Mihin Lanka airline under Mahinda Chinthanaya

The government is planning to launch a budget airline in the coming months to reduce dependence on the Emirates-managed SriLankan Airlines, according to a Civil Aviation Authority (CAA) source—but the take off might run into a storm.

The airline is to be named Mihin Lanka - or Mihindu Airlines, The Sunday Times learns.

“Talks are to be held with the Emirates and the President wants us to be in a strong negotiating position this time,” an official told The Sunday Times. The Emirates management contract to run SriLankan Airlines ends in 2008 and its renewal is under negotiation.

The source said that an application had not yet been submitted to the CAA for the new airline but this would be done when the business proposals were developed soon.

“The Treasury will fund this project entirely,” he said. The Sunday Times understands that initial discussions have taken place between officials of the President's Office and likely private promoters, some of them based in Switzerland together with some local operators in the travel trade.

An industry source said this might be a risky move because Governments generally did not run airlines. He said efficiency was important for an airline and the level of efficiency in the government sector was known to be low.

“The trend in the region and all over the world is to completely liberalise and commercialise the carriers,” he said. He also pointed out one of the proposed names Mihin or Mihindu, was the Sanskrit version of Mahinda, President Rajapaksa’s forename.

Some retired SriLankan Airlines financial officials have already been recruited to study the proposal, and are working at an office at the World Trade Centre.

Airlines sources said that the promoters of the new airline were suggesting that the airline 'take-off' by about February next year. There was a suggestion that the airline be in operation when Sri Lanka's second international airport at Weerawila in the Hambantota District becomes operational.

SriLankan Airlines communications chief Chandana de Silva said the idea of setting up a budget airline was an "excellent one", but the Government would have to think of the consequences before it went ahead with the plan.

He said the government owned 51 per cent of the shares in SriLankan Airlines and it would need to carefully study the consequences that a new carrier could have on SriLankan Airlines.