While Sri Lanka has scrapped plans to sell a stake in its national carrier, SriLankan Airlines, after foreign offers it sought didn’t meet up to expectations, government officials say they are pursuing an alternate route which still includes attracting investors to the debt-ridden airline.
“We are looking at an alternate proposal which would still be under the previous plan to invite investors. It’s sensitive at the moment but we hope to announce the new plan in two to three weeks,” said a source close to the negotiating team.
On Thursday, the government said it had dropped plans to sell a minority stake of 49 per cent of SriLankan Airlines, after none of the bidding entities that expressed interest in it was deemed “worthy”.
“Instead, the airline will undergo restructuring under an alternate plan,” stated Sri Lankan minister of ports, shipping and aviation Nimal Siripala de Silva. However, he did not share what the alternate proposal was.
“We are not going to sell SriLankan Airlines but restructure it. According to Sri Lankan law, only 49 per cent of the airline’s shares can be given to a non-Sri Lankan entity – but there is minimal interest in the world for that.”
The airline reported an operating profit of 43.4 billion rupees (US$143 million) from April 1, 2022 to March 31, 2023 but has suffered a net, carry forward loss of 71 billion rupees. The airline flies to 114 destinations in 62 countries, has a staff of 6,000 and has relied on government financial support to sustain the carrier.
In October last year, the government called for offers to bail out the struggling airline and there were six bids, none of which included an international carrier.
In 1998, Dubai’s Emirates bought a 43.6 per cent stake in SriLankan Airlines together with a 10-year management concession but opted out of renewing the contract in 2008 due to disagreement with local authorities.
Aviation analysts said the lack of a clean balance sheet is one of the reasons why the airline is not attracting any positive offers. One analyst said: “Investors want their money ploughed into the airline instead of settling a government loan.”
Another expert, who was involved in the 1998 part-sale to Emirates, said the problem in finding a suitable partner is the timing and uncertainty of the call for offers.
He noted: “Sri Lanka is heading for a series of elections starting with the Presidential election in September/October 2024 and investors are unsure what the situation would be if a new president is elected. Furthermore, Sri Lanka’s economic woes have also created uncertainty.”
An acute economic crisis in 2022 which saw a shortage of foreign exchange led to long queues for fuel, cooking gas and essential items, forcing the authorities to seek an IMF bailout package.
“The government also needs to provide a proper risk assessment to potential investors so that they know in advance what they are getting into in making a positive bid. The amount of debt and the profitable routes and non-profitable routes have to be clearly expressed and whether these unprofitable routes would be shed; these are all questions that have to be answered,” the aviation expert, who declined to be named, said.
Source: TTG Asia
