Cash-strapped Sri Lanka to privatise national carrier reeling under USD 1.226 billion debt
By Sunita Iyer | First Published Aug 29, 2022, 9:03 PM ISTSri Lanka is looking to sell a 49 per cent stake each of the SriLankan Airlines' catering and ground-handling units in efforts to restructure the state-run carrier, while 51 per cent will be retained under state hold.
Sri Lanka has announced that it would privatise the nation's losing national airline because the cash-strapped administration "can no longer afford to inject money" into maintaining it.
To restructure the state-run airline, the government proposes selling 49% part in SriLankan Airlines' catering and ground-handling businesses. Nimal Siripala de Silva, the aviation minister, told reporters in Colombo on Monday that 51% will be kept under state hold.
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"This restructuring is essential as the government can no longer afford to inject money into running the airline," he said.
"Annually, the government has been providing the airline between USD 80 billion to USD 200 billion to run its operations," de Silva said.
The minister stated that debt totalling USD 80 million that was acquired by mortgaging its shares and other loans might be paid off with the proceeds from the sale of the catering business.
He stated that the airline currently owes USD 1.226 billion in debt (LKR 401 billion).
Under Emirates' supervision, the airline, founded in 1979 as Air Lanka, changed its name to Srilankan Airlines in 1998. The government regained possession of it from the Emirates in 2007. One of the more than 190 state-owned companies suffering from severe losses is Srilankan Airlines.
Without retaining a 51 per cent stake in the airline, Sri Lanka might lose ownership of the companies to be sold, Economy Next news website quoted minister de Silva as saying.
"But if the investors are Sri Lankan nationals, we can go for more. There are many rich people in Sri Lanka, they can come together as a syndicate or with airlines and offer a bid," he said.
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Ranil Wickremesinghe, the president of Sri Lanka, has called for the loss-making national carrier to undergo urgently needed reforms. SriLankan Airlines has accumulated approximately LKR 53.6 billion in guarantees as of August 2021, according to a report by the Colombo-based think tank Advocata. The airline has frequently needed government-guaranteed loans to stay afloat, the report said.
The 22 million-person nation of Sri Lanka is experiencing the deepest economic instability in seven decades. Due to the crisis, millions of people are now struggling to pay for food, medicine, fuel, and other necessities. In order to implement a staff-level rescue programme with the International Monetary Fund (IMF), the island nation is currently rushing to find a solution to its current economic woes.
The country declared in April that it is postponing payments of about 7 billion USD of its outstanding foreign debt for this year, out of the approximately 25 billion USD due until 2026, due to an extreme foreign currency crisis that has led to foreign debt default.
(With inputs from PTI)
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