Air Asia, Hayleys, Fits Air among six vying for SriLankan Airlines

Malaysia’s multinational budget carrier Air Asia, diversified blue chip Hayleys Plc and Fits Air are among six parties vying for SriLankan Airlines.

These three and an equal number were announced as parties qualified to bid for the national carrier after Request for Qualification (RfQ) closed yesterday. The other three are Dharshaan Elite Investment Holding Ltd., Sherisha Technologies Ltd., and Treasure Republic Guardians Ltd.

Contrary to earlier claims by Aviation, Shipping and Ports Minister Nimal Siripala de Silva the final list of RfQ respondents lacked major regional or international airlines.

AirAsia is the largest airline in Malaysia by fleet size and destinations. AirAsia operates scheduled domestic and international flights to more than 166 destinations spanning 25 countries.

Hayleys has extensive interests in aviation and travel business whilst FitsAir is the only low cost carrier in Sri Lanka owned by Aberdeen Holdings. It operates flights to Dubai, Chennai, the Maldives and Dhaka, Bangladesh.

The RfQs received were considered by the Opening Committee appointed by the Special Cabinet Appointed Negotiating Committee.

The SOE Restructuring Unit (SRU) said the RfQs will be evaluated as per the Special Guidelines on Divestiture of State-Owned Enterprises approved by the Cabinet of Ministers in July 2023.

International Finance Corporation, as transaction advisors for the divestiture of SriLankan Airlines Limited, will continue to advise the Government.

The Government acting through the Ministry of Finance, Economic Stabilisation and National Policies on 31 October 2023 via international and local media, called for RfQ from potential investors for the acquisition of shares in SriLankan Airlines Ltd.

The original deadline for pre-qualification application was 5 April. However, it was extended to 22 April 2024. This was to facilitate the transfer of select Dollar and Rupee debt to the Treasury which was done in March 2024.

SRU last week said the divestiture of SriLankan Airlines is likely to be concluded by September.

The Government in March announced the takeover of debt worth Rs. 100 billion of SriLankan Airlines sparing the $ 175 million five year international bond. 

The Cabinet of Ministers by its decision dated 4 March 2024 approved the transfer of the following liabilities of SriLankan Airlines to the Government of Sri Lanka (GoSL):

1. $ 105 million of Treasury guaranteed debt due to Bank of Ceylon

2. $ 12.9 billion of Treasury guaranteed debt due to Bank of Ceylon

3. $ 105 million of Treasury guaranteed debt due to People’s Bank

4. Rs. 18.5 billion of Treasury guaranteed debt due to People’s Bank

The SRU said consequent to the move (worth Rs. 100 billion), the only component of significant term borrowing that remains in the books of SriLankan Airlines relates to a $ 175 million, 7%, five year international bond issued in 2019. This bond is also backed by a sovereign guarantee and is due for settlement in June 2024.

 ”The Cabinet of Ministers has also decided that in the event of a ruling in favour of SriLankan Airlines with respect to the arbitration case filed by it against Airbus SE, steps will be taken to transfer proceeds arising from the same to the GoSL,” the SRU added.

As at 31 March 2023, SriLankan had accumulated losses of Rs. 601.7 billion as against Rs. 529 billion a year ago. 

As per the last audited accounts (FY23) released in October, SriLankan Airlines reported a group loss of Rs. 71.3 billion, down from Rs. 163.5 billion in FY22. However, excluding foreign exchange loss, the group posted an operating profit of Rs. 43.3 billion as against Rs. 1.6 billion in FY22. Exchange loss was Rs. 63.1 billion and the finance cost amounted to Rs. 51.5 billion.

Group revenue grew nearly three-fold to Rs. 369.4 billion with 23 aircrafts in its fleet. The cargo services segment, contributing approximately 14% to SriLankan Airline’s income, generated a revenue of Rs. 51 billion in FY23.

The airline carried 11.8 million passengers in FY23 up from 5 million during COVID-hit FY22. Passenger load factor was 77.65% up from 49%. It has a route network of 126 destinations in 61 countries. The network of international destinations served by SLA has expanded from 37 destinations in 2019 to 39 in 2023. It has extensive landing rights in many Indian cities. Male, Chennai, London and Singapore are the largest destinations served, contributing to a combined 25% of the airline’s seats.