30 August 2022 12:38 am Views - 178
Ports, Shipping and Aviation Minister Nimal Siripala de Silva and SLA Chairman Ashok Pathirage.
Pic by Kithsiri De Mel
By Nishel Fernando
With the aim to rescue SriLankan Airlines (SLA) from a looming collapse due to its heavy debt stock, the government is planning to sell up to a 49 percent stake of two profitable units of the airline, with management transfers, in order to restructure the national carrier with a possible local or foreign partner.
“SLA doesn’t have the financial ability to repay the debts and lease rentals owed to the local and foreign parties, including the lessors of aircraft and the government is not in a position to continue to fund the airline under the present environment,” Ports, Shipping and Aviation Minister Nimal Siripala de Silva told reporters in Colombo, yesterday.
As at present, the outstanding debt of SLA stands at whooping US $ 1.05 billion. It includes a US $ 175 million dollar-denominated bond, US $ 80 million debt owed to state-owned Bank of Ceylon (BOC), US $ 386 million owed to People’s Bank, US $ 80 million arrears in aircraft lease payments and US $ 325 million in arrears owed to Ceylon Petroleum Corporation (CPC), AASL and CAASL.
Accordingly, the minister has submitted a plan to restructure the national carrier by initially selling 49 percent stakes in SLA’s catering subsidiary and ground handling division, with the management.
The Cabinet approval for the proposed plan is expected to be granted within the next two to three weeks. “For those two units, we plan to call for expressions of interest,” he said.
For FY 2021/2021, SLA’s catering subsidiary SriLankan Catering made a Rs.2.79 billion profit while its ground handling unit posted Rs.5 billion in profits.
SLA Chairman Asoka Pathirage remarked that each unit is valued up to US $ 1 billion, considering the steady stream of income over the past few years.
The minister noted that the government might be open for discussions to grant even beyond 49 percent stakes in the two entities. With the sales proceeds from the units, the airline expects to settle the US $ 80 million arrears in aircraft lease payments and the US $ 80 million debt owed to BOC, with plans to settle a substantial level of its outstanding debt owed to others, including CPC. The government believes that the airline will become more attractive to a joint venture partner offering to take 49 percent, with a substantially reduced debt stock. With all of its aircraft being facilitated through lease agreements, the minister highlighted that the invisible asset of the airline is its landing rights, which allow SLA to operate direct flights to 26 countries.
However, such rights were granted to SLA under the state control. Therefore, the minister noted that the government can only transfer a 49 percent stake in the airline to foreign parties. Unlike with the earlier arrangement with Emirates, he assured that the government wouldn’t interfere with the future management of SLA.
Further, he assured that the government plans to include mandatory clauses and conditions safeguarding the rights of the SLA employees in the restructuring agreements.
Pathirage stressed that SLA is in urgent need of restructuring, as the airline cannot manage the current debt servicing stemming from its inherited debt stock. Despite the urgency, the minister emphasised that the transparency won’t be compromised in the restructuring process.