Restructuring Sri Lankan Airlines

Govt seeks investors to sell 49 % of SLA & ‘Ground Handling’

The government has decided to call for open tenders to sell 49 per cent shares of both Sri Lankan Airlines and another new entity of the company- Sri Lankan 'Ground Handling' that's to be incorporated as major restructuring proposals for the lossmaking national carrier, a senior Cabinet Minister said today. 

Minister of Ports, Shipping and Aviation Nimal Siripala de Silva said that funds raised from the restructuring process will be utilized to settle the creditors of Sri Lankan Airlines while the rest- 51 per cent stake will be kept with the government. 

Under the proposed restructure of the national carrier which recorded a massive loss of USD 1.1 billion (SLRS 401 billion), the ‘Ground Handling’ which is currently undertaken by Sri Lankan Airlines to be continued and administrated as a separate unit, the Minister noted. 

For that purpose, fresh incorporation of a company as a subsidiary of Sri Lankan Airlines is to be established with respective assets and staff dedicated for ‘Ground Handling’ and 49 per cent of the said company and its Management to be transferred to a competent investor selected through a transparent procurement procedure. 

If the restructuring could be completed successfully, foreign debts of  USD 175 Million and the Bank Overdraft obtained from the Bank of Ceylon i.e. USD 80 million could be repaid as Priority Payments, according to the Cabinet proposal seen by the Times Online. 

"Further to that USD  80 million, the arrears amount to Air Craft leases could be paid and then there will not be any foreign debts be paid. It is also significant to note that if USD446 million owed to BOC and People’s Bank could be paid, the said Banks will be strong institutions contributing to the national economy and financially viable institutions," the Cabinet proposal stressed. 

When USD 312 Million, the arrears payments to Ceylon Petroleum Corporation (CPC) is settled, CPC will also be a financially stable institution.

The move for major restructuring at the national carrier came after it was decided that Sri Lankan Airlines cannot be managed and maintained amid the current economic crisis without the substantial financial assistance of the government. "SLA does not have the financial ability to repay the debts and lease rentals that it has obtained from local and foreign parties including Lessors of Aircraft,"

It was also decided that government or its Treasury does not have the financial capacity to maintain Sri Lankan Airlines or grant any guarantees whilst the government is fighting the current economic restraints, according to the proposed Cabinet memorandum.