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More powers, extra time given to SriLankan probe commission
View(s):The loss-making budget airline, Mihin Lanka, was proposed to be brought under SriLankan Airlines (SLA) as a subsidiary company to ensure a proper aviation service and meet the demands of a booming tourism industry.
But professional recommendation was overlooked by the then management, it was revealed this week, at the Commission of Inquiry (CoI) appointed to investigate alleged irregularities in SriLankan Airlines, SriLankan Catering Ltd and Mihin Lanka (Pvt) Ltd.
Testifying before the Commission, former Chief Financial Officer (CFO) S. A. Chandrasekera, who played a major role in formulating the Business Strategic Plan for the budget airline, said, he had recommended to the then top management to bring Mihin Lanka under SriLankan airlines as a subsidiary company for effective airline services and to avoid competition when flying to same destinations in the region.
“I recommended forming fully owned separate subsidiary companies within SLA including Mihin Lanka to make them contribute to the equity of SLA with joint ventures. However, my recommendations were not implemented,” Mr Chandrasekara said.
He said these recommendations were supported by solid reasons such as the factor that both airlines could have utilised the aircraft as a joint venture.
The evidence was led by Additional Solicitor General (ASG) Neil Unamboowe, assisted by Senior State Attorney Fazly Razik.
Mr Chandrasekara was the chief architect of two business strategic plans formulated in 2008 and 2010.
He said he was commissioned for that process by the then Treasury Secretary and SLA Director P.B. Jayasundara in 2008 and SriLankan Chairman Nishantha Wickremasinghe in March, 2010.
The promising SLA Business Strategic Plan for 2010/11 – 2014/15 with USD 300 million as equity capital had what he believed were some remarkable features with the aim of making the national carrier cover its own expenses instead of depending on the State.
He said he also recommended expanding the SLA fleet to 24 aircraft by the 2014-2015 financial year.
“Ground handling, catering and engineering are lucrative processes. For example, the ground handling operation alone is worth at least USD 400 million and if we issued shares for half its worth, USD 200 million, we could have paid off a lot of debt. Moreover, the fact that ground handling, catering and engineering were with SKA would have allowed the covering up of the losses incurred by the flight operation. I wanted to continue this operation without being a burden to the treasury,” Chandrasekera said.
On Monday, President Maithripala Sirisena conferred additional powers to the CoI to enable it to obtain bank details of those under investigation and details pertaining to them from the Inland Revenue Department.
The additional powers have been conferred at the request of the commission for it to effectively accomplish the task entrusted to it.
With CoI’s mandate extended further until February 15 and armed with more powers, all five Commissioners met President Sirisena on Wednesday to brief him on the progress of the proceedings.
Meanwhile, during the Commission’s hearing last week, Rajeewa Jayaweera, a former SriLankan Airlines Country Manager in Oman, South India, and France, and a former Regional Manager for Qatar Airways, said two of the airline’s CEOs of Sri Lankan nationality had no previous airline managerial experience.
When queried if any other factors influenced the airline’s poor performance besides high aircraft lease costs and heavy competition from Middle Eastern carriers, Mr Jayaweera said another key factor was the manner in which the airline was marketed abroad. During Emirates management, all overseas managers received training in the preparation of marketing plans. Their annual marketing plans were incorporated to the company’s overall marketing plan by the Chief Marketing Officer and approved by the Senior Management Team (SMT) and the CEO. Once approved, country marketing plans would be implemented by country managers with their sales teams, he said.
Good quality sales staff could be recruited only if they were suitably remunerated. The airline’s management, in pursuit of cost reductions neglected this key aspect after March 2008. As a result, the quality of field sales staff deteriorated over time. It reflected in their performance and results, he said.
Commenting on the evolution of the aviation policy in Sri Lanka, Mr Jayaweera said European carriers which ceased operations to Sri Lanka in 1988 due to the civil war did not return after 2010 due to their inability to compete with Middle Eastern carriers.
Meanwhile, the Government constantly overruled the airline’s objections and granted traffic rights to foreign carriers. First were carriers from Amman, Beirut, and Muscat starting from early 1990s, despite the absence of Sri Lankan labour in Jordan and Lebanon at the time. Key to granting traffic rights, to the detriment of SriLankan, was that local General Sales Agents (GSA) of two carriers were closely connected to local politicians at the highest level, while the third GSA was a family member of a very senior politician, it was alleged. First two flights of one such carrier had landed in Colombo even without a Temporary Operating Permit (ToP) in place.
SriLankan’s European routes had made continuous losses from their inception. The LTTE attack on Katunayake in July 2001, followed by the 9/11 attacks in the US, worsened the situation. There were times when SriLankan aircraft were departing with as few as 30-40 passengers. This suddenly changed from February 2002 when air travel boomed once again. After that, European routes continuously exceeded their revenue targets till the Tsunami in December 2004 though not achieving route profitability, Mr Jayaweera noted.
Commenting on the airline’s current route network, Mr Jayaweera stated established airlines generally expanded their route network once reaching profitability. New aircraft were acquired to facilitate such additional routes. However, the national carrier had recently added several routes in order to utilise excess aircraft. The recently introduced Melbourne route had recorded a deficit in excess of USD 20 million in first twelve months of operations.
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 hearings will continue tomorrow.