President Sirisena to sort out crisis at SriLankan Airlines

by Zacki Jabbar

National carrier, SriLankan, maintains that its losses have decreased since January 2015, but its performance is scheduled to come up for discussion  at this week’s Cabinet meeting headed by President Maithripala Sirsena.

Health Minister and Co-Cabinet Spokesman Rajitha Senaratne, admitting that there were concerns about how the airline was being run, said on Friday that President Sirisena had assured the worrying situation would be discussed in detail at this week’s Cabinet Meeting. "The Srilankan Board of Management has also been invited for the discussion."

Informed sources revealed that several Ministers had expressed concern over the delay in a proper restructuring of the airline and other issues relating to staff recruitment, procurements and failure to act on the Weliamuna report, which called for action against frauds and irregularities under the previous administration.

SriLankan carries  a debt burden of  USD 3.2 billion accumulated since March 2008, when its Dubai based partner Emirates Group, cancelled the joint venture agreement, after former President Mahinda Rajapaksa removed the  Emirates appointed CEO Peter Hill, for refusing to offload fare paying business class passengers, to accommodate some members of his family returning from London.

Attempts at  finding an international partner for the national carrier on a debt for equity swap by the current government, has failed. One of the three bidders shortlisted, the U.S. private equity firm TPG, pulled out of talks last month.

The SriLankan Airlines Board of Management which is under fire from sections of the government, claimed that Rs. 91.8 billion in losses incurred between 2011 and  2015 had been  reduced to a fraction of that amount. "The  fuel price reduction of 2015 saw a drop in ticket prices which did not recover when fuel prices increased again. The effect of this, coupled with the acceptance of several new and expensive aircraft, a depreciation of the rupee and other currencies against the US dollar saw a weakening of the balance sheet. The runway re-surfacing project at Colombo Airport, which was absolutely necessary, also forced us to cancel over 600 flights, equivalent to two entire weeks of scheduled services, in the first three months of this year. These factors combined to worsen the performance of what could have been a successful financial year in 2016/17."

The Board said that a heavy price was being paid for the extremely high lease rental agreements entered into by the Rajapaksa administration.

The cost of terminating the leases on four A350-900 aircraft that were grossly overpriced and completely unsuitable, imposed a further burden, it noted adding "We are  now undergoing a modest recovery in revenues and are about to launch significant regional expansion. Three new destinations in India, direct flights to Hong Kong and  Guangzhou and a long awaited non-stop service to Australia are all planned in the coming months. Further restructuring is required in order to reduce the cost base and make the company competitive in this extremely challenging market."

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