SriLankan to pay Rs.25bn for aircraft order cancellation

By Chandeepa Wettasinghe
The Sri Lankan government will be paying Rs. 25 billion to the Netherlands-based world’s biggest aircraft leasing company AerCap Holdings N.V. before the end of this year in order to exit the lease agreement for four Airbus A350-900s ordered by the state-owned national carrier SriLankan Airlines.

“When looking for the best option, Minister Kabir Hashim and I, with the approval of the Prime Minister, decided to leave the agreement and pay them a fine,” Finance Minister Ravi Karunanayake told a media gathering yesterday.

He noted that the four aircraft would have cost the government Rs. 900 million in losses per month through operations. The first aircraft was set for delivery this month.
“If we didn’t reject this payment yesterday, it would have been put in our account. On the other hand, to erase this monthly loss, we have to pay Rs. 25 billion. We have to pay this amount before the end of this year,” Karunanayake said.

Karunanayake said that those asking the current administration to point out any shortcomings of the past regime should look at such spending. “This is what we have to clean up. When the country needs buses, they have gone and bought Airbuses.”

The previous administration had also ordered 4 A350-900s directly from Airbus to be delivered by 2019. Karunanayake said that the remaining four will also have to be cancelled.
“If we start negotiations for them now, the amount we have to pay will also be lower,” he said.
He said that SriLankan has no need of aircraft of such specifications, since SriLankan’s longest routes to The UK, Japan and Australia are less than 12 hours. The A350-900 could fly 325 passengers in 3 classes for 19 hours or 8,100 nautical miles.
Karunanayake noted that if all the eight A350-900s were taken in by SriLankan as originally planned, the losses would have amounted to Rs.162 billion.
“Based on the size of the deals, we could have instead cut down the prices of sugar by Rs. 40, or purchased 20,000 buses. These are the things they have done. 

We could have done a project similar to half of Mahaweli, or spent more on education,” Karunanayake added.
SriLankan has also taken an order of seven A330-300 aircraft, one of which has been wet leased to Pakistan International Airlines, and 3 more are to be dry leased.
SriLankan is currently in the process of a major restructuring, ahead of finalizing one out of the ten international operators who expressed interest to take over its management.
In order to make SriLankan investor-friendly, the government has announced plans to take over the Rs.461 billion in debt SriLankan has accrued over the past 8 years, after the Rajapaksa regime forced Emirates out of managing the national carrier profitably.