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Why SriLankan, Mihin crashlanded
The Commission of Inquiry appointed by the President to inquire into alleged irregularities in SriLankan Airlines, SriLankan Catering Ltd and Mihin Lanka from January 1, 2006 to January 1, 2018, after concluding its inquiry and investigations, reveals a callous abuse of power and fraud in the billions by successive Boards of Directors at the three enterprises with the support of the governments.
The CoI report exposes and bashes several key figures in Sri Lanka’s then Government and the boards of directors of the companies for their gross mismanagement of the two airlines. SriLankan suffered losses to the tune of Rs. 148 billion between 2008 and 2017 and Mihin accumulated a loss of Rs. 17.2 billion from 2008 to 2016. The CoI opines that the departure of Emirates from the management in 2008 could be one of the main reasons for this.
At least 560 people were interviewed and investigated with oral and written submissions from 150 witnesses. The commission’s Criminal Investigations Department unit recorded 853 statements from 341 persons. Most of the key persons facing allegations sent affidavits instead of appearing in person at the public hearings, citing a legal clause.
The Commission comprised 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 and Auditing Standards Monitoring Board Director-General Wasantha Jayaseeli Kapugama.
Excerpts of the report follow:
Justice Anil Goonaratne
Justice Gamini Amarasekera
Judge Piyasena Ranasinghe
Don Anthony Harold
Wasantha Jayaseeli Kapugama
Termination of SriLankan-Emirates deal
One of the key witnesses who gave evidence in this regard was the former Company Secretary of Sri Lankan Airlines Ltd, Ms Mildred Peiris who joined the company in 1993 and was also the Secretary of the Board of Air Lanka Ltd, the report noted.
The Government of Sri Lanka (GOSL) and Emirates Airline entered into a share sale and purchase agreement whereby GOSL sold Sri Lankan Airlines shares to Emirates Airlines on the 30th March 1998. On the same date, the GOSL, Emirates Airline and Sri Lankan Airlines entered into a tripartite Shareholder’s Agreement for a period of 10 years, with the management of the airline vested with Emirates.
As per the evidence provided by the witness, there were two share allocations done. Initially, 19 per cent of the shares were transferred to Emirates. Thereafter 21 per cent of shares, amounting to a total 40 percent of shares transferred to Emirates at a later point, with the share and purchase agreements coming into effect from the 1st of April 1998. Prior to this transfer, the GOSL held 100 percent of shares of SriLankan Airlines Ltd. However, subsequently the employees of the Airline were allocated 9 percent of shares of the Airline.
As per the shareholders’ Agreement, it was compulsory that the CEO and Finance Director to be from Emirates Airline along with three directors appointed by the Emirates Airline. The GOSL appointed four directors to the Board of Directors.
The Shareholders’ Agreement was for 10 years and due to expire on the 31st of March 2008. The witness said there was provision for early termination, as long as it was with the concurrence of the GOSL and Emirates.
When questioned by the Deputy Solicitor General, the witness said that as per the agreement, Emirates was entitled to sell their shareholding to someone else at the end of the period.
It must be noted, however, that as per the agreement, the shares must first be offered to the GOSL and in the event the GOSL is not interested in purchasing these shares, Emirates after obtaining approval of the GOSL, could dispose of these shares to another party. The shares of Sri Lankan Arilines were sold to Emirates Airline by the GOSL for US$ 70 million and these monies were paid to the GOSL.
The witness commenting on the procurement aspects of the Airline, states that SriLankan Airline had a very good procurement process prior to 1998.
In December 2007, the Managing Director of Emirates, Mr Timothy Clark, who was also the Managing Director of Sri Lankan Airlines, had emailed the witness and staff of SriLankan Airlines stating that Emirates will not extend the Shareholders’ Agreement or the Management agreement entered into with the GOSL .
This email was contradictory to the statement made by Mr Clark in his letter to Dr P.B.Jayasundara on the 22nd of January 2006 in which he states that “the Emirates management was looking forward to recommencing discussions with GoSL on the future developments of SriLankan Airlines” (further discussed below).
It must be noted at this point of time, that most functions such as IT related expertise, software, procurement, code sharing agreements, etc were shared between Emirates Airline and SriLankan Airlines.
The witness stated that some of the SriLankan Airlines staff also had been given overseas training, especially on the functions of the IT system known as ‘Mercator’, given that Mercator was a subsidiary of Emirates Dubai. This system was introduced to SLA by Emirates after obtaining Board approval subsequent to signing of the management agreement.
The witness refers to one Lalith de Silva who was appointed by the GOSL as a consultant to assist with matters during the transition period from the management of Emirates back to the management of SriLankan Airlines itself. She (the witness Ms Mildred Peries) also mentioned about the complex insurance mechanism in which SriLankan Airlines was a party to during the management of Emirates. Although SLA was initially insured by Sri Lanka Insurance, upon being managed by Emirates Airline in 1998, SriLankan Airlines was insured by the insurance company by the name of the Gulf Insurance Company. To do this, SLA had to obtain the consent and obtain assistance from Emirates.
When analyzing these situations, one could observe that Emirates seem to have been calling all the shots and thereby leaving the Directors of GoSL with no choice, but to agree with the proposals put forward by Emirates.
Seats from London to Colombo refused by Emirates; work permit of Peter Hill refused
The witness refers to an incident where the management of Emirates Airline refused 35 seats from London to Colombo. She also mentioned that the work permit of the then CEO Mr Peter Hill was refused during the latter part of 2007. Due to this issue, the CEO had been operating from Dubai and SLA was obtaining instructions from Dubai. Prior to this incident, the CEO operated from Sri Lanka. Peter Hill was the CEO of SriLankan Airlines after 31st March 2008.
Observations by Peter Hill
With regard to this incident, the Commission obtained an Affidavit from Mr Peter Hill on 17th May 2019. He explained his perspective of this incident to the Commission.
Mr Hill stated that during the summer (July/August) of 2007 , he was contacted by the Defence Attache of the British High commission in Sri Lanka, to provide him with advance notification that President Mahinda Rajapaksa, accompanied by members of his family and other officials would be visiting the UK in December 2007, to attend the ‘Passing out ceremony’ of one of the former President’s son’s, who was attending the Royal Navy College at Dartmouth.
He suggested that Mr Hill should make some provisional bookings for this VIP Party to and from London, as he was aware that this was peak travel time to this route, due to the end of term school holidays and the Christmas Holiday season.
Acting upon this advice Mr Hill had arranged for provisional bookings to be made on 2/3 flights on the anticipated dates of travel, whilst they sought clarification from the Presidential Secretariat on the precise dates of travel and the number of passengers travelling and class of travel.
During the course of the next few months (September-November) a number of calls were made to the Presidential Secretariat requesting confirmation of travel dates, names and numbers in party etc. No information was forthcoming and, therefore, a deadline was given to provide this information, as otherwise Mr Hill states that he would have to release the blocked seats. The deadline has passed with no further information provided and so the seats were released to waitlist passengers who quickly took up the option and purchased their tickets. At that stage they were under the impression that the Presidential Secretariat was either making other arrangements for the VIP Party to travel to London, or that the visit was not going ahead.
He stated that on the morning of 4th December 2007, the Sales Manager, Government Travel of SLA, received a phone call from Mr Sajin de Vass Gunawardena requesting details of SriLankan Airlines flights from London Heathrow Airport to Colombo on 13th and 14th December 2007.
These details had been provided. That same afternoon an email had been received from Mr Sajin de Vass Gunawardena stating; ‘Will take the 13th December fight UL 506. Please ensure the entire business class cabin and the economy part of the cabin which is immediately after the business class cabin (separate by the galley) is reserved as we have a total of 35 pax traveling”.
On 5th December 2007 around midday, a further email had been received from Mr Sajin de Vass Gunawardena informing SLA that he has made a mistake and requested that the flight be changed to UL 502 on 13th December 2007 departing London Heathrow Airport at 2155 hours. He had wanted all the seats previous requested on the EK506 , to be confirmed by return email.
Mr. Hill further stated that as predicted earlier all SriLankan flights from London to Colombo were fully booked for December 13, 2007 and for many days following, this being the peak travel period on the route. SLA had a team of senior Commercial staff exploring all possibilities to accommodate this VIP group, but the only way this could be achieved would have been to offload 35 booked and ticketed full fare paying passengers, which in the circumstances, Mr. Hill, as the CEO was not prepared to authorise. He states that he was prepared to authorise the accommodation of the President, the First Lady and their son on UL 502 and re-accommodate the three displaced commercial passengers with suitable compensation. After an extensive search on other airlines services they were able to offer six first class seats, two business class seats and 16 economy class seats on (at the time) their partner’s (Emirates) flight EK/UL2016 on December 13, 2007 from London Gatwick Airport to Dubai, with a connecting service onward to Colombo. This would have accommodated the bulk of the passengers.
All of the above information was sent to Mr. Sajin de Vass Gunawardena on December 06, 2007, but apparently there had been no response from him to their e-mails. SLA’s Sales Manager Government Travel had then called Mr. Sajin de Vass Gunawardena on his mobile phone and was at that point informed that he did not want any of the options offered to him. Mr. Hill states that he is not aware of any further official communication that took place between him or his staff and either Sajin de Vass Gunawardena or the Presidential Secretariat, prior to the former President’s return flight from the UK.
He also went on to state that it transpired that an Airbus A320 series aircraft was provided by Mihin Lanka to carry H.E. the President and his party on their private journey to the UK. On the return flight, which was departing from London Luton Airport, the Royal Navy had provided transportation to the airport by helicopter for H.E. the President and his immediate family members. However, Mr. Hill stated that it had appeared to him that most of the accompanying members of the party, probably being unfamiliar with the distance that Luton Airport is from Central London, got delayed and missed the Mihin Lanka flight. SLA’s London office was then involved in trying to make arrangements over the next few days to return these passengers to Colombo, which was successfully accomplished despite most flights being fully booked.
With regard to Mr. Hill’s cancellation of his work permit, he stated by way of his Affidavit that on December 19, 2007, a letter was sent by the Chairman/Director General, Board of Investment, Sri Lanka (BOISL), Dhammika Perera instructing the Controller, department of Immigration and Emigration to cancel Mr. Hill’s resident visa with immediate effect. The Acting Controller General of Immigration and Emigration, D M S D Jayaratne wrote to Chairman SriLankan Airlines, Harry Jayawardena informing him that Mr. Hill’s Resident Visa had been terminated with effect from December 28, 2007. Mr. Jayawardena had informed Mr. Hill accordingly and subsequently Mr. Hill left Sri Lanka on December 26, 2007.
He further stated that an unreferenced letter from Sarath Gunarathna, M.P. Deputy Minister of Aviation dated December 18, 2007 was then sent to Chairman SriLankan Airlines asking for an explanation on “Inability to reserve passage for H.E. the President in SriLankan Airlines flight en-route to Colombo from London on 17.12.2007”. Subsequently, the Chairman SriLankan Airlines instructed the airline’s Company Secretary on December 18, 2007 to appoint Mr. T.A.M. Tillekeratne, Attorney-at-Law, to conduct an inquiry into the incident referred to by the Deputy Minister of Aviation. Mr. Hill states that he is unaware of the outcome of the inquiry.
| CBK’s blunder: Gulf rulers in name merger | |
| The Commission of Inquiry (PCoI) investigating SriLankan Airlines’s operations discovered an embarrassing blunder made by former President Chandrika Kumaratunga where she sent an unfavourable letter addressed to the Chairman of Emirates, merging his name with that of the Al-Sabah Royal Family of Kuwait. The Chairman of Emirates was and still is Sheikh Ahmed Bin Saeed Al-Maktoum, a member of the Dubai Royal Family. She, however, addressed it to ‘Sheikh Ahmed Bin Saeed Al-Maktoum “Al-Sabah”’. President of Emirates Airlnes Timothy Clark had written to former Treasury Secretary P.B. Jayasundara saying ‘for your information, Al Sabah is the name of the Kuwaiti ruling family’. |
