Despite worsening situation, SriLankan retains same aviation consultant

SriLankan Airlines has retained the same international aviation consultant from whom it commissioned a partial restructuring plan last year to draw up yet another proposal to turn the ailing company around.

Of the 2016 contract, Nyras says on its website that it was assigned “to carry out strategic options review of viability and opportunities for SriLankan Airlines, a Stateowned flag carrier”.

“The Sri Lankan Government had set a requirement for the business to deliver break-even profitability within two years, and the airline asked Nyras to help address issues with both financial performance and excess future aircraft orders,” it said.

It was based on Nyras’ recommendation that SriLankan cancelled the A350s order of the previous administration, authoritative sources said.

But the full plan was not adopted as the Government then decided that it would look for a partner, an initiative that subsequently failed.

SriLankan Airlines Chairman Ajith Dias recently wrote to employees saying the carrier faces closure “in the larger interest of the country’s economy” if “tangible and sustainable restructuring cannot be achieved.”

Only two options were available, he said. One was to restructure the company in such a way as to attract an equity partner. The other was to carry out the restructuring in a manner that the airline could manage its own affairs without Government funding if finding a partner failed.

Nyras has once again been assigned the task, the year after it did the first analysis. The company says its team of strategic, commercial and finance experts had worked closely with airline management, the Board of Directors and senior government officials to identify “a number of realistic and achievable strategic options, addressing revenue, costs, balance sheet and aircraft commitments with potential solutions provided for each”.

The recommendation to cancel the A350 leases resulted in SriLankan having to pay a hefty penalty amounting to millions of dollars, although the amount was far less than what Nyras had predicted it would be.

Nyras had also been asked “to write a detailed report with evidence, findings and recommendations of each strategic option, complete with financial evaluations in terms of profit, cash flow and balance sheets”. “This report enabled the Government to clearly understand the underlying performance and issues facing their national airline to implement a number of critical restructuring initiatives,” the statement on its website said.

But none of these restructuring plans appears to have helped the national carrier. Authoritative company sources said the new proposal would be more comprehensive than the last, covering the route network, head count, leases, IT systems and pay and benefits. ( The last one, they said, focused mainly on the A350 leases with recommendations for other areas). "All routes will be looked at and some may be closed," the sources said. "Aircraft may be returned or negotiated for better deals. Loans will be restructured with private equity coming in, we hope."

Meanwhile, six unions including the Airline Pilots’ Guild of SriLanka have expressed serious concern about the state of the national carrier. Sri Lanka Nidahas Sevaka Sangamaya (SLNSS) has written to the management saying it was clear that there was no proper plan and clear vision for the future of the airline.

It called for any restructuring to be one with the consent of all trade unions. In its own proposals to the management, SLNSS has recommended that 51 percent of total share ownership be retained by the Government; that the airline’s internal audit process continues under the Auditor General’s Department; that privatisation should not sell out identified profit-earning sections; that the job security of all employees be maintained with secure privileges; and that the restructuring process is transparent and genuine.

Meanwhile, the Alliance of Unions of SriLankan Airlines has sent a strong letter to the Chairman criticising the Board’s failure to improve the carrier’s projected financial decline and rectify the many alleged malpractices and misappropriations of the company’s predecessors.

“We wish to very categorically state that if you, the CEO or any one of your members from the Board of Directors is retained and remains a constituent of the Management of our Company; post restructuring process, we have no confidence in, or trust that the said process will be effective and yield the desired results. We also wish to place on record that we will consider the liabilities and accounta- bility of the Board, for the present state that the employees have been subjected to,” it said.

Union sources said the Chairman had pledged to share the restructuring plan by December 20.

Meanwhile Sri Lankan Airlines Chairman Dias has written to members of the Airline’s alliance of unions that the Consultants and the Management will engage with the Unions in the implementation of the Plan on the Restructure of the Company.

“It will be a difficult period but has to be done in the interest of the Airline and its employees. Irrespective of what is reported in the Press and Social media, we are confident that with the buy-in of a majority of our associates we can turn this Company around to a positive situation,” he said.

The letter was sent this week to the heads of the Airline Pilots Guild of Sri Lanka, Association of SriLankan Airlines Licensed Aircraft Engineers, Executive Association of SriLankan Airlines BIA, Flight Attendants Union and the SriLankan Airlines Aircraft Technicians Association.

Mr. Dias admitted that the corporate restructure presents the company and employees with formidable challenges.

The Chairman said that representatives of the Unions were invited to an awareness meeting on the ‘way forward for the airline’ on December 6, 2017 where it was explained in detail the position in respect of the proposed restructuring programme for the airline.

“At the meeting your confirmation and assurance to make it a success was very encouraging and we kept all staff informed in this respect. However, your subsequent letter to us and copied to the Press is contradictory and not at all consistent with the assurances or the spirit of co- operation given at the meeting,” Mr. Dias said.

He said that owing to the Government’s financial and other constrains, the Board did not receive approval for implementation of the several restructuring plans put forward with the advice sought from the three foreign consultancy firms, which worked with the management and the Board on these initiatives.

“With the pressures of international lending agencies towards re-organising and restructuring several State Owned Enterprises, the Government of Sri Lanka has appointed an Officials Committee reporting to the Ministerial Committee under the leadership of the Prime Minister, to come up with the necessary plans to make the Company a viable Entity and thereafter, to find a suitable Partner to drive the airline to the next level,” he said.

Mr. Dias said the Board of Management is working closely with the Officials Committee to see how best the debt could be taken off from the Balance Sheet, receive jet fuel at international market prices and right-sizing the Company. The success in these areas will ensure a viable airline.

“We are very mindful of the fact that due to the downturn of the global Airline Industry, there is little demand now especially in the Middle East for our trained and competent staff and as such the closure of the Airline is a concern to all and not in anybody’s interest,” he added.

Mr. Dias also explained that the information requested by one of the unions under the RIT Act could not be disclosed due to its personal nature and as stipulated so in the Right to Information Act.

“It is to be noted that the total remuneration of the Senior Management team of SriLankan Airlines amounts to less than 1% of the total wage cost of the company. SriLankan Airlines is a USD 950 MN (LKR 140 BN) Company in terms of revenue and needs highly skilled and experienced management, employed at market rates in keeping with specialised companies both here and abroad. The Chairman and the Directors are not paid a salary or any allowances.”