SriLankan’s search for new partner getting desperate

SriLankan’s search for new partner getting desperate

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Sri Lankan officials are getting increasingly desperate to find a private-sector partner to share the burden of rehabilitating flag carrier SriLankan Airlines.

The airline, which for a decade was managed and part-owned by Emirates, saw its expenses and debt level soar after the respected Gulf carrier pulled out its team in 2008 amid tensions with then President Mahinda Rajapaksa and his family.

Prime Minister Ranil Wickremesinghe kicked off the search for a new partner for SriLankan last year, culminating in the selection of TPG Capital, the U.S. private equity group which has a record of guiding airline turnarounds, ahead of seven other bidders.

On May 5, however, SriLankan Chairman Ajith Dias announced to staff that TPG had ended talks to buy a 49% stake after completing its due diligence on the airline and concluding potential returns were less attractive than other investment options.

The airline has been losing money since 2009 and in its annual report for the year ended March 2016, it reported current liabilities of 100.26 billion rupees, double its total assets.

According to a preliminary results announcement on May 4, the carrier lost 6.49 billion Sri Lankan rupees ($42.5 million) in the year ended March 31, excluding finance and one-off charges. The loss was aggravated by the depreciation of the rupee against the dollar because of the airline’s heavy dollar-denominated expenses and by flight cancellations necessitated by the daytime closure between January and March of the runway at Colombo’s international airport for resurfacing work.

Officials told the Nikkei Asian Review that following TPG’s retreat, Wickremesinghe appointed Minister of Public Enterprise Development Kabir Hashim, Minister of Development Strategies and International Trade Malik Samarawickrama and Minister of Special Assignments Sarath Amunugama to talk to Emirates, Qatar Airways and Air Asia in hopes of convincing one of them to be SriLankan’s partner.

The move bypasses two bidders which had originally been shortlisted by the government alongside TPG but which lacked its track record in international operations and airline turnarounds. Peace Air, a defunct private local airline which has announced plans to restart operations, had bid with support from Lufthansa Consulting, an arm of the German airline. Trans Maldivian Airways, an air-taxi service operating in the nearby archipelago, had bid with reported backing from Singaporean air services company SATS. Peace Air last month announced plans to file legal challenges to its exclusion from the due diligence process.

Family business

An official inquiry following the change in Sri Lanka’s government in 2015 found that gross mismanagement and corruption had ruined SriLankan’s finances. The investigation panel said Nishantha Wickramasinghe, chairman of SriLankan between 2010 and 2015 and a brother-in-law of Rajapaksa, was paid 500,000 rupees a month despite having no relevant qualifications.

asia.nikkei.com | MUNZA MUSHTAQ, Contributing writer

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