Cash-strapped Treasury to absorb USD 510 million liabilities from debt-ridden SriLankan Airlines

By Sanath Nanayakkare

The bidding process for disposing of Sri Lankan Airlines has been postponed with a new programme aimed at reducing the debt-ridden airline’s debt pile by about half with the help of the cash-strapped Treasury.

Accordingly, the bidding process for divestiture of the SriLankan Airlines which was to be concluded yesterday has been extended by another 45 days.

Addressing a press conference in Colombo yesterday, Shipping and Aviation Minister Nimal Siripala de Silva said that President Ranil Wickremasinghe as finance minister has agreed to the proposals made by him to ease the debt burden on the Airline with the help of the Treasury to make it more attractive for prospective buyers including airlines and investors.

“IFC – a member of the World Bank Group which advises us on the restructuring of the Airline has told us that under the current debt strain, SriLankan would not lure the right kind of prospective buyers. So, we have decided to reduce its debt pile and make it a more attractive offer for investing,” he said.

“The President as finance minister agreed to get the Treasury to absorb USD 510 million worth of SriLankan Airline’s debt payable to Ceylon Petroleum Corporation, the Bank of Ceylon and the People’s Bank in the next six months. This amounts to half of the Airline’s total debt quantum. The Cabinet approval was given on Monday to select a suitable investor for SriLankan under these less-stressed financial conditions because it would then be a more conducive investment in the eyes of potential investors,” he said.

The minister, however, noted that the funds received by SriLankan from the Treasury would have to be repaid from the earnings of its profitable arms such as Ground Handling, Catering and Engineering.

“The Treasury will be providing about USD 60-70 million to the Airline in the next six months for engine repairs and related activities. We will ensure that Treasury funds thus given to the Airline would be recovered though the proposed mechanism because we can’t pass it on to the taxpayers like in the past,” he said.

“These moves have been taken not only to make SriLankan Airlines attractive to potential investors but also to safeguard the job security of 6,000 employees working for the Airline. We are confident that with the Airline’s debt halved, it would attract more bidders when bidding reopens.”

“Further, I have given directives to the Airline to give no one any new perks, salary hikes or unnecessary foreign tours in the next six months to consolidate its financial discipline. I think I will get the support of the employees and the trade unions in this exercise,” he said.