The Sri Lankan government has confirmed it will abandon its current process to privatise SriLankan Airlines (UL, Colombo International), with the Ministry of Finance, Economic Stabilisation, and National Policies issuing an official note on July 18 reflecting the change. However, the government still wants to divest the airline, and ch-aviation has learned it intends to announce a new strategy to do so next month.
"The Cabinet of Ministers at its meeting of July 9 has decided to terminate the current bidding process with respect to the divesture of SriLankan Airlines," the note reads. "Instead, the government of Sri Lanka will now follow an alternative strategy to be decided on shortly, to divest the airline based on a framework approved by the Cabinet of Ministers."
The plan to sell a 51% stake in SriLankan Airlines had progressed as far as the government accepting expressions of interest. But in June, ch-aviation reported that Colombo was cooling on its privatisation plans, preferring instead to restructure it, after the EOI campaign failed to attract the interest of quality foreign investors and airlines. Instead, it primarily garnered responses from smaller local entities with limited or no aviation industry experience.
However, a Sri Lankan government source close to the matter told ch-aviation the government still intends to sell the SriLankan stake, albeit by taking a different approach. "We hope to make another announcement around the first week of August," the source said.
According to a July 21, 2024, Sunday Times report, there was interest in SriLankan Airlines from India-based entities but no real appetite to participate in the previous privatisation process. Another government source told that outlet that those entities may now resume talks. “We need to take this asset off the Treasury," the source said. "The future efforts will be for that." The source also said once a buyer was found, the government may move to list the airline on the Colombo Stock Exchange.
Meanwhile, US rating agency Fitch says it will stop rating SriLankan Airlines. The agency had affirmed SriLankan's USD175 million government-guaranteed 7% unsecured bonds due on June 25, 2024, at a C rating. Fitch has now withdrawn that rating. The bonds and interest owed remain unpaid, triggering a default event. However, the airline has an in-built 30-day grace period.
"The rating on the bonds was driven by the unconditional and irrevocable guarantee of the government of Sri Lanka," a July 15 statement from the rating agency said. "Fitch has chosen to withdraw the rating for commercial reasons. Therefore, Fitch will no longer provide ratings or analytical coverage for SriLankan Airlines."
