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PM to signal Airbus termination today

Comments / {{hitsCtrl.values.hits}} Views / Thursday, 28 September 2017 00:12

  • Meeting with PM and top ministers to decide how to proceed with termination 
  • Top officials to discuss potential cost of cancelation of four A350 aircraft 
  • COPE tells Govt. to fast-track termination to avoid paying massive fine

By Chathuri Dissanayake 

Prime Minister Ranil Wickremesinghe is to chair a meeting today to decide the fate of the four remaining Airbus A350-900 aircraft ordered for SriLankan Airlines under the $ 2.5 billion re-fleeting program initiated by the previous Government.  

The latest committee appointed by the Prime Minister is to look into the restructuring and monitoring of SriLankan Airlines. It is expected to make a decision on how best to handle the termination of the second batch of aircraft as the order placed with Airbus has no proper exit clauses, Public Enterprise Development Minister Kabir Hashim told Daily FT. 

The first four aircraft were cancelled by SriLankan earlier this year after paying a fine of $ 98 million. Four remaining aircraft, which were to be taken delivery of in 2019/2020, will be cancelled under this latest round. 

The Committee on Public Enterprises (COPE) last week in Parliament called on the Government to take action without further delay to terminate the ordered aircraft as the manufacturing process by Airbus was scheduled to start at the end of this month. 

The ministry has already instructed the board of SriLankan to write informing them of the decision to terminate the order after the expert panel appointed by the line ministry decided to terminate the contract, Hashim said.

However, the terms of the cancellation have to be negotiated with Airbus, he said. SriLankan has already selected a legal firm to carry out the negotiations subject to approval from the committee headed by the Prime Minister. 

The committee comprises the Minister of Special Assignments Sarath Amunugama, Civil Aviation Minister Nimal Siripala De Silva, Development Strategies and International Trade Minister Malik Samarawickrama, Finance Minister Mangala Samaraweera and Minister Kabir Hashim.

“We have to discuss the cost of cancelling this contract. We will have to evaluate our options and opportunity and make a decision,” Hashim said.

Transferring the order to another airline or changing the order can also be considered during the negotiations, although the Minister is unsure if the agreement with Airbus would allow for such a move.

The expert committee has already prepared a report on the matter, he said. The report has been given to be studied by another committee comprising Ministers Sarath Amunugama, Mangala Samaraweera, Thilak Marapana and the subject minister.

Eight A350-900 aircraft were ordered during the Rajapaksa era with four scheduled for delivery in 2016. The order was cancelled by the current Government after several rounds of negotiations and a payment of $ 98 million. The Minister claimed that the agreements inked by the previous regime were “not negotiated and rates were in excess of market prices with no proper exit clauses” leaving the job of cancelation a tough one.

“I am not a magician to deliver results overnight,” he said, adding that the agreement was a “monster” created by the previous Government.

Further, he said that Attorney General has also advised that it is in the best interest of the Government to not get directly involved in the negotiations with the company.

“But as the line ministry, we have given instructions based on the advice of the expert panel,” he said.

In June SriLankan Airline CEO Suren Ratwatte told Reuters, Airbus had indicated it was willing to change the terms of the order for four A350-900s from SriLankan Airlines to different planes but did not elaborate on the specifics. 

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