Commission chairman notes lavish expenditure on VIP Kit, while poverty persisted

While the national carrier was struggling with poor cash flow and dwindling revenue to meet its daily expenses in 2013, the then top management requested aircraft manufacturer Airbus to fix a VIP Kit worth US$ 15 million in an A330300 aircraft for the exclusive use of the then President Mahinda Rajapaksa.

Though the then management had claimed that it was a ‘goodwill gesture’ extended by the aircraft company for being a longstanding customer, two SriLankan Airlines top officials told the inquiry commission this week that the VIP kit was requested by the airline.

The airline's Group Legal Affairs Chief Mayuka Ranasinghe and Finance De p a r t m e n t C h i e f Ya s a n t h a Dissanayake testified before the Commission with regard to the re-fleeting process that was carried out for five years, beginning 2009.

They made this claim during their testimony before the Commission of Inquiry ( CoI) probing allegations of large scale frauds and malpractices in SriLankan Airlines, SriLankan Catering Ltd and Mihin Lanka (Pvt) Ltd.

The Commission was told that some top-level officials of the national carrier had decided arbitrarily to go for this ‘VIP kit’ facility under the banner of a voluntary ‘bonus’ from Airbus while binding to the lease agreements put forward by Airbus when ten A330-300 aircraft were purchased.

The commission was told that, according to the lease and purchase agreements, which were submitted to the Commission this week, any changes in the placement of orders would be subjected to an additional payment of US$ 1.5 million on each aircraft.

The order for the VIP kit, which was expected to be delivered in 2015, was scrapped soon after the change of government in January 2015.

On Tuesday, Mr. Dissanayake told court that the top management in 2013 took a decision acquire the VIP kit which was to be delivered by 2015.

He said the VIP kit, complete with a bed and conference chairs, was not for the use of the airline’s directors or the senior management; instead it was for the exclusive use of the then President Mahinda Rajapaksa.

The airline had not mentioned the kit in its Request for Proposal (RfP), the witness said, adding that it did not even surface during the initial discussions. Despite M r. Dissanayake terming the kit a ‘goodwill gesture’, he told the commission the airline was bound to buy ten aircraft to get this ‘ VIP kit’ as a bonus and, therefore, it came with strings attached.

Accordingly, SriLankan had placed an order for 10 aircraft from Airbus, and if SriLankan wanted to cancel the order for any one of these aircraft, it would incur a cost of US$ 1.5 million, or ten percent of the VIP kit’s total value.

Earlier, it had been claimed that Airbus’ decision to offer the kit was made known to SriLankan only after the airline placed the order to procure the ten aircraft. The order for the aircraft was made after the then CEO Kapila Chandrasena in an email declared that the Treasury, as a shareholder, wanted to maintain an all Airbus fleet.

However, another email exchange between Mr. Chandrasena and former chairman Ajith Dias, SriLankan’s top management indicated that the top management knew about the kit even before the Treasury’s directive.

Mr. Dissanayake said the VIP kit was designed to accommodate 12 VIPs and it included a separate area for security personnel. He said that, to install the kit, it would require three days as the aircraft's passenger seats have to be removed.

Senior State Counsel Fazly Razik, who led the evidence, asked: “Didn’t anyone from SriLankan speak out against this as something unnecessary?”

The witness responded that no one had done so, and added that the procuring authority for the airc r a f t , the Engineering Division, and the Board were responsible for it. When Commissioner and Supreme Court Justice Gamini Amarasekara asked the witness who made the decision to accept the offer, he said he did not know.

The airline’s Legal Affairs Department Chief Ranasinghe said his department received directives from both the Engineering Division and the Finance Division expressing interest to go for this ‘gift’ and sought legal opinion. “I’m not sure of the thinking of then management over these decisions. These are commercial decisions at the end of the day.”

Senior State Counsel Razik asked him what would be the commercial benefit of this ‘VIP kit’ for the airline and why the legal department failed to raise concerns over this legally binding ‘ gift’ if the department was working for the best interests of the company.

The witness said the then SL Chairman Nishantha Wickramasinghe signed the agreements for the VIP kit without obtaining approval from Board of Directors (BoD) or shareholders other than the Treasury. They held 49 percent of the shares.

Noting that someone from the airline had requested for ‘VIP kit’, Commision Chairman Justice Gooneratne intervened to ask whether those who wanted to plant this kit was considering to convert the aircraft as another Air force One -- the United States’ President’s official aircraft, which, among other things, has satellite communication facilities.

“Why do we need a VIP kit at all? What kind of business you can do with such kits? We have to remember, we are still a third world country struggling with severe poverty in various parts of the country. How can we afford this kind of lavish expenses?” Justice Gooneratne asked, while noting that the airline was deeply burdened with severe financial difficulties.

The Commission was told on Thursday that Airbus refused for a premature exist from the leasing agreements, after the then SriLankan management realised that the placed orders for the aircraft were not financially viable and the requirements of the company had changed significantly.

Evidences placed before the Commission revealed that CEO Wickramasinghe acted arbitrarily in signing the lease agreements with Airbus without obtaining approval from the Board of Directors.

Early this week, Mr. Dissanayake said a board meeting was held on March 1, 2013 at the then Speaker Chamal Rajapaksa's residence in Battaramulla to decide on the procurement of the 10 aircraft. It came three days after the board meeting held at the airline’s boardroom. At this meeting, a proposal for a widebody re-fleeting was taken up, with the then Chief Executive Officer ( CEO) Chandrasena making a presentation.

When SSC Razik asked the witness why they had chosen the Speaker's residence, he replied it was for convenience.

On Friday, the airline’s Properties and Facilities Manager Patrick Christian Anton Fernando appeared before the Commission to answer queries on the air taxi operation launched in 2003 and the construction of eight floating docks across the country. Senior State Counsel Dishna Warnakula led the evidence as instructed by Deputy Solicitor General (DSG) Chanaka Wijesinghe.

The CoI comprises retired Supreme Court Justice Anil Gooneratne ( Chairman), Supreme Court Justice Gamini Rohan Amarasekara, retired High Court Judge Piyasena Ranasinghe, retired Deputy Auditor General Don Anthony Harold and Sri Lanka Accounting and Auditing Standards Monitoring Board Director General Wasantha Jayaseeli Kapugama.