SriLankan Airlines, after spending years on the hit list of loss making State Owned Enterprises (SOEs), is finally seeing the light at the end of the tunnel through a new restructuring program aimed at leveraging the geographical advantage of Sri Lanka and staving off price-cutting competition by cash rich rival airlines.
Since being put under new management, the airline’s net loss for the financial year that ended on 31 March 2016 was down by a healthy 45% to Rs. 9 billion whilst in the first five months of FY17 it was down by 37% to Rs. 2.3 billion from a year earlier. In fact, Chairman Ajith Dias told reporters this week that the airline could have broken even for the first time since it was removed from Emirates management if it had not had to make heavy debt repayments.
However, the road ahead remains tough; total interest bearing liabilities as at 31 August 2016 was $478.5 million or Rs. 70 billion, and interest cost for the current year was Rs. 6.2 billion. Lease payments are likely to continue with six new narrow-body aircraft to be added to the fleet next year and in 2018. Cost of offloading four A350 aircraft at $116 million will also push the balance sheets further into the red and SriLankan will have to add most of Mihin Lanka’s staff and debt, which is estimated to be in excess of Rs.20 billion onto its own plate.
Among the many financial blunders made by the previous management of the airline was the $2.6 billion Airbus deal that had been inked behind the scenes with little to no consultation of experts or transparency.
The situation of SriLankan initially came to light last April when a report ran the entire gamut from simple financial fraud to human smuggling and even crossed into the murky waters of the former Chairman’s love life. The report, compiled by eminent good governance activist J. C. Weliamuna read like a detailed explanation of how to run an airline into the ground.
Despite the ferociousness of the report, holding relevant parties responsible has moved at snail’s pace. The public perception that the new regime may just be ‘all talk, no action’ has been building up and certainly must be a source of concern with Local Government elections looming ever closer.
Consequently, the report on SriLankan Airlines had the potential to turn the tide in the debate on corruption, giving the ‘Yahapalanaya’ regime its first true victory over clear-cut corruption. The new regime has been fond of hurling vitriol at the malpractices and corruption of the previous Government but has failed to show that it is committed to reform in a genuine and real way.
SriLankan is important because larger State-Owned Enterprise reform will not be successful unless accountability is infused into the core of organisations. It is no secret that the largest four organisations including the Ceylon Petroleum Corporation (CPC) and Ceylon Electricity Board (CEB) are among the most inefficient establishments in Sri Lanka and little has been done to clean them up since the new Government came into power more than a year ago.
Mismanagement of SriLankan was an open and shut case of large scale corruption by the Rajapaksa regime with clear links to the highest ranking members of the former Government as well as their relatives. The Government’s inaction in the eyes of the public, essentially, amounts to tacit support.