Ten EOIs for SriLankan

Wednesday, 7 September 2016 00:00 -     - {{hitsCtrl.values.hits}}

Untitled-5

Public Enterprises Development Minister Kabir Hashim - Pic by Lasantha Kumara

By Uditha Jayasinghe 

Ten Expressions of Interest (EOIs) have been received for SriLankan Airlines, which will be whittled down in the coming months before the Government begins official talks to enter into a public-private partnership with an international company, a top official said, but a debt sharing agreement appears unlikely. 

Public Enterprise Development Minister Kabir Hashim told Daily FT that the national carrier had received ten applications from international companies seeking a stake in the airline but declined to divulge their names.     

“We have received applications from 10 interested parties. I cannot name them because I don’t even know who they are because the entire process is confidential. We closed requests last week and there is an evaluation committee and the facilitating partner is the National Savings Bank (NSB). There is a committee looking at it and they will shortlist three to four of those ten applicants based on their capacity. Those three or four shortlisted companies will then be called for negotiations and then, based on the negotiations, we will look at the best terms for the country and the airline and then make the final decision,” he said. 

However, the Minister acknowledged that an eventual deal may not include a debt sharing agreement as the “losses are huge” and would likely deter any partnership. Prime Minister Ranil Wickremesinghe in April received Cabinet approval to allow the Treasury to absorb, part or the entirety, of SriLankan Airlines’ Rs. 461 billion loss to facilitate a partnership that will essentially handover management to an international company. 

Earlier this year the Government also allocated funding for SriLankan operations that will run out in October, putting a tight deadline on the negotiation process and possibly increasing the losses to be borne by the taxpayer. 

“I think I have breathing space till December. I’m hoping that in December the Treasury will give me the money, that’s why we are hurrying it (the restructuring) because funding is running out and the Government cannot go on giving money. So we are hoping we would be able to wrap up something fast,” the Minister noted.    

The carrier will also work to deepen its agreement with Pakistan International Airlines (PIA) with two more A330 aircraft to be handed over along with other services.    

“We are also hoping to expand our services with them for the A330s. We are also looking at setting up our engineering services in Islamabad because PIA was very impressed with SriLankan’s engineering services and we believe we have a lot of potential.” 

The Government and the national carrier are also struggling to decide what to do with the first A350 to be ready for delivery in October Hashim noted, reiterating his criticism of the previous Government’s decision to purchase costly, long haul aircraft unnecessary for the airline’s routes.

“We have looked at it and think that the A350s will be a problem. We are in the process of deciding whether or not we should take delivery of it and deciding how we should handle it. We are in touch with our legal counsel, we are in touch with the airline and we will make a decision in the next couple of weeks.” 

Discussions are also continuing with AerCap, the world’s largest aircraft leasing company, on restructuring leases for all seven A330 aircraft and four A350 aircraft. Minister Hashim had previously harshly criticised lease agreements that were made by the previous administration headed by the brother-in-law of former President Mahinda Rajapaksa as being significantly higher than market rates.   

 “SriLankan Airlines has been in talks with AerCap about buying some of the aircraft out or renegotiating with some other parties, for the Government of Sri Lanka to get involved and then to think of a different model for the leasing arrangements. AerCap has not still given them a word.”    

COMMENTS