Hopes are rising for Sri Lanka’s ailing national carrier, SriLankan Airlines, as U.S.-based private equity firm TPG Capital conducts due diligence on the indebted company.
The process is scheduled to be completed by the of May, after which the Sri Lankan government and TPG Capital will start negotiations on a deal to salvage the airline, which has been losing money since 2009.
Deputy Minister of Public Enterprise Development Eran Wickramaratne told the Nikkei Asian Review that eight companies had shown interest in partnering with SriLankan following a local and international call for tenders last year, although only three were shortlisted.
TPG Capital was selected because it possessed the necessary experience in turning around troubled airlines, he said. TPG acquired Continental Airlines in 1993, selling it in 1998 for 10 times its original investment.
If the negotiations succeed, TPG will augment the management team at the airline by bringing in an international team, said Wickramaratne, whose ministry oversees the carrier. TPG declined to comment.
The government has been trying for more than a year to convince an international airline or investment group to buy a stake in SriLankan, manage it and help the government pay off the airline’s debts, which stand at over 140 billion Sri Lankan rupees ($92 million).
An inquiry found that gross mismanagement and corruption had plunged the airline into debt. The investigation panel said Nishantha Wickramasinghe, chairman of SriLankan between 2010 and 2015, was paid 500,000 rupees a month, despite having no relevant qualifications. Wickramasinghe is the brother-in-law of former President Mahinda Rajapaksa, who was in office from November 2005 to January 2015.
The inquiry said the ex-chairman had received luxury sports utility vehicles, in addition to a Mercedes Benz car and a Prado Jeep. The airline had issued more than 700 free tickets for a rugby tournament and night-time motor racing events in Colombo, which were pet projects of Rajapaksa’s sons.
The inquiry also called for a criminal investigation into alleged fraud in the award of a duty-free contract in which Rajapaksa’s first cousin Udayanga Weeratunga was allegedly involved. Weeratunga has fled the country since the change of presidency in 2015, and is the subject of an Interpol arrest warrant. Rajapaksa has denied that his government was beset by widespread corruption.