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Lufthansa sought exclusive deal to settle US$ 1.1 million dispute
View(s):A German-based aeronautical maintenance company sought from SriLankan Airlines an exclusive contract outside the tender procedure to settle a US$ 1.1 million dispute pertaining to questionable invoices, according to a top audit official of the national carrier.
Testifying before the Commission to inquire into irregularities in SriLankan Airlines, SriLankan Catering Ltd., and Mihin Lanka (Pvt) Ltd, Group Assurance and Advisory Services Senior Manager Mahesh Nanayakkar said Lufthansa Technik (LHT) had used the disputed invoices that were rejected by SriLankan Airlines as ‘bargaining tool’ to secure a new contract on the maintenance of an A320 aircraft.
“LHT even insisted that the airline not issue a Request for Proposals (RfP) and, instead, give the contract exclusively to it,” Mr Nanayakara told the Commission when he was asked about the role the airline’s audit department played in settling disputed invoices rejected by the engineering division.
Last week the Commission was told that the national carrier paid US$ 1.1 million more to LHT on some 15 invoices sent by LHT for services obtained from 2014 to 2016, though they were found to be inaccurate and rejected by the engineering division. SriLankan could not get the money back as it took up the matter with LHT only after the stipulated period had lapsed. In terms of the agreement, any dispute over an invoice had to be brought to the notice of LHT within six months.
State Counsel Fazly Razik, who led the evidence, accused the airline’s audit department of failing to act promptly when internal audit reports indicated that the disputed-unsettled invoices put a huge strain on the drying cash flow of the national carrier which was running at loss at that time.
Appearing before the commission on Wednesday, Mr Nanayakkara said SriLankan paid Rs. 120 million in the financial year 2017/18 as deportation costs to bring back Sri Lankan citizens. The commission was told that most of these deportees were sent back mainly due to improper documentation. State Counsel Razik said document checkers and check-in counter staff should be held responsible for this. The bulk of the costs, Rs. 89.6 million, was spent on air tickets.
The commission was told that a forensic audit highlighted several shortcomings in the security and investigation divisions, which handled forged documents, pilfered, mishandled and lost baggage, cases of gold smuggling and similar matters.
Asked whether the two departments were subjected to an internal audit scrutiny, Mr. Nanayakkara said they could only look into the two divisions if a special request was made by the management. He said that with regard to security matters, they had to rely on ‘external audits’ as they were not competent enough to do that.
However, the commission was told that what Mr. Nanayakkara meant by ‘external audits’ were reports made by the airline’s Security Striker Team. State Counsel Razik pointed out that being an arm of the security division, the striker team’s reports and findings were not audits.
In another development, five witnesses told the commission on Thursday that SriLankan Airlines experienced losses of up to Rs. 1.72 billion between 2006 and 2018 owing to its failure to return 14 leased aircraft to the lessor before the re-delivery deadline. Some of these delays had dragged on for more than three months.
Technical Services Engineer Asitha Fernando, who appeared first, said the delays occurred mainly due to lack of staff to repair and refurbish the aircraft on time as specified by the lessor. Among the other reasons was the poor maintenance of technical records. Besides, the aircraft were old and quick to corrode and found to be damaged during inspections.
Production Planning Assistant Manager Samantha Liyanage said SriLankan was in the habit of acquiring aircraft that were midway through their lifespan. Airlines like Emirates would not procure aircraft older than six years and not keep aircraft in their fleet for more than 10 years. In contrast, SriLankan possessed airplanes that were 26-years-old.
At this stage, the commission’s chairman, retired Supreme Court Justice Anil Gooneratne, asked who was responsible for getting those mid-life aircraft. Mr. Liyanage said he believed it was the senior management.
Deputy Solicitor General Milinda Pathirana, who led the evidence, asked the witness whether the senior management had ever requested for a report from the engineering division prior to striking up a procurement deal.
“No they didn’t. The decision to procure airplanes rests with the senior management,” Mr. Liyanage said. “We only carry out technical assessments if requested to do so by the management. It is not possible to carry out a complete and comprehensive study to determine whether an aircraft is good or not.”
Mr. Liyanage said the general assumption was the management acted in the best interests of the company and, therefore, its decisions were to be trusted.
Commenting on the damages found in the aircraft and if these would have an impact on the flights’ ‘air-worthiness’, the witness said that in terms of the Geneva Convention any well-maintained aircraft that flew could be considered air-worthy.
In one particular instance, an airplane that required extensive repairs was delayed by 54 days.
Mr. Liyanage explained that this was because it was the first aircraft to be returned and the airline lacked experience with regard to the re-delivery process.
Amila Waidyaratna, another technical services engineer, who testified regarding two other aircraft, said a shortage of maintenance staff was the main reason for the delay.
“We ground the aircraft when we think it is time to do so, but due to the lack of staff and coordination between various departments we fail to finish the task on time,” he said.
Charith Agulugala and Amila Thodugala of the Technical Division also appeared before the commission to answer questions over the delay in delivering leased aircraft on time.
The commission comprises retired Supreme Court Justice Anil Gooneratne (Chairman), Supreme Court Justice 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 sittings will continue tomorrow.
| Commission seeks 3-month extensionBy S. Rubatheesan The Commission probing large scale frauds and financial malpractices at SriLankan Airlines, SriLankan Catering Ltd. and Mihin Lanka has urged President Maithripala Sirisena to extend its mandate by three more months, as key witnesses are yet to testify, the Sunday Times learns.“With the commission’s earlier extended term expiring on February 15, its Chairman wrote to President Sirisena seeking a three-month extension, as more time is needed for the commission to complete the workload and for its investigative unit to conduct an in-depth probe before key personnel of the airline’s management are summoned to testify,” a commission source said. He said the commission is expected to receive an official reply once the President returned from the Philippines.The commission was established on January 31, 2018 by the President to look into alleged irregularities in the national carrier and allied companies. Last month President Maithripala Sirisena conferred additional powers on the commission to enable it to obtain bank details of those under investigation and details pertaining to them from the Inland Revenue Department. | |