Sri Lankan Airlines’ divestiture plan fails to see the light of the day
By: Staff Writer
July 21, Colombo (LNW): The Sri Lankan government has decided not to sell its national airline, SriLankan Airlines, despite initially attracting interest from six firms and shortlisting three potential buyers.
The airline had accumulated over US $2 billion in debt by the end of the 2022/2023 fiscal year. Ports, Shipping, and Aviation Minister Nimal Siripala de Silva highlighted the preference for restructuring over selling, constrained by regulations allowing only 49% of the airline’s shares to be transferred to another entity, which limited investor interest.
The International Finance Corporation (IFC) served as transaction advisors for the potential sale. By mid-May, the government had shortlisted AirAsia Consulting, Hayleys PLC, and Supreme Global Holdings/Sherisha Technologies Ltd., which claimed Qatari backing.
However, the State-Owned Enterprises Restructuring Unit eventually called off the sale, leading the government to explore other options for reviving the airline.
Minister de Silva reiterated the focus on restructuring rather than outright selling, acknowledging that the 49% share transfer limit deterred suitable investors.
Only six individuals expressed interest, none meeting the required standards. Among the six firms, AirAsia Consulting, Hayleys PLC, and Supreme Global Holdings/Sherisha Technologies Ltd. were shortlisted, while FitsAir, Dharshaan Elite Investment Holding Ltd., and Treasure Republic Guardians Ltd. also responded.
Amidst speculation, the government considered involving top local companies like John Keells Holdings, Hayleys, and Aitken Spence in a consortium to take majority ownership and manage the airline.
This idea followed a poor global response to the initial Request for Qualifications (RFQ) for the airline’s sale. The restructuring proposal included retaining 49% state ownership and transferring $500 million of the airline’s debt to the Treasury.
The Ministry of Finance, initiated the RFQ process on 31 October 2023, through international and local media, seeking potential investors for the airline’s shares. The pre-qualification application deadline was extended from 5 April to 22 April 2024 to facilitate the transfer of select Dollar and Rupee debt to the Treasury in March 2024.
As of 31 March 2023, SriLankan Airlines had accumulated losses of Rs. 601.7 billion, up from Rs. 529 billion the previous year.
The last audited accounts for FY23, released in October, reported a group loss of Rs. 71.3 billion, down from Rs. 163.5 billion in FY22. Excluding foreign exchange loss, the group posted an operating profit of Rs. 43.3 billion compared to Rs. 1.6 billion in FY22. The exchange loss was Rs. 63.1 billion, and the finance cost amounted to Rs. 51.5 billion.
Group revenue nearly tripled to Rs. 369.4 billion with a fleet of 23 aircraft. The cargo services segment, contributing around 14% of the airline’s income, generated Rs. 51 billion in FY23.
The airline carried 11.8 million passengers in FY23, up from 5 million in the COVID-hit FY22, with a passenger load factor of 77.65%, up from 49%.
Its route network expanded to 126 destinations in 61 countries, with significant growth in Indian cities. Major destinations like Male, Chennai, London, and Singapore account for 25% of the airline’s seats.
