Srilankan, a hopeless case even with a management change: Eran
„Says airline has no business and economic proposition in current context „Cites national pride as only reason keeping Srilankan in air
Finance State Minister Eran Wickramaratne lashed out at the national carrier, Srilankan Airlines, at a recent forum in Colombo, saying that the airline has no business proposition even with a change in the management.
Wickramaratne’s comments come at a time the government’s attempt to find a foreign partner to run the airline has failed.
“It doesn’t matter who is in charge. It doesn’t matter what the management team is. Fundamentally, is there a proposition for Srilankan Airlines? Is there a business and economic proposition for Srilankan Airlines in the current economic context of the airline industry? My personal view is there isn’t an economic or financial proposition,” he said.
Speaking at the Economic Freedom Summit in Colombo, organised by the free-market think tank Advocata, Wickramaratne said that national pride is the factor currently keeping Srilankan in the air.
“We need to be honest with ourselves. We then need to ask the question ‘how much are we willing to pay if it brings some kind of national pride to fly the flag in the air?’ That’s the question that we need to ask ourselves. That’s a political question. That’s not an economic and financial question,” he said. He said that a political question needs a political answer. The price of national pride, until April 2017, had been a total accumulated loss of Rs.170 billion, with Treasury guarantees provided up to Rs.29.92 billion and US $ 210 million for the airline’s total interest-bearing borrowings amounting to Rs.90.34 billion.
Political answers are continuing to be provided for national pride, with our sister publication, The Sunday Times, last week reporting that the Public Enterprise Development had requested the cabinet approval for the Treasury to provide two letters of comfort totalling Rs.13.02 billion until a foreign partner is found.
Wickramaratne was until five months ago Deputy Minister at the Public Enterprise Development Ministry, which is currently tasked with finding an international partner to manage the airline, own minority shares and return it to profit-making.
Currently, a management team, appointed by Prime Minister Ranil Wickremesinghe, is attempting to restructure Srilankan into a regional airline, after absorbing the lossmaking Mihin Air into the Srilankan books as well.
Despite the boon of lower oil prices, this team also failed to turn around the airline during the 2016 and 2017 financial years, with the airline posting Rs.12.08 billion and Rs.28.34 billion in net losses, respectively.
This did not reportedly prevent Srilankan CEO Suren Ratwatte—brother of Prime Ministerial Advisor Charitha Ratwatte—from seeking Rs.10 million in a ‘performance bonus’.
The current management is pushing for the acquisition of the short-range narrow-bodied Airbus A320neo aircraft for operations in the new destinations Srilankan is expanding to, in the South Asian region.
The only medium to long-haul destinations served by Srilankan are London and Melbourne, which have considerable Sri Lankan expatriate populations.
Airlines serving out of the Middle East and Southeast Asia have pushed Srilankan out of competition in other routes.
The previous management headed by former President Mahinda Rajapaksa’s brother-in-law, had grossly mismanaged the previously profitable airline, leading to the accumulation of Rs.128 billion in losses from 2009-2014—a period highlighted by thousands of jobs in Srilankan given to Rajapaksa’s political supporters and falling quality standards.
The Rajapaksa administration also saw Srilankan ordering eight wide-bodied long-haul Airbus A350-900 aircraft at above the market rates, which now appear to be related to the scandal rocking the foundations of the Airbus management in Europe.
Four of the aircraft have already been cancelled with around US $ 100 million in penalty payments.
Over the previous decade running up to 2008, the Middle Eastern giant Emirates owned 40 percent of the shares in Srilankan and managed the airline.
Rajapaksa chose to interpret some of Emirates’ professional management decisions as personal slights and kicked the airline giant out of Srilankan.
Interestingly, national pride hasn’t blown out of proportion in the case of Srilankan, compared to the flak the current government is receiving for ‘selling out the country’ from protectionist elements, for finding partners for other nonperforming state assets.
This is perhaps due to the fact that the previous experience has been positive, with Emirates running Srilankan at high standards and profitability and posting a Rs.4.9 billion profit during the final year Emirates managed the airline.