Cabinet takes over restructuring of SriLankan

By Chathuri Dissanayake 

The much-needed restructuring of cash-strapped national airline SriLankan Airlines will be led by the Cabinet in order to expedite the program, Public Enterprise Development Minister Kabir Hashim revealed.

According to the Minister, the Board of Directors of SriLankan Airlines, which was tasked with the restructuring program over the last two years, has not been able to deliver results, prompting the Government to take charge of matters.

 “The last two years the board has been driving its own agenda in restructuring the entity but has not been successful. Now the effort will be monitored by the Cabinet. The Ministry will lead the restructuring,” Hashim told Daily FT.

The Government is pushing for the restructuring of the troubled airline as it failed to lock in a potential investor to form a public-private partnership (PPP). Over the last two years the airline has been unsuccessfully looking for an investor to pilot it away from the losses it has accumulated.

With the International Monetary Fund exerting pressure on the Government to carry out restructuring to ensure losses are minimised, the ministry will be looking at cuts “starting from the top”.

Indicating cutbacks in allowances and benefits afforded by the company, the Minister said that “everyone will have to make sacrifices”.

“It has to be led from the top. The Board of Directors will have to take salary cuts and the termination of perks given to them. This is how other airlines which were dying were turned around. It is not rocket science,” he said.

Despite earlier assurance given by the State Minister of Public Enterprise Development Lakshman Yapa Abeywardena on not cutting down on staff, Minister Hashim said that the option has not been ruled out.

“It is a question of whether or not we are willing to subsidise a loss-making entity by the national budget. It is a national issue. The airline, which should only have 3,000 staff, has over 7,000, all political appointments made during the Rajapaksa time. So what do we do?” he asked.

However, Hashim assured that all possible attempts to realign staff to deliver better results would be explored.

“We will try and minimise damage to the employees. We will try to figure out ways to realign,” he pledged.

The Ministry is also focusing on how to optimise different areas of businesses under SriLankan Airlines, focusing on ground handling, catering, engineering and the aviation academy which are already profitable. However, the Minister highlighted that the entities were not running at an optimum level and the restructuring would focus on maximising profits and leveraging advantages.

The Ministry has not set a deadline for the restructuring process, but the Minister said that the process should have happened “yesterday”.

“The airline is in very bad shape. It is bleeding funds and even the IMF has said that it has to be restructured as soon as possible,” Hashim added.

Although discussions are ongoing with a possible PPP with an investor for the national airline, so far the Ministry has not had any success. According to the Minister all discussions currently being held with possible investors are at a preliminary stage.

Abeywardena last week said that any PPP would have to be with an international investor with previous experience in the industry, not a local investor.