Special Assignment

13th December 1998

Why Harry left in hurry

The hostility between AirLanka's controversial Chairman Harry Stassen Jayawardena and its new management, Emirates Airlines, has been no secret. Ever since the partnership came into effect from April 1 this year, and even before the much disputed agreement was signed, Mr. Jayawardena seemed hellbent on harrying the government from allowing AirLanka a foreign equity partner.

The intrigue and dramatics which followed the tie-up left even the new management in confusion. Rated as one of the best airlines of the world, Emirates could not understand why its arrival into AirLanka was greeted with such suspicion and disapproval.

"We expected the red carpet to be rolled out for us," a top official told The Sunday Times, adding that the allegations that Emirates Airlines was here to bleed Air Lanka dry were ludicrous. While also facing the outrage of the opposition, the deal stood every chance of going through only because of the support of the Government.

AirLanka's new management faced a fresh challenge last week when Chairman Harry Jayawardena quit informing only President Chandrika Kumaratunga, who accepted his resignation with no protest.

Air Lanka's Chief Executive Officer Andrew Gray told The Sunday Times that Mr. Jayawardena had done a "moonlight flit" and left without informing anybody at Air- Lanka. There will be no farewell party for the colourful Chairman. The icy atmosphere that prevailed on Monday March 30th this year, when the controversial partnership was sealed between AirLanka and Emirates Airlines appears to have culminated in a grand finale with Mr. Jayawardena vacating his post in the same indecent hurry as the Emirates deal was signed.

Why was Harry Jayawardene in such hurry to leave?

Only time will prove whether Air Lanka's fate has been sealed with this new partnership which has faced little joy so far but plenty of disruptions and dissension. Emirates Airlines and its British born top executives have already been accused among other things of allegedly having got back the investment on Air- Lanka by taking commissions on the A330's, manipulating the accounts at Air Lanka generating huge dividends for themselves, and in short, 'skinning the cat' entirely for their own benefit.

When The Sunday Times traced Mr. Jayawardena to his former desk at Stassen House last Wednesday, to get his side of the story, he, acting true to form, exclaimed in apparent horror, "My gosh, don't speak!!!" before putting the phone down. The indomitable Mr. Jayawardena already facing charges by Sri Lanka Customs awaits probably yet another indictment, to be served by Customs for illegally importing this month, three container loads of raw cashewnuts which have been seized by the Government under the Plant, Quarantine and Seed Protection Ordinance.

Mr. Jaywardena's disenchantment with the new management has been growing steadily since April this year, and while he did not directly voice his discontent to the new management he did so allegedly using the media, and certain senior managerial staff at Air Lanka.

Inquiries made by The Sunday Times reveal that Mr. Jayawardena usually visited his office at AirLanka after 6pm. "He was like a mole," a senior management official said, adding that Mr. Jayawardena would before his late arrival, inform certain key managerial staff at Air Lanka to see him by 6.30pm whereby they would be questioned as to what changes had been effected during the day by the new management.

Worse was to follow. Known for his autocratic approach, Mr. Jayawardena, seethed at being a mere figure-head at AirLanka and a 'non-executive chairman'. He displayed his anger at the first Board meeting in May this year with Chief Executive Officer, Andrew Gray and Chief Commercial Officer, Peter Hill when he ordered them to leave the Board Room, as at the time Gray was not yet an Alternate Director of Air Lanka and so technically could not sit at a Board meeting. It was the first time both Mr. Gray and Mr. Hill met Mr.Jayawardena, a meeting which gave them an inkling that all was not well between them and the Chairman.

Air Lanka staff continued to be petrified of a tyrannical Jayawardena, melting into the shadows whenever he was around the office.

His history of interdictions and treatment of employees, more often than not, caused an unfortunate individual to either be demoted or out of job.

A recent incident involved the purchase of headphones for AirLanka's inflight department. The employee concerned acting on instructions issued by a supervising officer at AirLanka purchased a large number of headphones of higher quality but at bigger cost than what the airline has been using so far. Due to the cost factor being more, the man was immediately demoted by Mr. Jayawardena. That the employee concerned had acted on instructions seemed irrelevant to Mr. Jayawardena.

The rift widened, as Mr. Gray began re-instating at least three of some eight senior managers of AirLanka who had been interdicted by the Chairman. The interdictions had been in many cases effected allegedly with no show cause letters or internal inquiries being held.

Mr. Jayawardena is also reported to have managed to floor the usually stoic British born executives from Emirates, with explanations like that he was withdrawing the Tiger brand cheese being served on board AirLanka as the Tiger was a symbol of the LTTE.

It is reported that Mr. Jayawardena may have resigned from his post because the new management attempted to force him into lending acquiescence to AirLanka leasing an A340 airbus, which required an initial down payment of US$ 100,000/= as a refundable deposit for negotiations to begin.

Airbus Industries informed Timothy Clark, Managing Director, AirLanka, on November 19 that the A340 was available for lease purposes from June 1999, but that negotiations should begin as quickly as possible. In a letter dated December 4, Mr. Gray wrote to Laurence Barron, Vice President Airbus Industries Financial Services (AIFS), informing him that arrangements were being made for the amount of US$ 100,000/= to be transferred as a refundable deposit to the account of Airbus Industries. Mr. Gray says that this commitment is fully supported by the AirLanka board, and by the shareholder, Emirates.

Mr. Gray told The Sunday Times he submitted a board paper on December 2 and requested a response by the end of that day, saying a reply to Airbus Industries was required within 48 hours, and that it was vital this option was given due consideration as AirLanka had just secured an additional slot at London's Heathrow Airport which would generate an increased profit for AirLanka of US$ 345,000 a month or US$ 4.1 million a year.

"The net benefits were quite considerable," Mr. Gray claims. If the financial talks collapsed AirLanka could walk away with no loss at all,Mr. Gray said.

Mr. Jayawardena however was out of the country at the time and returned to his private office Stassen House, only on Dec. 7. He wrote to Mr. Gray on this day saying he had been out of the island, and since the deadline for his response had now passed he believed the other directors would have responded.

Mr. Jayawardena has constantly maintained that from the time the deal with Emirates Airlines was sealed, he has had documents pushed at him and asked to sign with hardly any time given to study or peruse the documents.

"I honestly do not understand what the issue here is at all. Whatever it is, it is certainly not an issue for a Chairman to resign," Mr. Gray said. The other Directors have given in writing their approval for negotiations to proceed with Airbus Industries to negotiate the lease of the A340. "Why did not the Chairman voice his disapproval in the note sent to me?" Mr. Gray asked.

Airbus Industries, he maintains, had imposed a deadline which "we had to react to." Mr. W.P.S. Jayawardena, Director, Air Lanka said he had given his approval for negotiations to commence with Airbus Industries for the lease of another A340 aircraft. "I had no objections," he told The Sunday Times. Mr. W.P.S. Jayawardena meanwhile confirmed he has been appointed as Acting Chairman for Air Lanka.

Meanwhile investigations by The Sunday Times found that in December 1997, Sunil Peiris, Chief Marketing Officer AirLanka wrote to Mr. Jayawardena recommending that the leasing of a fourth A340 aircraft by AirLanka was important if the airline was to meet its financial obligations.

The letter dated Dec. 15, 1997, states that in the recent past AirLanka has been experiencing high cabin factors which indicate that the airline is spilling traffic and additional capacity has to be provided.

Air Lanka, Mr.Peiris says is inhibited in providing this additional capacity due to the present fleet. Mr. Peiris asserts that the present fleet hinders the airlines growth, product improvement and the ability to increase revenue which makes it crucial for the airline to lease a fourth A340 as a solution to these problems. The letter recommends that the A340 be leased from Winter 1998/99.

The letter is signed jointly by Mr. Peiris and Dilhara Selvanayagam.

If the leasing of this aircraft was already an issue under favourable consideration at AirLanka, by its Chairman and Board of Directors, since December last year, it seems curious as to why it is now an issue for dissension solely by Mr. Jayawardena.

Chief Commercial Officer Peter Hill reiterated that it is vital that Air Lanka's growth measures to those of other international airlines. AirLanka's growth over the last five years has been a mere seven percent, just over one percent per annum in terms of traffic. The average growth per year for most airlines is six percent per annum. The average airlines, he said would have grown by thirty percent over the past five years. This has to be changed, Mr. Hill maintained, asserting that AirLanka cannot be allowed to stagnate and blunder. "We have to go out there, take more risks, grab markets and bring in more revenue.

"Otherwise Air Lanka will just become more vulnerable instead of being more efficient, more cost effective and more productive," he said.

It has certainly not been smooth sailing for AirLanka's new management as problems seemed to compound since the partnership came into effect.

AirLanka began to face labour disputes, technical problems, engineers' protests and a few spectacular breakdowns in London and Paris, all pointing to a conclusion that Air- Lanka if anything had gone from bad to worse since the tie-up with Emirates Airlines.

Why AirLanka employees are behaving in this manner has left the new management nonplussed. Convinced there was more to the unrest than met the eye, it became impossible however to prove who was behind the dissension and disruption. The new management began to seriously wonder whether a plot was being hatched to muddle operations.

A senior official told The Sunday Times even the unions appeared to be acting in an unpredictable manner, making it more difficult for the new management to conduct proper negotiations

Air Lanka's new management continue with long and arduous negotiations with the Pilot's Guild. The Pilots Guild The Sunday Times learns has yet to accept a package deal offered by the new management which lays them open to heavy taxation.

Mr. Jayawardena meanwhile and for his part never openly disagreed with the new management on any issue. Yet regularly the management would discover to their dismay public exposure of Air Lanka's internal documents some of which had been discussed at Board meetings only. Reports which lent publicity to salaries the new management were being paid, for the first time, alerted the foreign team that maybe they did have a serious problem internally. "Upto that point we were giving everybody the benefit of the doubt," a senior management member said.

The Sunday Times learns President Kumaratunga by this time also shared some concerns, and had decided, that it was crucial for the Government, for this venture to work. Government sources told The Sunday Times that at this stage the government realised that it is not feasible for AirLanka to be state funded and the kind of guarantees and money that would be needed to be raised in the international market would be impossible for the government to achieve.

The government probably recognises that the airline business is changing.

It is vital that national carriers are managed with a global vision that would facilitate long term benefits. To pool resources, cut costs and work together in terms of market revenue generation making such carriers gain reputable international status. Mr. Jayawardena however is on record as saying he saw no reason for AirLanka to have a partner and that the airline should have remained independent.

Mr. Jayawardena, saw himself as a protector for the government's interest at Air- Lanka. But what the Emirates managers of AirLanka ask is if and when he thought the new management was not conforming to government regulations, why he chose not to address these issues openly with the foreign team.

"Why did he not ever question us or voice his disapproval if he was unhappy with certain decisions being made?," Mr Gray asked.

Mr. Jayawardena he says, could have complained to the government, since it has a majority on the Board, this too he chose not to do.

Mr. Gray asserts strongly that it is crucial who the government now chooses as its representative at AirLanka. It is hoped that someone who can share a global vision with a commitment to make Air- Lanka a revenue generating carrier that can be on par with other international airlines in the industry, conforming to international conventions required by the industry will be appointed.

The Sunday Times learns that W.P. S. Jayawardane will serve as acting Chairman for AirLanka.

Either you believe in the views of the President who appointed you or you don't. All things considered, Harry Jayawardene was opposed to the partnership, was thoroughly uncomfortable not having management control over the airline over which he presided being the de jure head not the de facto head and should have gone a long time ago when he obviously realised the writing was in the sky.

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