SriLankan to sue Mihin for Rs 100m non-payment
Emirates-managed national carrier SriLankan Airlines has threatened government-owned budget Mihin Lanka, it would be sued, if over Rs. 100 million due for ground handling and other services provided, is not settled.
The warning, in writing, by SriLankan Airlines CEO Peter Hill, was communicated to Mihin Lanka CEO Sajin Vas Gunawardena last week. Hill?s salvo follows Sajin firing a letter to SriLankan Airlines making various allegations over the withdrawal of ground handling services on January 1, 2008, to Mihin Lanka.
Hill has denied Sajin?s allegations that SriLankan Airlines? withdrawal of ground handling services, was in violation of its obligations to Mihin Lanka or the Government of Sri Lanka ?or that it is a deliberate or insidious attempt to destabilise and disrupt Mihin Lanka operations, or that our ground handling charges at BIA are arbitrary, excessive and not commensurate with the services provided.?
?As such, we will take all necessary action to resist any claims which you may make against us in respect of the non provision of ground handling services to Mihin Lanka,? Hill has warned.
Emirates-seconded Hill is due to retire on March 31, 2008, along with end of management of SriLankan Airlines by the award winning major global carrier.
According to SriLankan Airlines, Mihin Lanka as at January 1, 2008, owed US$ 647,589.54 in respect of ground handling services, US$ 12,121.45 in respect of engineering and other services provided to you and US$ 6,311.40 in respect of interline charges. A further US$ 353,222.58 is due to our subsidiary, SriLankan Catering for catering services uplifted by Mihin Lanka. ?All of this adds up to a total of US$ 1,019,244.97 due and owing from Mihin Lanka to SriLankan and its subsidiary,? Hill enlightened Sajin.
This, Hill said, bares out the fact that, contrary to Sajin?s unfounded allegations, SriLankan Airlines has continued to provide Mihin Lanka ground handling and other services up to December 31, 2007, further exposing the national carrier.
?This amply demonstrates our willingness to facilitate your requirements, even at risk to our commercial interests. We have repeatedly sought your cooperation to settle the outstanding amounts, which would allow us to resume the provision of catering and ground handling services to you. You have consistently failed to provide us with any credible plan to resolve the issues,? Hill had told Sajin.
?You (Sajin) had assured our Chairman (Harry Jayawardena) that the matter regarding ground handlings dues will be totally resolved by November 30, 2007. However, there has been no settlement or settlement proposal forthcoming from you up to date. Therefore, by your own action and inaction, you left us with no alternative but to withdraw ground handling services to you, until you settle the outstanding amounts in full. Notwithstanding this decision, we have provided you ground handling services on a strict cash up front basis. This too, you did not comply with. As at date, the sum due to us, on account of ?temporary credit?, stands at US$ 112,982.97 for such services, with you having stopped payment to us completely, since about December 30, 2007,? Hill had said.
As per his letter, SriLankan had been more than patient waiting for Mihin Lanka money, and ?it is impossible to continue providing services, at risk to our own commercial interests.?
?We, therefore, demand that you settle all amounts due and outstanding to SriLankan Airlines and SriLankan Catering immediately, failing which, will leave us with no option but to commence litigation and or arbitration proceedings to recover all amounts due to us and our subsidiary,? the SriLankan Airlines CEO had said.
Aviation sources said that Mihin Lanka was running at a daily loss while frantically trying to survive. Notwithstanding the widening hole in its coffers, Mihin has also been accused of resorting to financially suicidal pricing and promotional strategies.
Although SriLankan Airlines, since inception, handled Mihin Lanka?s ?Above wing? operations, The Bottom Line reliably learns that, since recently, this passenger handling operation is now being controlled by the budget airline itself.
However, sources said that Mihin Lanka continues to obtain engineering assistance from SriLankan.
?The budget airline continues to receive assistance in spheres of toeing the aircraft, cleaning the aircraft toilets and filling water tanks,? the sources said.
According to the sources, Mihin Lanka is of the view that they can?t continue to afford the rates charged by SriLankan, since Mihin is a budget carrier.
?Carrying out our own duties also helps us monitor the airline?s safety and standard levels, but where necessary, we do avail of SriLankan?s services,? the source noted.
The Bottom Line learns that, following the expiry of the management contract with Emirates, the government would force SriLankan Airlines to reduce grounding handling charges to budget carriers, thereby giving some financial relief to Mihin Lanka. |
23 Jan 2008 03:05:18 GMT