SriLankan Airlines eyes more suitors
File picture of a SriLankan Airbus
The due diligence engagement by the Texas Pacific Group (TPG) to assess SriLankan Airlines’ commercial viability won’t limit the government from entertaining other interested suitors for the national carrier.
Public Enterprise Development Minister Kabir Hashim speaking at the Malaysian Business Council, Breakfast Meeting recently said that TPG is doing a due diligence, but they may not get the airline. “They don’t have airline experience to run a national carrier and that’s a concern,” he told the gathering adding that TPG is an entity that ‘restructures’ airlines. “In addition TPG is also a fund management company and if SriLankan was given to them to operate it may also damage the airline’s image. TPG is qualified for the restructure but that doesn’t close the door for the government to discuss the future of SriLankan Airlines with others,” he said.
He further said, “My ministry has been given the right to look at others that are interested.”
In this light, he said that the ministry has received information that some airlines are relooking at SriLankan while there’re also certain fresh ones eyeing it. He told the Business Times on the sidelines of this event that four airlines – IndigoAir (from India), Air Asia (Malaysia), Japan Airlines and Emirates Airlines have approached his ministry.
TPG was shortlisted from 14 bidders through a transparent process and is now carrying out the due diligence.
Ministry Deputy Minister Eran Wickremaratne told the Business Times that TPG has experience in turning around airlines but their timelines to (stay in an investment) is short (as they’re only fund managers). “In TPG’s case studies, they restructure on different ways either employ a management consultant, an international management team, an airline, etc.”
“So we’ll know in two months’ time how they intend to do it,” he said noting that the due diligence will at least take two months. He added that this private equity fund has the capital and that they may either come up with a consultancy or tie up with an airline.
Mr. Hashim in his address said the government has put in a staggering Rs. 123 billion towards the upkeep of 245 State Owned enterprises (SOE) in 2014 and this is increasing each year. The loss from these entities was Rs. 60 billion, an amount that could have been used to build 300 hospitals with 200 beds each, he said.
“The Government has decided to form a Public Enterprise Board to monitor the SOEs and then coordinate with investors to convert them to PPP. Though it would be hard we want to discontinue political appointments and appoint professionals to run some of the SOE,” he said, adding that the Bill for this is now being studied by the Legal Draftsman.
He added that some 42 SOEs facing financial difficulties, received Rs. 215 billion in budgetary support in 2012 and 2013. “In 2014 it was Rs. 123 billion which means each of the households in Sri Lanka were burdened with Rs. 24,000,” he added. He said that in order to restructure the economy, all should think beyond economic times.
Meanwhile Gamini Wettasinghe, CEO of Peace Airways which also made a bid (later rejected) for the national carrier, told the Business Times that he plans to file a fundamental rights action in Supreme Courts arguing that while his company was shortlisted, it wasn’t given an opportunity of carrying out a due diligence similar to TPG.