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SriLankan will go for four new aircraft instead of four A350-900 it has ordered: Witness
SriLankan Airlines is to follow a new Business Plan, which will see the company buy in the next two years four new aircraft from Airbus instead of the four A350-900 wide-body aircraft it has ordered, but a decision is yet to be taken on the model.
This information was disclosed by the airline’s legal affairs chief Mayuka Ranasinghe this week, when he appeared in the Commission of Inquiry (CoI) investigating allegations of large-scale fraud and corruption.
He said SriLankan had ordered four A350-900 aircraft from Airbus for direct purchase and these were scheduled to be delivered by 2020 and 2021. However, in 2017, the airline changed its mind and conveyed its decision to Airbus, saying it was not interested in the wide-body aircraft, each of which would cost the airline around US $283 million at the time. Each aircraft had the accommodation capacity of 325 passengers. Following talks with Airbus, the manufacturer quoted a price of US$ 136.3 million apiece.
As highlighted many times in the testimonies of the airline’s Finance Department Chief Yasantha Dissanayake, SriLankan was in no position to afford this, and still is not.
Mr. Ranasinghe did not mention as to why the airline’s present directors changed their mind about the A350-900s.
He, however, said the deal was not cancelled. “The deal is still on, as per the 2013 MoU, and we are simply changing the model of the aircraft,” he said.
The commission was told that the MOU conditions had SriLankan gripped by the neck. The airline is bound to pay US$1.5 million for every aircraft it cancels. The fine was worked out in relation to a US$ 15 million worth VIP kit ‘gifted’ by Airbus.
Retired Additional Solicitor General, Neil Unamboowe, who is leading the team from the Attorney General’s Department, explained that although President Maithripala Sirisena turned down the VIP kit on assuming office in 2015, the airline is still liable to pay the penalty in terms of the MoU.
SriLankan also entered into an agreement with AerCap, the world’s largest independent aircraft leasing company, to lease another four A350-900s, only to cancel these following the change of government in 2015, on the basis that the deal was incompatible with SriLankan’s plan to cut down on the long-haul sectors.
AerCap initially demanded that a fine of US$ 115 million be paid for the cancellation, but later the company settled for US$ 98 million on four conditions. The conditions were: Making the instalment payments on the agreed date, extending the lease period of one A330-200 aircraft by 10 years, implementing a lease agreement for another A330-200 aircraft, and transferring to SriLankan Airlines Aercap’s two narrow-body aircraft that had been leased to Mihin Lanka.
On Wednesday, State Counsel Chathura Gunathilake questioned former Mihin Lanka Commercial Head Rohan Perera why the airline did not commission a feasibility study when it started new air routes.
A feasibility study was due following Mihin’s decision to change the Dubai route to Sharjah, because it would clash with SriLankan’s route. Although he was the Head of Commercial Affairs, Mr. Perera said he was not informed on the matter and he had seen no feasibility study conducted.
Subsequently Mihin suffered losses on the Sharjah route, too, the witness said. This was due to stiff completion from airlines like Air Arabia.
The witness pleaded ignorance to a number of questions posed by the State Counsel and the commissioners.
“Mr. Perera’s role in the company was reduced to that of a mere information communicator to the Board, while CEO Kapila Chandrasena made all decisions,” State Counsel Gunathilake said.
The lawyer then proceeded to demonstrate to the commission the strange logic the airline followed when it cancelled its Thiruvananthapuram route, while continued operations to Male.
Furthermore, the airline had not received board approval to operate flights to Male, Jakarta, Dhaka, Varanasi, Bahrain and Kuwait.
“You were flouting the law by not seeking board approval,” declared retired Supreme Court Justice Anil Gooneratne impatiently.
The commission will sit again on Wednesday.