What fate awaits a national airline steeped in debt?

What fate awaits a national airline steeped in debt?

What fate awaits a national airline steeped in debt?

Written by Lahiru Fernando

31 Jul, 2016 | 10:01 pm

On Saturday, July 30,  News 1st reported a massive per capita debt burden of Rs. 500,000. We sought answers on how major infrastructure projects have contributed to the debt burden.

The National carrier SriLankan Airlines is another institution in dire financial straits, which is contributing to the debt burden.

Amid the clamour for reform, what fate awaits the national airline?

With a fleet of 21 aircrafts to its name, SriLankan Airlines has a cadre of 6,800 including foreign expatriates. At present, the government owns 94.68 percent of shares in Sri Lankan airlines while the balance 5.32 percent is owned by the employees.

A glance at the airlines’ annual reports for the past several years indicates the pattern of losses.The current government has adopted the stance that given the state of the corporation’s finances, it is no longer viable for SriLankan Airlines to continue to function as a public enterprise.

Nevertheless, close scrutiny of data and statistics shows that the losses have been gradually declining.

On July 21,  the Minister of Public Enterprise Development Kabir Hashim stated that the government is not prepared to invest more money on Sri Lankan Airlines.

“In the past, the Emirates company was given a 45 percent share. We are hoping to maintain a majority share for the government. But it is not a necessity, ” said Minister of Public Enterprise Development, Kabir Hashim.

In spite of the views expressed by the subject minister, the 2016 mid-year fiscal position report published by the Ministry of Finance on June 30 states that the government had decided to take over all liabilities of SriLankan Airlines as at March 31, 2015.

The report reads further that the government had decided to source a suitable partner for the successful management of the business operations on the basis of a clean balance sheet.

While the government is seeking an investor for SriLankan Airlines, agreements have been signed to give three Aircraft to Pakistan. Three A330 aircraft and the necessary crew will be given to Pakistan International Airlines under a wet lease.

While Pakistan is using aircraft from SriLankan Airlines to expand their flights to Europe, SriLankan airlines has in fact decided to cease services to Europe.

Thereby, direct flights to Paris, Rome and Frankfurt have been ceased though the three airports had granted favorable time frames and space for Sri Lankan airlines flights.

It was also reported recently that ground services provided by SriLankan Airlines have been taken over by Airports and Aviation Limited.

Trade Unions allege that SriLankan Airlines will lose revenue amounting to eight billion rupees per annum as a result.

Against a backdrop where the fleet has been reduced to 18 aircraft , and several services have been curtailed, the government published newspaper advertisements recently inviting new investors.

“We have only one airline. It is under the government. For a while it was operated in partnership with Emirates. When the government took over it was four billion in profit. Five years after the government took over, it was valued at negative 102.816 billion. When the government took over, the asset base was valued at 15.536 billion. Now, there is a negative value of 74.106 billion. Now, the government minister is saying that if there is anyone willing to buy it, they will give it away even for one rupee, aircraft included”, said COPE Chairman,  MP Sunil Handunnetti.

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