April 6, 2015

Corruption claims regarding SriLankan Airlines alleges $billions are missing

The new Sri Lankan government has demanded an immediate investigation into the running of the state airline, SriLankan Airways. It is alleged that the carrier has been subject to levels of corruption which have seen billions of dollars unaccounted for. An inquiry into financial affairs at the airline, which was led by an anti-corruption lawyer, found “shocking details of corruption running into billions of dollars” as well as “irregularities” in its US$2.3bn 2013 deal to buy 10 Airbus aircraft, according to Prime Minister Ranil Wickremesinghe’s office. The fact the deal is today being reported as having a value of US$2.3bn is interesting as, when the original deal for six A330-300 and four A350-900 aircraft was announced in May 2013, Chief Executive Officer Kapila Chandrasena said in an interview that “The total cost altogether is going to be around $1.3bn.”

The Government holds a 51% stake in the airline and it was in January, after the Sri Lanka’s President, Mahinda Rajapaksa, failed to be re-elected after 10 years in office that Wickremesinghe then resigned his position at SriLankan Airways. The current situation, according to a statement, sees the inquiry recommending investigations into the national carrier’s “entire re-fleeting process”. It also said that former airline chairman Nishantha Wickremasinghe, who it identified as the brother-in-law of former President Mahinda Rajapaksa, “should be prosecuted”.

Additionally, the statement made indicated that staff at the airline had blatantly ignored conflicts of interest with individuals and companies it hired, and that the inquiry had also discovered incidents of manipulation of contracts. It also has indicated that Rajapaksa changed the management of the loss-making airline to ensure the purchase of the Airbus planes despite the availability of cheaper alternatives. At the time the CEO, Kapila Chandrasena, stated: “We looked at who is giving more value for us. In that discussion, it was apparent that the Airbus offer of A330-300s in the interim and long-term A350-900 is much more favourable than the Boeing. Boeing did not have interim aircraft. They were only interested in the long-term offer, which was the 787.”

Sri Lankan Airlines has a fleet of 21 aircraft including eight A320s six A340s, and seven A330s. At the time of the order for the 10 new aircraft Sri Lankan Airlines estimated that it had incurred a loss of US$134.8m in the 2012/13 financial year to March 31st, which was similar to the year before, and that it was finding it hard to finance new aircraft purchases.



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