The Sri Lankan government has extended the prequalification deadline to buy a majority stake in SriLankan Airlines (UL, Colombo International) until March 5, 2024. It is the third extension, with the application originally due in early December 2023. Consequently, the government has adjusted other target dates in the sale timeline.
No reason was provided for the new deferral in the January 30 bid bulletin update released by the Ministry of Finance. Under the amended timeline, the selection of prequalified bidders and opening of the data room will now occur in mid-March, with the issuance of the RFP and draft definitive agreements slated to happen at the end of the same month.
One-on-one meetings with bidders and site visits will now take place across April. Final submissions and the selection of the successful bidder remain scheduled to happen in May. The issuance of a letter of intent, cabinet approval, and a signing of agreements will follow that in June.
The Sri Lankan government is selling stakes in several state-owned enterprises in an attempt to clean up the national balance sheet and shift the operations of what are mainly commercial entities to the private sector. The government owns 99.52% of SriLankan Airlines but intends to sell a majority stake to a strategic investor. Last year, spruiking the divesture, the government said the state-owned carrier offered "a great opportunity for profitable growth in the hands of the right investor building a major hub in the Indian Ocean."
CEO Richard Nuttall agrees about the potential for profitable growth. "The commercial opportunity is huge," he recently told Colombo's Daily Mirror. "The risk is more about the country, politics and the currency."
The government, rather than the airline, is managing the sale process, but Nuttall told the newspaper that non-airline entities in other jurisdictions were interested in acquiring the Sri Lankan Airlines stake. "This is what I understand," he said. "We understand there was a Zoom call for people to ask questions when they first put out the document for expressions of interest. We understand that seven or eight people, some domestic, some international, participated in that call, and none were airlines. We also understand that some of those people asked for time to see if they could get together to form consortiums."
Meanwhile, SriLankan Airlines is looking to grow its revenues from the Indian market. The country already accounts for 20% of the carrier's income, and the target is to increase this to 25% by the end of March 2025. According to ch-aviation PRO airlines data, the airline flies to 37 airports in 21 countries, including Bengaluru International, Chennai, Delhi International, Hyderabad International, Kochi International, Madurai, Mumbai International, Thiruvananthapuram, and Tiruchirapally Airports in India. SriLankan intends to add Ahmedabad to the list in 2025.
Nuttall notes the barriers to growth include supply chain issues, particularly around engines, and the difficulties sourcing replacement and extra aircraft. "Our problem is not just that we can't grow," he said. "We have a problem keeping our existing fleet in the air because we can't get engines. And when we have an aircraft with a problem, we can't get spares because they don't exist. If you want to grow, it's very difficult. Everybody is looking for aircraft."
SriLankan's fleet of 26 aircraft includes seven A320-200s, two A320-200Ns, one A321-200, four A321-200Ns, five A330-200s (including two wet-leased from Air Belgium), and seven A330-300s. Of that number, eight are out of service, including two A320-200s, one A320-200N, the one A321-200, three A321-200Ns, and one A330-200.
