Sri Lanka's aviation minister has warned more aircraft at state-owned SriLankan Airlines (UL, Colombo International) may be grounded if the government cannot get stakeholders, particularly employee groups and unions, to agree to government plans to sell a minority stake in the carrier. The warning comes as the Minister of Ports, Shipping and Aviation, Nimal Siripala de Silva, revealed plans to get the expression of interest (EOI) process up and running as soon as November.
This week, de Silva told Ada Derana's State of the Nation current affairs show that if the partial privatisation of the airline didn't go through, it wasn't the Sri Lankan government that would suffer, it would be the trade unions, pilots, engineers, and cabin crews that suffered.
"If there is no taker, then we will have to ground aircraft at some time or other," he said, adding that under existing Sri Lankan law, the government cannot sell off all of the airline. Instead, it intends to sell a 49% stake and form a joint venture agreement with the buyer. "We can't run the airline (ourselves). We need a capital injection of at least USD500 million to make the airline viable. The government has no money to do that and no intention of paying that because we feel the correct policy is to enter into a joint venture and get the necessary capital.
de Silva said SriLankan had 19 operational aircraft, which correlates with ch-aviation fleets data. The airline has a single A320-200N, two A321-200Ns, and one A330-200 parked, although ch-aviation is aware the A330 is not operating because it is out of lease and going back to the lessor. The minister said attempts to procure additional A330s have been unsuccessful, although the airline had managed to lease some additional A320 types. All of SriLankan's fleet is leased.
de Silva confirmed that the government has yet to call for expressions of interest in the minority stake but says he is getting unsolicited inquiries ahead of formal announcements. He says the Sri Lankan Treasury, which is responsible for state-owned enterprises (SOEs) like SriLankan Airlines, in consultation with the World Bank and International Monetary Fund, decided to appoint an independent advisor to oversee any sale process. While the minister did not name the independent advisor, ch-aviation understands it is the International Finance Corporation (IFC), a member of the World Bank Group.
de Silva also said the government's point man in its drive to wholly or partially privatise multiple SOEs, including SriLankan Airlines, is Suresh Shah, the head of the government's State-Owned Enterprises Restructuring Unit. "I am pressing on him," said the minister. "I told him I can't wait any more and I need this joint venture to be done soon. He has promised me that they will have all the papers ready by the end of October so that potential investors can apply. We will appoint the necessary committees and get the base proposal up."
Shah has previously said unions and employee groups at various SOEs had raised concerns about privatisation plans. He says this is to be expected. But he noted that, in general, privatisation plans were now broadly supported. “The opposition and the violent protests that we saw two or three years ago against privatisation of SOEs have now died down," he said in July. "This is because they have realised that by divesting SOEs, their employees could get better returns, and the country’s economy too would improve, lessening the possibility of facing an economic crisis again.”
