Turbulence ahead: SriLankan Airlines divestiture on the brink
The divestiture of national carrier SriLankan Airlines and its subsidiaries catering and ground handling services is being pursued with glitches under the present difficult circumstance of attracting a broad range of potential investors, Aviation Ministry sources said.
They said the prequalification deadline to buy a majority stake in the national carrier has been extended (until March 5, 2024) for the fourth time consequent to six recent flight delays and three cancellations due to technical issues and a rat found in a plane resulted in grounding it for three days.
The selection of prequalified bidders and opening of the data room is now set to take place next week, with the issuance of the Request for Proposals (RFP) and draft conclusive agreements scheduled at the end of the same month, Finance Ministry sources revealed.
The divestiture is planned to be completed through a two-stage competitive bidding process; RFQ (Request for Qualification) and RFP (Request for Proposals) for the Proposed Transaction.
Finding a prospective investor has now become bleak as a result of poor status of the airline with depleting fleet and recent negative publicity and complaints by angry passengers, a senior official said
Minister of Ports, Shipping and Aviation, Nimal Siripala De Silva said that managing the national carrier as a joint venture is the solution as SriLankan was in total debt up to US$ 1.8 billion
He noted that the recent delay may also have a negative impact on the proposed divesting of three segments of the national carrier: airline, catering and ground handling.
Sri Lankan Chairman Ashok Pathirage told a media conference this week that the grounding of two aircraft along with technical and staff issues were the main reasons for the current delay and measures have already been taken to tackle this issue.
The airline earns over Rs. 330 billion turnover and with the acquiring of more aircraft this can be further increased, he added.
It had leased two aircraft from Air Belgium to boost its fleet, which had been depleted by expiring leases and aircraft grounded due to an engine manufacturers’ defect, he revealed.
Economic expert Professor Wasantha Athukorale of the Peradeniya University said SriLankan Airlines has recorded losses due to inefficiency and weak administration of politicised top management who were incompetent in making the airline profitable.
During the previously completed fiscal year 2022/2023, the airline generated a passenger and cargo revenue of $ 994 million and an operating profit of US$53 million after recording losses during the past few years.
The operating profit at group level was $104 million. The group‚ however‚ incurred financing costs of $101 million, resulting in a profit of $ 3 million.