Emirates' SriLankan Airlines deal runs into turbulence

Dubai: Emirates' management role with SriLankan Airlines is in limbo as it waits for the Colombo government to decide whether to renew its contract.

Emirates owns a 43 per cent stake in Sri Lanka's national carrier and also manages the airline under a 10-year contract, which expires in March 2008.

However, the carrier is majority owned by the Sri Lankan government, and its CEO Peter Hill has said there have been no discussions with the government so far about renewing the Emirates contract.

Emirates airline declined to comment to Gulf News while the matter is pending.

A SriLankan spokesperson said Emirates wants a new contract and has submitted a five-year plan for SriLankan Airlines to the government.

With a year left on the current contact, the relatively short time remaining for renewal strips SriLankan Airlines of any forward planning as it seeks to cement its position as the largest foreign carrier to serve India. It faces competition in the increasingly liberalised Indian aviation sector, particularly from upstarts Qatar Airways and Etihad Airways. Additionally, a political party within the Sri Lankan government recently announced intentions to create a budget carrier to slash travel costs to India and the Middle East.

"This shorter-term planning allows us to make tactical decisions, but not a strategic plan," the SriLankan spokesperson said. "Something is holding up the [government's] decision, and we don't know what it is."

Ruvini Jayasinghe, a media relations manager at SriLankan, said it would like to grow from a fleet of 14 aircraft to 25. "But nobody can go ahead until the government of Sri Lanka gives the green light for Emirates to continue with management."

SriLankan Airlines, which was started in 1979, currently operates flights to 28 countries.