party had exceeded 150 with the addition of members from the opposition to the government on various occasions, including when the 20th amendment was passed.
At present, the Sri Lanka Freedom Party is working independently and the group including Wimal-Gammanpi-Vasu is also sitting in the opposition. Headed by Anura Priyadarshana Yapa, 06 MPs work as a separate group and the GL-Dallas group also joined the opposition today.
Due to this situation, the number of MP seats owned by the ruling party has decreased to less than 100.
In order to pass the interim budget presented to Parliament yesterday, at least 113 MPs must be in favor of it. The independent groups from the ruling party have so far not expressed a definite decision whether they support or oppose the budget.
The Consumer Affairs Authority has issued a special gazette notice imposing conditions related to the production, import and sale of 48 types of goods including wheat flour, milk powder, rice, tinned fish, cement, steel wire.
It is mentioned in the gazette notice that the goods should be supplied immediately when requested by the customers and maximum production capacity should be maintained if there is no shortage of raw materials or any other reasonable problem.
It has also announced that an electronic receipt should be given to the customers during the sale of the goods and a copy of the receipt should be kept in the seller’s possession.
Sri Lanka approached the IMF on 15th March 2022. Since then, there have been regular assurances to the public by the IMF and the Government about a “staff level agreement” being finalized very soon. At various times, ordinary Sri Lankans have been assured that such an agreement would be reached within two months or so, and that thereafter the disbursement of funds from the IMF would follow.
Sri Lankans have also been led to believe that all of Sri Lanka’s problems would then be solved and the economy would start to become vibrant once again.
In the meantime however, there has been no tangible progress other than a highly damaging and controversial foreign debt default, sky rocketing prices, astronomical interest rates and aggravated shortages. These outcomes are confirmed on the daily basis whenever anyone reads the newspapers.
Now, after 5 1/2 months, there is once again a fresh assurance of a staff level agreement by September 2022, and a possible funds disbursement after another 6 months.
In the meantime, all “bridging finance” continues to be stopped and NOT A CENT is forthcoming. All traditional bilateral funding sources have completely dried up. All foreign funded projects have been stopped.
Sri Lanka is on a “hand to mouth” beggarly mode of existence, with sporadic announcements of some charity or another giving some grant, causing further humiliation to the devastated Sri Lankan people.
But, now, even more importantly, another vital question arises. What’s in this elusive and unknown “staff level agreement”? Has anyone seen it? Has anyone been able to evaluate and discuss it? If Sri Lankans are going to place their entire future and fate on this so-called staff level agreement, shouldn’t they at least know what’s in it? What are they are getting into? What is the country going to commit? What are the sacrifices that would have to be made in the future?
In the interest of good governance and transparency, the IMF and the Government must reveal the main clauses of this impending economic plan and the government’s committments to the country. It is only then that the experts, professionals, politicians and even the simple people of the country could examine these clauses and understand what’s in store for them in the short as well as a long term. Unless that’s done IMMEDIATELY, and thereby knowing the committments and conditions, it would be useless to know about these matters AFTER it has been finalized. By then, it would be TOO LATE, as the damage would have already been done.
The Ministry of Public Administration, Home Affairs, Provincial Councils and Local Government has issued a circular regarding responses to letters, e-mails and telephone calls received from the public to government institutions. This circular has been issued under the signature of Ministry Secretary MMPK Mayadunna.
According to the circular, letters, e-mails and phone calls received from the public must be answered promptly. If it takes time to send the reply, it should be notified by letter within a week that the message has been received.
The Ministry Secretary informs through this circular that it is the responsibility of the Heads of Institutions to send the final reply before the lapse of 04 weeks and it is mandatory to mention the direct contact number of the staff officer in charge of the subject under the signature of the relevant letter when sending the reply to all duty letters.
It is stated in the circular that it has been observed that there has been a delay in responding to the messages received from the public to government institutions in view of the Covid epidemic situation and the fuel crisis.
The Sri Lanka Podujana Peramuna declares that a stable government should be established very soon in order to re-establish the broken trust both locally and internationally. The party also emphasizes that in order to stabilize the country economically, it is essential to stabilize the country politically.
Sagara Kariyawasam, Secretary of the Podujana Peramuna, Member of Parliament, who points out that the main obstacle to getting support from foreign countries to get the country out of the current crisis, says that through the establishment of a stable government, an important message can be sent to foreign countries, international organizations as well as foreign investors.
Sagara Kariyawasam states that Podujana Peramuna full supports the formation of an all-party government, and if the establishment of such an all-party government is delayed further, another type of government should be formed or the country should be stabilized.
The secretary also says that his party requested the president to appoint cabinet ministers and state ministers who have not been appointed so far and establish a stable governance.
India has decided to completely suspend the export of wheat flour. Due to the Russia-Ukraine war, the production of wheat flour has been hampered, and due to this, India has decided to maintain its stocks of wheat flour as a safety reserve.
Due to this situation, the importers have informed the Ministry of Commerce that the import of wheat flour to Sri Lanka has been completely stopped.
Due to the heat of the Russia-Ukraine war, a wheat flour crisis has emerged all over the world. Most of the world’s wheat flour is produced in Ukraine, and the war has disrupted wheat flour production and exports.
Importers of wheat flour say that it was possible to import wheat flour through India very easily. Due to the emerging situation, wheat flour has to be imported only from Turkey and due to this, the shortage of wheat flour in the country will be further aggravated.
The price of a kilo of wheat flour imported from India had gone up to 350 rupees and bakery owners recently said that due to this situation, the price of a pound of bread will have to be increased to at least 250 rupees.
President Ranil Wickremesinghe tabling the 2022 Interim Budget Appropriation Bill in Parliament today (30) said he expects Sri Lanka to become a developed nation by 2048.
The bill proposes the provision of many reliefs and several proposals related to increasing state revenues including tax revenues are also included in the list.
The state revenue will be increased from 8.2 per cent of the gross domestic product (GDP) in 2021 to 15 per cent by 2025.
The value added tax (VAT) will be increased from 12 per cent to 15 per cent from October 01, 2022.
Many tax proposals introduced in the last period will be enforced from October 01, 2022.
All persons above the age of 18 must register with the Inland Revenue Department.
The retirement age of government and semi-government officials will be reduced to 60 years. Government employees above 60 years of age who are currently in service should retire on December 31, 2022.
In future, fossil fuel-driven vehicles shall not be purchased for public service and only electronic vehicles will be purchased.
A few selected local councils with minimum incomes will be attached to the nearest urban council or municipal council.
Proposal to establish a branch of Kotalawala Defence University in Kurunegala
Rs. 680 million in default of payment to state banks (excluding interest) will be cut off.
A subsidy of Rs. 10,000 per month for 61,000 families entitled to subsidisation.
An additional allowance of Rs. 2500 for pregnant women.
20 per cent of the total shareholding of Bank of Ceylon and People’s Bank will be entitled to depositors and employees.
The protest march organised by the Inter-University Student Federation (IUSF) today (30) started from near Maradana Elphinstone Theatre despite the Police’s repression. The march was organised to demand an end to the repression carried out by the government using the controversial Prevention of Terrorism Act (PTA) and the release of the arrested activists and was endorsed by many civil activists and movements.
As the Police announced that the protest was illegal as they had not obtained permission from the Police, the protesters demonstrated a strong objection towards the law enforcement officers, leading to a heated exchange.
The protesters were to march to the point of the Fort Railway station but were repressed by tear gas and water canons thrown by the Police near the Technical Junction, Maradana.
Meanwhile, Police Spokesman Thalduwa revealed that 25 people who took part in the protest march were arrested.
