The Sri Lanka government wants to buy back the 43.6 % stake owned by Emirates Airline in SriLankan Airlines but the Middle East carrier is in no hurry to sell, according to a Abu Dhabi-based newspaper.
“The Sri Lankan government has put the feelers out, but we’re not negotiating anything at the moment,” Tim Clark, President of Emirates, was quoted as saying in the National newspaper on Friday.
A sale could end a two-year wait for Emirates, which had been eager to sell its stake since it ended its management of the Colombo-based airline in 2008. “The government has decided to purchase,” Nishanta Wickremasinghe, Chairman of SriLankan, said, adding: “They are negotiating.” The paper said the Sri Lankan government owns 51 %of the airline, which operates 12 aircraft and targets India and the Gulf as its major markets. It has run the airline since Emirates opted not to renew its management contract.
Emirates officials acknowledged that the Sri Lankan government was interested, but said no substantive discussions had taken place. Emirates purchased the stake in Sri Lankan in 1998 for US$70 million in a partnership with the government that at times was contentious.
“It was a very difficult relationship for Emirates,” Keith McMullan, the managing director of Aviation Economics, a consultancy based in London, told the National. He said many appointees to the airline were influenced by the Sri Lankan government.
The foray was a departure from the strategy Emirates has pursued over its 25-year history of growing organically out of Dubai International Airport. Two years ago, Emirates said it believed its SriLankan holdings were worth $150 million. Since then, airlines have been hit hard by the global recession, suffering billions of dollars of losses, and analysts said Emirates would be hard pressed to get that price today.
“For an airline with no record of profitability, that is probably on the optimistic side,” Mr McMullan said. “While it is impossible to generalise, of course valuations of all aviation assets have fallen sharply over the last two years due to the global recession and the credit crunch. Emirates would be fortunate to get that asking price.”
SriLankan slumped to a loss of Rs 10 billion in the year ended last March, hurt by dwindling tourist arrivals and the global recession.
However, tourist arrivals in Sri Lanka increased beginning in June, a month after the government ended its war with rebels. This helped the carrier trim losses and consider expanding, said Manoj Gunawardena, its chief executive, according to the report.
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