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From 2008, no Govt. rep on SriLankan board to arrest financial nosedive: Top official
The Government, as the main shareholder, had no representation in the SriLankan Airlines’ board of directors since 2008 to safeguard the state’s interests, the airline’s chief financial officer pointed out this week.
The airline’s Financial Management department head, Yasantha Dissanayake, highlighted this shortcoming while testifying before the Commission of Inquiry (CoI) appointed to investigate alleged irregularities in SriLankan Airlines, SriLankan Catering Ltd and Mihin Lanka (Pvt) Ltd, from January 1, 2006 to January 31, 2018.
Giving an account of the airline’s financial nosedive, the official said the national carrier fell into a deep financial crisis soon after the Emirates Management left in 2007-2008 financial year.
Mr. Dissanayake revealed that though the Government was the main shareholder in the national carrier, since 2008, neither the Treasury nor any other relevant state agency had represented the Government in the board of directors to protect the state’s interests.
He said the last government representative to sit in the board was the then Treasury Secretary P.B. Jayasundara and that was when Emirates Airlines ended its administration in 2008.
Mr Dissanayake submitted to the Commission a detailed report on the annual revenue and loss recorded from the time Emirates Airlines ended its management of SriLankan airlines in 2008.
Here are excerpts:
- In 2008, after Nishantha Wickramasinghe was appointed chairman, the airline recorded a revenue loss of Rs 5.63 billion, of which Rs 4.8 billion was covered through the sale of two aircraft. Thus the net loss was Rs 1.6 billion.
- In the financial year 2011-2012, a total loss of Rs 19.67 billion was recorded under the management of Chairman Nishantha Wickramasinghe and Chief Executive Officer Kapila Chandrasena.
- In the financial year 2012-2013, under the same management team, the airline’s total losses shot up to Rs 21.7 billion..
- When the Commissioners asked about the huge losses the airlines had made, Mr. Dissanayake said that with every passing year, the financial status of SriLankan Airlines worsened.
- * With the accumulation of losses, the recorded losses hit a staggering Rs 32.4 billion mark in the financial year 2013-2014. The witness said this was due to the sale of three aircraft engines and the adoption of a new accounting system with the approval of the management.
- In 2014-2015, the losses dropped to Rs 16.4 billion – a nearly fifty percent decline when compared to the previous financial year. The Commission was told the recovery was largely due to a sharp fall in the prices of jet fuel.
- In the meantime, the airline’s operating costs saw a gradual increase. In 2012, the total operating cost was Rs 144 billion. In the financial year 2016-2017, it went up to Rs 146 billion.
- Mr Dissanayake said the increase in the operating costs in recent years was mainly due to the penalty paid for the termination of four Airbus A350-900 leases from 2015 to 2017. The airline paid Rs. 18.8 billion as penalty.
- The Commission was told that in the Executive Directors’ Report for 2007-2008, the then Chairman Nishantha Wickramasinghe justified the then President Mahinda Rajapaksa’s recommendation to take back the management from the Emirates.
- In the report, Mr Wickremesinghe had noted that “with the support of President Mahinda Rajapaksa, it is the right time to take back the responsibilities and management of the airline into our own hands and therefore we don’t have to blame others if it fails to achieve what it set out to do,”
- Commission Chairman and retired Supreme Court Justice Anil Gooneratne noted that Nishantha Wickramasinghe, who was the Executive Director during the Emirate management, played a key role in taking over the management from Emirates to run it as a purely local venture.
- State counsel led by Senior Deputy Solicitor General Neil Unamboowe questioned Mr. Dissanayake whether he had submitted any observation reports to the monthly board meetings, when the airline’s financial situation was becoming worse, forcing it to borrow from state banks with government security.
- Mr Dissanayake said he had submitted comprehensive reports on the financial situation of the airline to special board meetings held every month to analyse and discuss financial matters. However, he had not received any undertaking in writing or instructions from the board as follow-up measures.
- The Commission was told that Srilankan Airlines paid Rs. 50.7 million to a third party company called Via Capital Company in 2010 to evaluate a business plan formulated by former top official S. A. Chandrasekera. Mr Chandrasekara was hired by the then Chairman Wickramasinghe to formulate the Comprehensive Strategic business plan and paid a salary of Rs 250,000 for three months along with other company allowances.
- Mr Dissanayake claimed that a conflict-of-interest issue emerged in selecting the evaluation company as two SriLankan board members were also found to be sitting board members in Via Capital and its joint venture company InterVISTAS Consulting Group. He told the Commission he was not aware whether SriLankan’s other board members knew about this issue during the evaluation process.
The Commission comprises retired Supreme Court Justice Anil Gooneratne (Chairman), Court of Appeal Judge Gamini Rohan Amarasekara, retired High Court Judge Piyasena Ranasinghe, retired Deputy Auditor General Don Anthony Harold and Sri Lanka Accounting & Auditing Standards Monitoring Board Director General Wasantha Jayaseeli Kapugama. The Commission hearings will continue tomorrow.