Cash-strapped government to privatise Sri Lanka’s national carrier soon

SRILANKAN AIRLINES

Sri Lanka will privatise the country’s loss-making national carrier as the cash-strapped government “can no longer afford to inject money” into running the airline.

The government is looking to sell a 49% stake in each of the SriLankan Airlines’ catering and ground-handling units to restructure the state-run carrier, while 51% will be retained under state hold, Aviation Minister Nimal Siripala de Silva said.

This restructuring is essential as the government can no longer afford to inject money into running the airline. Annually the government has been providing the airline between USD 80 billion to USD 200 billion to run its operations.

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Cash-strapped government to privatise Sri Lanka’s national carrier soon

The minister said the revenue from the sale of the catering operation can be used to pay off debt amounting to USD 80 million that was obtained by mortgaging its shares, as well as some other loans. The airline’s debt currently amounts to USD 1.226 billion (LKR 401 billion).

The airline, formed in 1979 as Air Lanka, was rebranded by Srilankan Airlines under the management control of Emirates in 1998. In 2007, the government took back control of it from the Emirates.

Srilankan Airlines is among over 190 state-owned enterprises that are making huge losses. Without retaining a 51% stake in the airline, Sri Lanka might lose ownership of the companies to be sold.

But if the investors are Sri Lankan nationals, we can go for more. There are many rich people in Sri Lanka, they can come together as a syndicate or with airlines and offer a bid, he said.

The airline, formed in 1979 as Air Lanka, was rebranded by Srilankan Airlines under the management control of Emirates in 1998.

Sri Lankan President Ranil Wickremesinghe has called for much-needed reforms for the loss-making national carrier.

According to Colombo-based think tank Advocate, SriLankanAirlines has, on numerous occasions, required treasury guaranteed loans to stay afloat, and has amassed over LKR 53.6 billion in guarantees as of August 2021, the report said.

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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 refuelling stop in the Southern Indian cities of Trivandrum, Kochi, or Chennai.

The airline did report a USD 1.2 million profit earlier this year – its first profit since 2006.

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 USD 7 million per month in lost revenue. That said, the airline did report a USD 1.2 million profit earlier this year – its first profit since 2006.

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.

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