SriLankan Airlines divestment phase 1 ready by end 2023
Divestment of SriLankan Airlines (SLA) and its subsidiaries has been identified as a priority due to its high fiscal risks and its phase 1 restructuring process is to be completed by end 2023, Finance Ministry sources divulged.
The Cabinet has approved the divestment of Government-owned shares of SLA and International Finance Corporation has been appointed as the sell side transaction advisors.
It is expected that the initial due diligence and divestment strategy (phase I) will be completed by the transaction advisors by the end of December 2023 and phase II of the engagement to execute the transaction would take a further six months.
Despite the challenging external and internal funding constraints, SLA has recorded a profit of Rs. 60.2 billion during the last quarter of the financial year 2022/23 and the SLA had negative net assets of Rs. 511 billion at the end of March 2023.
This was confirmed to the Business Times by Ports and Civil Aviation Minister Nimal Siripala de Silva.
He warned that the jobs of SriLankan Airlines 6000 employees are at risk if immediate restructuring measures are not implemented.
The Minister said that out of the fleet of 27 Airbus aircraft owned by SriLankan Airlines, only 16 are currently in operational condition.
He emphasised that the Government cannot withstand the financial losses incurred by SriLankan Airlines and it would be unfair to continue using taxpayer funds in this manner.
He disclosed that several foreign investors have already expressed interest in taking over the management of the airline but didn’t name them. It has been speculated that a major airline operator in India was among the possible investors in the national carrier.
The restructuring process is expected to raise around US$ 500 million by handing over the profit making ground handling services, and SriLankan Catering, Minister de Silva disclosed.
This money to be raised from selling the subsidiaries would cover less than half of SLA’s $1.2 billion of debt, he said adding that the balance of the debt will have to be borne by the Treasury.
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