In the current status quo, the technical crew situation at SriLankan Airlines has been challenging, with 57 pilots resigning since early 2021, including some early retirements…writes By R.R.M. Lilani
SriLankan Airlines, the flag carrier of the island nation, has encountered colossal difficulties primarily due to its substantial debt burden and political interference. However, recent updates indicate that the government is on the verge of reaching an agreement with a foreign airline in the coming two months.
Minister of Civil Aviation Nimal Siripala de Silva has confirmed that SriLankan Airlines will maintain a majority stake of 51 per cent in this agreement.
In the current status quo, the technical crew situation at SriLankan Airlines has been challenging, with 57 pilots resigning since early 2021, including some early retirements. This trend is concerning, and further departures may occur unless an investor steps in to support SriLankan Ground Handling and Catering, which are vital components.
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Before the Covid-19 pandemic, the airline employed 320 pilots for its fleet of 27 aircraft. Currently, there are 257 pilots, which is sufficient to meet the operational needs of the reduced fleet and maintain compliance with global standards for crew flying hours.
Although the government has expressed its intention to finalise an agreement with a foreign airline within the next two months, aviation experts believe that finding an investor who is willing to accept a stake of 49 per cent would be nothing short of a miracle. In fact, even six months may not be sufficient for such a deal to materialize as the legal process itself would take at least three months.
The Aviation Minister stated that they are awaiting a report from the international financial advisory firm Lazard in the US, which is the state’s financial consultant on debt restructuring. They are working out with the international creditors of Sri Lanka to see how the country can obtain the IMF loan as well as help finalising the debt restructuring programme.
The Minister stated that the report from Lazard will determine the optimal strategy for restructuring SriLankan Airlines. This includes considering whether to sell stakes in the ground handling arm and catering wing separately or to sell the entire SriLankan Airlines entity, he added.
The Minister mentioned that they expect to generate approximately USD 500 million from the sale of ground handling services, and SriLankan Catering also holds some value. However, it remains unclear whether the government intends to sell a 100 percent stake or only a 49 per cent stake.
He is of course sending mix signals about the stakes.
According to reports, the interested investors have expressed their desire to operate other airline services, such as SriLankan Catering and Ground Handling services, alongside the airline itself. Minister de Silva has made it clear to one media outlet that he will not agree to any conditions that would be detrimental to Sri Lanka’s interests while collaborating with a foreign airline to manage SriLankan Airlines.
Despite rumors of potential investors like Lyca Mobile Chairman Subaskaran Allirajah, a British-Sri Lankan Tamil entrepreneur, as well as TATA, Reliance, and Adani Group expressing interest as bidders, it is doubtful that these investors would be willing to acquire a 49 percent stake while the majority of the airline remains under state control. Experts believe that given the current circumstances and the airline’s tainted history of corruption, a joint operation is highly unlikely.
It has been over three years since the UK courts provided evidence of egregious corruption by SriLankan Airlines’ CEO, his wife, and associates to the government of Sri Lanka. However, the wheels of justice have been grinding slowly. SriLankan Airlines has become aware of a Judgment in the UK related to a charge of corruption in the purchase/lease of aircraft between 2011 and June 2015. The country knows he was arrested but was released on bail.
Additionally, two Committees on Public Enterprises (COPE) reports exposed the corruption and misuse of funds that occurred during Mahinda Rajapaksa’sregime through the purchase of airplanes. At the time, the SriLankan Airlines management stated that they would cooperate with any probe into Airbus corruption.
In 2018, then President Maithripala Sirisena announced that he had signed the gazette to establish a President Commission to investigate fraud and corruption at SriLankan Airlines and Mihin Air.
The BBC reported that SriLankan Airlines is accused of a “culture of corruption”.
Furthermore, despite the airline’s massive loss-making trend, a British executive has been appointed as CEO, receiving a salary comparable to sterling pounds. This decision raises questions about the necessity of such an appointment when the airline is in crisis.
Sri Lankans vividly recall the extensive discussions that took place with India concerning the management of the Mattala International Airport. Unfortunately, these negotiations did not yield successful outcomes, resulting in the termination of several visits by Indian technical and business strategic teams.
The Indian proposal of a joint management arrangement with the state was declined due to concerns regarding conflicting interests, particularly with China’s presence in Hambantota Port while India sought to handle the operations of the Mattala airport.
Over the current situation, the Aviation Minister has acknowledged that out of the fleet of 27 Airbus aircraft owned by SriLankan Airlines, only 16 are currently operational.
Another pressing issue is the significant number of pilots who have tendered their resignations since early 2021, including some early retirements. It is anticipated that more pilots will leave in the coming months and years. However, SriLankan Airlines has stated that they can sustain operations despite the government’s warning that nearly 6,000 employees are at risk of losing their jobs unless immediate restructuring of the airline business takes place.
Currently, the airline is burdened with a debt of $1.2 billion, which is close to half of the bailout package ($2.9 billion) the government is seeking from the International Monetary Fund. Several local banks and financial institutions are covering the outstanding payments for SriLankan Airlines.
Furthermore, Minister De Silva, has stated that the Treasury will bear a significant portion of the airline’s debt burden. However, negotiations for the restructuring of the airline have become complicated.
Meanwhile, the Minister expressed concerns about the potential loss of jobs for approximately 6,000 employees at SriLankan Airlines if immediate restructuring measures are not implemented.
SriLankan had forecasted an aircraft shortage factoring in scheduled lease expirations, but the actual shortage was worsened by several unforeseen events. This includes the prolonged time being taken to complete annual ‘C’ checks on two SriLankan Airlines’ aircraft due to the unavailability of components locally and the ongoing short supply of engines for Airbus A320neo aircraft in the global marketplace, the latter of which has caused 350 aircraft to be grounded worldwide.
The airline also had had to delay the procurement process for new leases, due last year, in view of the country’s economic situation.
The two aircraft undergoing ‘C’ checks will finally return to operations next week. The month of July will bring more positive changes in the way of a short-term lease extension for an aircraft that was supposed to be returned, four replacement engines for Airbus A320 neo aircraft on ground and the arrival of a newly leased Airbus A330, all of which would bump the SriLankanAirlines’ fleet to about 20 aircraft.
SriLankan Airlines, being the sole state-run carrier, crash-landed due to issues such as corruption, political interference, and nepotism. And thus far, no one has taken full responsibility.
In response to the Minister De Sliva’s statement about SriLankan Airlines being at risk, Captain Rajind Ranatunga made an intriguing comment on the social media recently.
He pointedly remarked: “You were present when Emirates was kicked out from Sri Lanka, and you served as the Minister when SriLankanAirlines acquired unsustainable loans and leased A330/A320 Neo aircraft at prices exceeding 30 per cent of the market value, resulting in a current debt of $1.2 billion. What actions did you take as a Cabinet Minister during that time?”
This statement, shared on Facebook, speaks volumes and leaves little more to be said on the matter.
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