SriLankan Airlines ready to sell stake in its ownership

by Sanath Nanayakkare

SriLankan Airlines (SLA) would soon announce the sale of an ownership stake subject to Cabinet approval in order to reduce its huge financial stress, Aviation Minister Nimal Siripala de Silva said, in Colombo, yesterday.

The Minister said negotiations with potential investors would be conducted to safeguard the rights of current employees of the airline.

“Today, there is a lot of discussion in the country about the loss-making national carrier and the reforms it should undergo. SLA’s debt payable to an international sovereign bond (ISB) on a government guarantee is USD 175 million. A loan, taken from Bank of Ceylon, mortgaging shares of SriLankan Catering, is USD 80 million. Debt payable to BOC and People’s Bank is USD 386 million. Arrears amount due to CPC, Aviation Services, etc., are USD 325 million. Arrears due for leases amounts to USD 80 million and SLA’s total debt is USD 1,126 million – more than one billion USD.

“SLA doesn’t have the financial capacity to repay these debts as the Airline was severely affected in the past few years and also because of the economic crisis the government itself is embroiled in. The government can’t help out SLA anymore. So, restructuring of SriLankan Airlines, and obtaining capital investments, is critically vital and if such capital infusion does not happen, SLA will certainly collapse and the company will have to be closed down which will end up creating a social distress as 6,370 local and foreign employees are working for the national carrier.

“They are employed in areas of administration, cabin crew, aircraft maintenance, engineers, etc. They could lose employment in such an event. So, it is the responsibility of the government to safeguard the employees, without creating the environment for retrenchment, and also keep the national carrier flying.

“SriLankan was making profits when it was operating as a joint venture with Emirates in 1998, and it was not a burden to the government back then. In the new collaboration we envisage, we will make strategic decisions. The profit-making Ground Handling Division, which is currently undertaken by SLA, is to be continued and administered as a separate unit. Our landing rights, in 26 destinations, which is an invisible asset, will also be retained. We will keep 49% stake of the profit-making Catering Division and offer potential investors the balance shares with a negotiable share of its management.”

“If the restructuring could be completed successfully, foreign debt of USD 175 million, and the bank overdraft obtained from BOC of USD 80 million, could be repaid, as priority payments.

Further, USD 80 million arrears, due for aircraft leases, could be paid and then there won’t be any foreign debt to be paid.”

“It is also significant to note that if USD 466 million, owed to BOC and People’s Bank, could be paid, the said banks will be strong institutions to support the national economy. And when USD 322 million, the arrears payments to CPC is settled, CPC will also be a financially viable institution.

“Therefore, we believe that SriLankan Airlines, its debtors and its employees could only be protected through this restructuring process.”