“SriLankan Airlines gets lifeline from Treasury”

SriLankan Airlines has sent a response to last week’s report in the Business Times headlined “SriLankan Airlines gets lifeline from Treasury”. The letter says that the airline didn’t get any new facilities from the state banks in the recent past. The last loan facility obtained by SriLankan Airlines was in March/April 2017 of US$25 million each from Bank of Ceylon and People’s Bank which were secured by Letters of Comfort issued by the Treasury. This facility was granted in order to fund the losses arising due to the cancellation of over 600 flights as a result of the day time runway closure at the Bandaranaike International Airport for a 3-month period for urgent renovations.

“Accordingly the figures mentioned in your article of two facilities amounting to Rs. 6.57 billion from Bank of Ceylon and Rs. 6.45 billion from People’s Bank is not correct. Periodically Cabinet approvals are granted to renew the existing facilities extended by the two state banks under Letters of Comfort ( LoCs) from the Treasury as these need to be reissued periodically. However, we note that none of these renewals match with the figures stated in the article.”

Business Times Reporter says: The report was based on a memorandum submitted by Public Enterprise Development Minister Kabir Hashim seeking approval from the Cabinet to obtain funds from the Treasury as SriLankan Airlines has been running with an operational loss as a result of operational inefficiencies and a weak financial position. According to this memorandum, “The airline’s long term liabilities includes a Rs.13 billion overdue CPC bill adding up to Rs. 48.96 billion. The total loss of Sri Lankan Airlines increased by 55 per cent to Rs. 9.52 billion in the first four months in 2017 compared to a loss of Rs. 6.12 billion recorded in the same period last year. The accumulated losses and the negative net worth of the airline as at end April 2017 reached Rs. 170 billion and Rs. 116 billion, respectively”.

It is reliably learnt that the Treasury will issue LoCs to both the People’s Bank and BOC after the budget.