Harry J-led Japanese consortium makes UL offer in writing

Wednesday, 16 August 2017 00:00 -     - {{hitsCtrl.values.hits}}

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  • Consortium which includes Japan’s largest airline ANA expresses interest to buy 49% stake along with management of SriLankan Airlines

The Japanese consortium led by business tycoon Harry Jayawardena has this week given a written offer on SriLankan Airlines to the Gover-nment, which is trying to revive the national carrier on a public-private partnership (PPP) basis.

The Daily FT learns the offer in writing is to own 49% stake and manage SriLankan Airlines. The written offer has been handed over to Prime Minister Ranil Wickremesinghe. The development follows the completion of a preliminary fact-finding mission by the Japanese consortium representatives recently. Apart from Jayawardena’s tourism-rich Aitken Spence, the Japanese consortium comprises All Nippon Airways (ANA) as the airline partner as well as a leading light aircraft manufacturer and shipbuilder.

ANA is the largest airline in Japan. Contrary to previous reports, the Japan Airlines (JAL) is not part of the consortium.  

The restructuring of SriLankan Airlines is also linked to the IMF’s $ 1.5 billion Extended Fund Facility.

According to the IMF’s latest country report on Sri Lanka released last week, SriLankan Airlines has undertaken route and fleet optimisation, and now aims at securing a strategic partner and resolving any fiscal contributions to its liabilities. 

“During the ongoing negotiation, the airline’s financial performance will be monitored quarterly,” the IMF report added.

Yesterday the Daily FT also quoted Public Enterprise Development Minister Kabir Hashim as saying that the restructuring of SriLankan Airlines will be led by the Cabinet in order to expedite the program.

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 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.

During an interview with the Daily FT (http://www.ft.lk/article/631248/Fresh-restructuring-plan-for-SriLankan) last month, SriLankan Airlines CEO Capt. Suren Ratwatte said the airline would have achieved break-even in FY17 if not for an estimated $ 45 million hit from the partial closure of the Bandaranaike International Airport earlier this year, which resulted in the cancellation of over 600 flights. The airline also faced few others issues. 

Parallel to the PPP initiative, the SriLankan board had submitted a revival plan to the Government with several conditions, saying if those were met the national carrier can be revived with the current status quo of 100% State ownership. 

In FY17, SriLankan boosted its revenue over the previous year and the latest restructuring plan focuses on several issues including the price of aviation fuel, aircraft leases, debt servicing cost, no adverse new taxation and the realignment of human resources. 

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