Dubai: The government of Sri Lanka has decided against selling a minority stake of 49 per cent of its national carrier, Sri Lankan Airlines, after none of the bidding entities that expressed interest in it was deemed “worthy.” Instead, the airline will undergo restructuring, Sri Lankan Minister of Ports, Shipping and Aviation Nimal Siripala de Silva said in a statement. Details about the restructuring agenda have yet to be revealed.
Silva said current regulations permit the transfer of 40 per cent of Sri Lanka’s national carrier shares to another entity, yet suitable investors have not shown interest so far.
“We are not going to sell Sri Lankan Airlines but restructure it. According to Sri Lankan law, only 49 per cent of the airline's shares can be given to a non-Sri Lankan entity. But there is minimal interest in the world for that.”
Bid requests from six firms
Richard Nuttall, the CEO of Sri Lankan Airlines, told Gulf News that the government had received bids from six firms for the stake sale.
The Minister said, “Only six parties bid for the airline, and we didn’t find anyone worthy among them. Even if we were to extend this opportunity to a Sri Lankan entrepreneur, their capabilities would need to be demonstrated.”
He added, “The parties should have a strong balance sheet and expertise, as the jobs of 6,000 people are at stake.”
The requests for qualification (in response to a formal solicitation process) were received from AirAsia Consulting Sdn. Bhd., Dharshaan Elite Investment Holdings (Pvt) Ltd, FITS Aviation Private Ltd., Sherisha Technologies Private Limited, Treasure Republic Guardians Limited, and Hayleys PLC.
Dubai’s Emirates bought a 43.6 per cent stake in Sri Lankan in 1998, together with a ten-year management concession. However, it opted not to renew its contract in 2008. It divested its shares to Colombo in 2010, after which efforts at finding a strategic investor for the airline failed. In the mid-last year, reports of a Middle East investor wanting to acquire a stake in the airline emerged. However, Nuttall restated these rumours and said only one Qatari firm had expressed interest in buying the airline.
Attractive deal
In 2022, the Sri Lankan government agreed to restructure and partially privatise several state-owned enterprises (SOEs), including the airline, with the International Monetary Fund (IMF).
The sell-off of state-owned companies is a fundamental component of the nation’s overall plan to mitigate losses incurred by state-owned businesses. This is a critical goal under the terms of a $2.9 billion IMF loan Sri Lanka secured.
The government of Sri Lanka, guided by the World Bank subsidiary International Finance Corporation (IFC), had hoped to raise $500 million by selling the airline’s catering and ground handling units.
The government even offered potential buyers an attractive deal, including assuming $510 million of the airline’s debt.
Achieving profitability
Official data shows that the airline reported a net profit of Sri Lankan rupees 1,124 million in the nine months to December 2023, turning around from a loss of SL rupees 73.26 billion for the full year ending March 2023.
The airline earned revenues of SL rupees 248 billion in the nine months to December 2023, with SL rupees 205.6 billion in passenger income, SL rupees 22.6 billion in freight, and SL rupees 18.7 billion in unspecified other income.
“We had profits last year (to the year ending March 2023). The challenge we have got is that the underlying business is profitable. These last couple of months, it is slightly underwater because we've got too many aircraft on the ground,” said Nuttall. “So, when we get them all flying again, that turns around. The challenge we've got is that we have quite a lot of legacy debt that we have to pay off,” Nuttall explained.
The government took off 30 per cent of the airline’s debt in December last year.
Airline fleet and network expansion
The airline has a fleet of 23 leased aircraft. “And we have four on the ground due to engine problems,” said Nuttall.
Commenting on the airline’s network expansion plans, Nuttall said, “There is a list of two to three cities we want to fly. However, more details about that will be announced in the coming months.” Nuttall had said the expansion plans were mostly concentrated in the regional markets, including the Indian subcontinent and Southeast Asia.
Nuttall said, “Before we add too many flights to other markets, we are still short on aircraft and have two or three places where we fly less than daily, and that's not a good idea. So, in places like Paris and Frankfurt, Pakistan, we want to fly daily.”
Moreover, the airline CEO also wants to boost inbound passenger traffic to Sri Lanka, as tourism to the country is still ‘underserved’.
