SriLankan Airlines gets lifeline from Treasury
In a last ditch attempt to maintain SriLankan Airlines till a foreign partner is found, the government has decided to infuse Rs.13.2 billion as a loan from two state banks, Bank of Ceylon (BOC) and the People’s Bank (PB).
This came after a directive from the President to the airline’s board of directors to turn it around or depart at a meeting in June in which the management was heavily criticised on management issues.
The President has given them time to prove results till last month (September). But no progress has been made up to now, official sources revealed.
In the meantime, the Government approved a proposal by State Enterprise Development Minister Kabir Hashim seeking necessary funds from the Treasury for this purpose, official sources said.
The Treasury has issued two letters of guarantee to the PB and the BOC to provide a credit facility of Rs. 6.75 billion and Rs. 6.45 billion, respectively to meet the airline’s financial requirements.
In March 2016, the then Finance Minister Ravi Karunanayake directed the Treasury to provide funding to the ailing national carrier for six months, a senior Finance Ministry official said adding that this period lapsed in September last year.
The Cabinet also approved a proposal made by Prime Minister Ranil Wickremesinghe in April 2016 to allow the Treasury to take over the airline’s total debt of Rs. 461 billion and set up a joint venture to operate it profitably.
Minister Hashim, who is responsible for SriLankan, has been entrusted with the task of devising new strategies to turn around the loss-making airline within this period and rescue it from its deep financial mess.
The attempts made to restructure the national carrier under a public private partnership basis and the process of finding a new investor in the past 12 months has been unsuccessful up to now.
The airline has submitted a restructuring plan recently to the government to reduce its debts and achieve breakeven point in the short-to medium term.
The plan is to downsise the group while operating its ground handling and engineering as separate entities under separate managements, and purchasing fuel at competitive prices, etc.
The accumulated loss of the airline had risen to over Rs.170 billion, he said adding that it has recorded a profit of Rs.4.4 billion in 2008 and thereafter suffered heavy losses amounting to Rs. 107 billion under the administration of the then chairman Nishantha Wickremasinghe, brother-in-law of former president Mahinda Rajapaksa.