Friday Nov 15, 2024
Friday Nov 15, 2024
Friday, 29 July 2011 03:37 - - {{hitsCtrl.values.hits}}
SriLankan Airlines is getting a US$ 770 million boost as part of an ambitious modernisation and expansion plan endorsed by the Cabinet on Wednesday. An urgent US$ 20 million Treasury guarantee has also been approved to pay creditors of beleaguered Mihin Lanka.
Media Minister Keheliya Rambukwella told the media at the weekly Cabinet briefing that the plan to infuse US$ 500 million over the space of the next five years from 2012 was geared to increase the fleet of aircraft of the national carrier and Mihin Air from 17 to 23 by the end of 2014.
However the detailed Cabinet paper shows that in addition to the US$500 million, the Cabinet has also approved a plan to authorise the Treasury to release a sovereign guarantee of US$ 270 million immediately.
This will be to obtain loans and overdrafts from local and foreign banks or other financial institutions.
“The US$ 270 million will reduce by US$ 50 million each year to be repaid every year by utilising part of the annual equity infusion of US$ 100 million over five years.” The Cabinet paper adds that since SriLankan does not at present own any aircraft the money will be used to purchase new planes bringing down the average age of aircraft from the present 11 years to below 7 years. Infusion of equity capital will also strengthen the balance sheet.
The equity investment proposed for Mihin Lanka in US$ 20 million over a two year period commencing 2012. The requirement by Mihin Lanka for a Treasury guarantee is US$20 million but will be repaid in 2012 and 2013 utilising the equity investment.
“Mihin Lanka requires urgent funds to repay creditors including SriLankan Airlines and for working capital. This will also strengthen the balance sheet for Mihin Lanka,” the Cabinet paper said. It clearly states that the government should allocate these funds from the 2012 Budget but Rambukwella contrarily told the media that the government would look for funding sources from banks and other finance institutions as well. He also supported the idea of listing the two carriers.
When questioned over the validity of pumping more public funds into loss making enterprises he stressed that scrapping the national carrier was not an option and therefore the government would infuse more funds to make SriLankan function better. He insisted that allegations of corruption and wastage in the State enterprise were unfounded and that the government was “happy” with the management.
“The losses could be a result of undercapitalisation,” the Minister stressed deflecting all questions from the assembled media as to why SriLankan and Mihin are making repeated losses. Instead he focused on the need to make the carriers expand to feed the rapidly growing tourist industry. When asked for the need for Mihin Air Rambukwella remarked that it was needed to provide low cost air transport to around 250, 000 migrant workers travelling back and forth from the Middle East. Once the new aircraft are obtained the two companies will decide how best to use them, he said. (UJ)
