Stay the course on SriLankan Airlines

SriLankan Airlines, once a symbol of national pride, has been struggling under the weight of financial losses for years. Despite numerous attempts at restructuring and cost-cutting, the airline continues to bleed money, putting an immense strain on the country’s already precarious economy. Recent reports indicate that the Government is wavering on its original plans for divestiture, a move that is both concerning and potentially disastrous. It is imperative that the Government stays the course and proceeds with the privatisation of SriLankan Airlines.

Earlier the Government called for bids to privatise the airline which was also a key demand of international lenders including the International Monetary Fund when granting a bailout loan to the country last year. Six firms had initially expressed interest and the Government announced in April this year that it had a shortlist of three potential investors. However it is reported that last week the cabinet of ministers had decided to terminate the current bidding process. The current debt of the national carrier is a staggering $ 2.0 billion at the end of the last financial year.

The financial losses incurred by SriLankan Airlines are unsustainable. According to recent financial statements, the airline has accumulated billions in losses, and there is no clear path to profitability under its current structure. These losses are not just numbers on a balance sheet; they represent a significant drain on the nation’s resources. Every dollar spent bailing out the airline is a dollar that could be used for essential services such as healthcare, education, and infrastructure development. The opportunity cost of maintaining the status quo is simply too high.

The argument for privatisation is rooted in the need for efficiency and financial prudence. Privatisation can bring in much-needed capital investment and managerial expertise, which are crucial for turning around the fortunes of the airline. Private investors are typically more driven by profit motives and efficiency, which can lead to better cost management and operational improvements. The infusion of private capital can also facilitate fleet modernisation, route expansion, and improved customer service, making the airline more competitive in the global market.

Moreover, privatisation can help reduce the political interference that has plagued SriLankan Airlines for years. Government ownership often leads to decisions that are influenced by political considerations rather than sound business practices as so vividly portrayed in the saga that led the Chairmen and management of Emirates Airlines to depart SriLankan during the tenure of President Mahinda Rajapaksa.

Privatisation is the potential for strategic partnerships with established global carriers. These partnerships can provide access to broader networks, advanced technologies, and best practices in the industry as was with Emirates in the first decade of this century. Collaborations with successful airlines can enhance operational efficiency and open up new markets, thereby boosting revenue and profitability.

While it is true that privatisation may lead to some job cuts as the new owners streamline operations, the long-term benefits far outweigh the short-term pain. A financially stable and efficiently run airline can provide more secure and sustainable employment opportunities in the long run. Furthermore, privatisation does not necessarily mean a loss of national identity. Many countries have successfully privatised their national carriers while maintaining strong national branding and service quality.

The reluctance of the Sri Lankan Government to follow through on its divestiture plans is understandable given the potential political backlash. However, the cost of inaction is far greater. Continuing to subsidise an ailing airline is a burden the country can no longer afford. The difficult decision to privatise SriLankan Airlines is not just an economic necessity but a strategic imperative.