By:Staff WriterColombo (LNW): The restructuring of State owned SriLankan Airlines is to be completed in 6 months, Ports and Civil Aviation Minister Nimal Siripala de Silva said.
He predicted that the jobs of Sri Lankan Airlines employees is at a take if immediate restructuring measures are not implemented.
In view of the fiscal burden, Sri Lankan Airlines (SLA) and its subsidiary companies are to be restructured by handing over a considerable number of shares and management of the company to selected investors, through a transparent procurement process, according to official sources.
Accordingly, the State Owned Enterprises Restructuring Unit of the Ministry of Finance has taken key initiatives to provide recommendations on restructuring SLA.
Outlining the status of the national carrier and its restructuring, Ports and Aviation Minister Nimal Siripla de Silva told the Business Times that the best outcome would be the purchase of the airline in a public private partnership.
He disclosed that several foreign investors have already expressed interest in taking over the management of the airline but didn’t name them.
It has been speculated that a major industrial conglomerate in India that recently acquired Air India from the government was among the possible investors in the national carrier.
Air India managed by Tata is likely to be among the contenders to acquire a major stake of the national flag carrier with considerable traffic from the Indian market, several aviation sector officials said.
The Open Skies Agreement between India and Sri Lanka enables SriLankan Airlines to operate more than 100 flights per week to 14 destinations in India. The restructuring process is expected to raise around US$ 500 million by handing over the profit making ground handling services, and Sri Lankan Catering, Minister de Silva disclosed.
This money to be raised from selling the subsidiaries would cover less than half of SriLankan Airlines’ $1.2 billion of debt, he said adding that the balance of the debt will have to be borne by the Treasury,
The airline officials informed that it had made $104 million as operating profit before interest payments resulting in a net profit of $3 million after interest expenses of $101 million.
Minister Nimal Siripala de Silva expressed concerns about the potential loss of jobs for approximately 6,000 employees at SriLankan Airlines if immediate restructuring measures are not implemented.
The Minister emphasized that the Government cannot sustain the financial losses incurred by SriLankan Airlines and it would be unfair to continue using taxpayer funds in this manner.
“SriLankan Airlines, established as our national carrier many years ago, holds a unique position. While it managed to generate a profit of Rs. 30 million during the period it was under the control of Emirates Airlines, it has struggled to achieve profitability otherwise,” he said.
The Minister said that SriLankan Airlines carries a debt of US$ 1.2 billion and various organizations, including local state banks, have had to cover outstanding payments for international bonds and leased planes.
The restructuring plan entails the Government retaining a 51% share, with the remaining 49% to be offered to another investor.
Cabinet approval of a comprehensive strategy would be sought to restructure the balance sheets of the Sri Lankan Airlines by June 2023 in accordance with a structural benchmark stipulated by the International Monetary Fund.
As per provisional financial statements, the operating loss of SLA was confined to Rs. 4.4 billion during the nine months ending December 2022, compared to the loss of Rs. 15.6 billion recorded during the corresponding period of 2021, the Central Bank annual report 2022 revealed.
Sri Lankan Airlines has recorded a marginal net profit of $3 million for the financial year 2022-23, for the first time of the airline after Emirates left the management in 2008, the airline officials disclosed to the Committee on Public Enterprises (COPE).