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The Government is seriously evaluating the proposal for the revitalisation of national carrier SriLankan Airlines with high level visits by foreign parties likely for formal discussions.
The Daily FT on 19 June exclusively reported that a consortium involving senior business leader Harry Jayawardena and Japan’s ANA and JAL had expressed interest to own 49% and manage SriLankan Airlines following the Government’s decision to make the national carrier viable via a public-private partnership. The latest proposal comes amidst a previous expression of interest by the world’s largest carrier Emirates to enter into a commercial agreement.
With Prime Minister Ranil Wickremesinghe taking a personal interest to revive the loss-making and debt burdened national carrier, the Daily FT learns that Japanese parties in the Harry J consortium have been invited to visit Sri Lanka for formal talks.
Separately, some level of discussions has taken place with Emirates when its President Tim Clark visited Sri Lanka a few months ago. However, an Emirates spokesman suggested the airline was not keen on the acquisition of a stake. (See separate box story)
“The Government is serious and positive. Proposals received will be pursued,” said an official source which declined to give specifics on the progress of talks.
If and when a new partner is identified and decided upon, the Board of SriLankan Airlines will be reconstituted to reflect new stakeholder interests.
All Nippon Airways Ltd. (ANA) is the largest airline in Japan while Japan Airlines (JAL) is the second largest.
Strong expression of interests by these two parties, according to aviation industry analysts, is a big boost for the Government’s plans to revitalise debt-saddled and loss-making SriLankan Airlines.
The previous exercise of calling for expression of interests saw around 14 parties responding and eventually the giant private equity group TPG being shortlisted. Following a due diligence exercise, TPG decided to withdraw, citing commercial and other reasons.
Sources said that the Government, under a PPP initiative, will own a 51% stake as well as take over the debt of the national carrier to make the airline viable for a new equity and management partner.
In a recent statement, the management of SriLankan Airlines pointed out that since the Unity Government was formed, the airline’s losses have been dramatically reduced from a high of Rs. 31.3 billion in 2013/14 to Rs. 27.7 in 2016/17. The airline lost Rs. 92 billion between 2011 and 2015.
It also said the airline continues to pay a heavy price for the extremely high lease rental agreements entered into by the previous Board. The cost of terminating the leases on four A350-900 aircraft that were grossly overpriced and completely unsuitable for the national carrier imposed a further burden on the airline. This figure was Rs. 14.3 billion in FY17.
Jayawardena is no stranger to the national carrier, having previously served as its Chairman during which time the airline made considerable progress.
The tycoon’s business empire includes Aitken Spence, which has extensive interests in tourism, aviation and logistics, as well as Melstacorp, which holds the majority of key investments including in distilleries. He also controls tea and food business giant the Stassen Group.
Incidentally, Aitken Spence Deputy Chairman and Managing Director Rajan Brito currently serves on the SriLankan Airlines Board whilst he was a Director previously as well.
The world’s biggest airline Emirates’ yesterday said it has no plans to acquire a stake in SriLankan Airlines, a declaration which is likely to dim the aspirations of those who were hopeful of a fresh tie-up.
“Emirates has no plans to acquire a stake in any airline/airport in Sri Lanka or elsewhere,” a Dubai-based spokesman for the airline told the Daily FT when contacted, adding, “Emirates’ strategy is unchanged.”
“Our business is focused on organic growth and has a pipeline of investments to renew and grow the fleet, expand the global network and continuous innovation of our products and services,” the spokesman added. Though some were hopeful, having previously owned a minority stake along with a management contract and being unceremoniously kicked out by the regime of former President Mahinda Rajapaksa, Emirates appears not to be keen on a similar engagement with SriLankan Airlines.
