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Debt-ridden SriLankan Airlines faces closure
The national carrier SriLankan Airlines faces closure “in the larger interest of the country’s economy” if “tangible and sustainable restructuring cannot be achieved,” its Chairman Ajit Dias has warned. Pointing out that the airlines’ principal lenders, the two state-run banks, are at a “risk situation,” he has said in a message to all SriLankan employees that there were only two options.
One was to restructure the company in such a way “as to attract an equity partner.” The other, he has said, is to “carry-out the restructuring in a manner that the airline can manage its own affairs without Government funding if finding a partner fails.” So far, the airline has been unsuccessful in persuading partner airlines or other entities to invest. They have backed out after studying the financial status. Both the Bank of Ceylon and the People’s Bank have been issuing guarantees to SriLankan to the tune of billions of rupees to raise loans. This is besides huge loans obtained from them. They remain unpaid.
The SriLankan Chairman has disclosed that the International Monetary Fund (IMF) has requested the Government to correct “this situation by coming up with a solution to the predicament of the airline before they agree to release funding pledged for vital development efforts in the country.” The two state-run banks, which are currently funding SriLankan, he has said, will face issues over “solvency and credit rating” and such a situation could affect the “national budget.”
Mr Dias’s bad news for SriLankan employees, during the Christmas season, comes as President Maithripala Sirisena has declared that a Commission of Inquiry would be appointed to probe the national carrier. Several ministers have complained to him about alleged widespread corruption and salaries in millions of rupees drawn by the top rungs in the airline.
Mr Dias has also disclosed that the Government has appointed a Ministerial Committee headed by Prime Minister Ranil Wickremesinghe and including Finance Minister Mangala Samaraweera, Special Assignments Minister Sarath Amunugama, Transport Minister Nimal Siripala de Silva, Public Enterprise Development Minister Kabir Hashim, Development Strategies and International Trade Minister Malik Samarawickrema to oversee the re-structuring. They are assisted by a Task Force chaired by Treasury Secretary R.H.S. Samaratunga and including Public Enterprise Ministry Secretary Ravindra Hewavitharana, Thilan Wijesinghe (convenor), Mano Tittawella, Dr. Rohan Perra, Chairman Dias and SriLankan CEO Suren Ratwatte.
The Sri Lankan Chairman has said the “process would address all aspects of the airline from the revenue to the cost angles.There would be hard decisions taken to rationalise the network, right-size the fleet, cut costs, rationalise people costs and be able to re-negotiate CBAs. As a result the company would not renegotiate or enter into new collective agreements until March 2018 when the process is scheduled to be completed.”
The cost cutting, sources at SriLankan said, would include pay cuts. Unions say that such cuts should first be taken by those at the higher levels of management and allege that some are directly answerable for the current state of bankruptcy of the airline.