Transparency key for SriLankan Airlines reforms

Privatisation of Sri Lanka’s state-owned companies has been discussed for a number of years, especially since it began to accumulate colossal losses after the Mahinda Rajapaksa Government cancelled a profitable partnership with Emirates Airlines in 2008. Emirates owned a 43% stake in the national carrier at the time it pulled out following a row over ticketing between the chief executive of SriLankan Airlines and the Rajapaksa family in late 2007. The rest is a tragic story well known to all of nepotism, corruption and mismanagement which has left the airline with a debt of over $ 1.2 billion.

Last week the cabinet had approved a proposal to absorb about $ 553 million of this massive debt, which would hopefully make the loss-making, aging airlines attractive to a potential investor. $ 378 million of the debt is owed to State banks and a $ 175 million State-backed bond it defaulted last year. According to the Minister of Ports, Shipping and Aviation the Government has received four bids for a proposed divestiture. Details are not clear at this stage. 

While there is no doubt that the Government cannot afford to finance this loss-making enterprise, any attempts to bring in external investors must be done with the greatest transparency. Sri Lanka has a poor record on privatisation which has mostly been led by crony opportunism, rather than sound policy. As a result, there is little confidence in the processes. 

Further exacerbating the matter has been the direct corruption related to SriLankan Airlines. In 2020 the UK’s Serious Fraud Office (SFO) discovered a massive financial fraud by Airbus Industries which exposed that the airline company had paid huge bribes to SriLankan Airlines officials between July 2011 and June 2015 to finalise an aircraft procurement deal completely unfavourable to the national carrier. Then President Gotabaya Rajapaksa ordered an investigation. Not much has been heard of this investigation nor has a single individual associated with this massive fraud been held accountable. 

There is also bound to be opposition to divestiture of public assets from many quarters due to entrenched opposition to any form of privatisation or restructuring of State-owned enterprises, including those making colossal losses. This Government in particular cannot ignore the serious concerns of corruption and lack of transparency. Due to its own dubious record and the serious lack of financial integrity of key players within the administration, the general public is right to be sceptical of any secret deals that are negotiated behind closed doors. 

The minister in charge of civil aviation himself had his allegations concerning corruption and malpractice. It is reported that a North Asian investor had previously complained about the minister asking for kickbacks in the project to expand the Bandaranaike International Airport. No action was taken against the individuals, nor any explanation provided to the public. It is with such individuals still at the helm that the Government is undertaking this much needed reform. 

In this context it is imperative that the Parliament is kept duly briefed and approval sought for any financial concession issued to potential investors. Any future agreement on divestiture should have the clear approval of Parliament, as the custodian of public finance. While the reform of SriLankan Airlines is vital at this time of national economic crisis, it needs to be done in a proper transparent manner to ensure that the public does not lose trust in the process.