SriLankan in talks with 3 airlines

Three airlines including Japanese Airlines are currently in negotiations with the Government, in efforts to divest 49% of the holding of the national carrier SriLankan Airlines, Minister Kabir Hashim said.

“Japan Airlines have already visited us, their representatives have already met with the Prime Minister, and initial discussions have commenced,” Hashim said. Still, he said, this does not mean anything has been established yet. He did not wish to disclose the other two airlines.

“They have asked for information and we want to sign a non-disclosure agreement (NDA) after which we will submit information to pursue it further” he said.

Whichever airline SriLankan Airlines ends up partnering with, said Hashim, the rough framework of the agreement will be the same.

“The partnership will certainly be a Public Private Partnership (PPP) and we intend on divesting 49% of the holding to come in with equity. 51% will be held by the state. We would hand over the entire management of the company, as we don’t think we are the best at managing the airline business.”

Hashim concluded by saying that, “In the event that there is some issue with equity participation we will be looking at other options — options like management contracts with limited equity involvement, where we hand over the management of the airline and also will be able to derive equity.” As recently as May, SriLankan Airlines had been in an agreement with TPG, a U.S. private equity firm, to acquire 49% of the company. But TPG ended up pulling out of the agreement after completing the due diligence process, said Ravindra Hewavitharana, Secretary of the Ministry of Public Enterprise Development.

Hewavitharana explained that until a partner is found, SriLankan Airlines is looking at other ways to cut down costs.

“We are looking at different types of nationalization, as well as restructuring and re-engineering of internal processes,” said Hewavitharana.

Since 2009, a year after its separation from Emirates Airlines, SriLankan Airlines has been operating at a loss.

The most recent fiscal year, which ended in March 2017, the company reported losses of Rs. 27.79 Billion, up from a loss of Rs. 12.08 Billion the year before.