Subsequent to the Sri Lankan government’s announcement in March this year that the nation’s flagship carrier and oneworld member, SriLankan Airlines will be unable to repay debts which have amounted to in excess of US$1 billion, it has now invited expressions of interest in the privatization of both SriLankan Airlines and its low-cost subsidiary, Mihin Lanka. It is understood that a stake of up to 40% in the airlines may be available.
SriLankan Airlines recent troubles began with the buy back of a 40% stake in the airlines acquired by Emirates in 1998 and triggered in 2008. The Gulf carrier had taken over management of the airline and by 2007 it was making an annual profit of LKR4.4 billion. Since then the airline has lost LKR108 billion. At the end of 2015 the airline had accumulated losses of LKR128 billion, debt of LKR78 billion, and a hole in its balance sheet of LKR74 billion.
It is understood that the government has been subsidizing the airline with US$100 million per year since Emirates decision to sell back its stake, an event triggered by the withdrawal of Emirates‘ Chief Executive Peter Hill’s visa after an insufficient number of passengers were ‘bumped’ to accommodate the then president Mahinda Rajapaksa’s substantial entourage on a single flight.
Earlier this year the government had been considering an equity buy-in from another airline, while also reducing network coverage. However, an advertisement in print publications of NSB Fund Management, a subsidiary of the National Savings Bank titled “Invitation for expression of interest for the reorientation of SriLankan Airlines and Mihin Lanka,” would seem to have made it clear which way the government has chosen to go in order to save the failing airline. Expressions of interest have to be registered by 1600hrs Sri Lankan time, August 24, and documentation can be accessed for a non-refundable fee of US$5,000.
BNP Paribas and KPMG have been appointed by the Sri Lankan government as its financial advisors for the transaction. (US$1.00 = LKR 146.06 at time of publication.)
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