• Cabinet gives approval to seek international partner for joint venture 
• Govt. to strengthen balance sheet of $3.2b debt-ridden National Carrier
• Cancels four of the eight Airbus A350s ordered under $ 2.3 b deal
• Treasury absorbs $ 200 m operational costs to keep both UL and Mihin running till October and allocates $70m from State banks to cover loan payments till then

By Uditha Jayasinghe 

Transplanting war terminology to economic challenges, Prime Minister Ranil Wickremesinghe yesterday said the Government would defuse the “landmine” of $3.2 billion debt accumulated by SriLankan Airlines by taking an international partner on board and strengthening the balance sheet of the National Carrier.

The Government will also cancel four of the eight Airbus A350s ordered under a $2.3 billion deal. Wickremesinghe, delivering what he promised was the first of a string of solutions to key economic challenges before Sri Lanka, outlined that three Cabinet papers were approved to tackle the debt of SriLankan Airlines, including one seeking approval to get an international airline to partner the National Carrier. 

“It has been recommended to us that we hire a local advisory company to assist us in selecting the best international partner for a joint venture. At present we have not decided to merge SriLankan and Mihin Lanka but debt from the budget carrier has been hidden inside SriLankanAirlines’ debt,” Wickremesinghe told reporters.

Request for proposals will be called by the Government over the next few weeks. 

Describing SriLankan Airlines as a “landmine” on the people that needs to be defused before it hurts the public, the Prime Minister insisted that despite its mammoth debt, the Government had ruled out closing down the National Carrier. The Government has already agreed to absorb operational costs of $201 million to keep both airlines running till October and allocated $70million from State banks to cover loan payments till then.

“We don’t want to put this bomb on the people. Today we defused only one bomb. These are the consequences of taking loans without adequate transparency and Parliamentary oversight. We are planning to introduce new legislation, including a new audit bill, to make public enterprises more accountable to the people.” 

SriLankan Airlines was a profitable 10-year joint venture with Dubai-based partner Emirates Airline until the pair split in 2008. Mismanagement in the years since has left it with a debt of around $3.25 billion, the prime minister said.

The airline has bought seven Airbus A330-300s since 2012 to replace its aging fleet, before ordering the eight A350s.

It posted a group net loss of 16.33 billion rupees ($112.57 million) for the financial year through March 31, narrowing from the 31.37 billion rupees loss of a year earlier due to lower oil prices.

The carrier last posted a profit in 2009, a year after Emirates sold its stake in the venture.

The Prime Minister recalled the Government had made promises to create one million jobs and uplift the rural economy and these pledges cannot be allowed to lose their priority in the face of challenges such as SriLankan Airlines.

“We have a good opportunity to develop the country. We were aware of the challenges before we came to power. This is why we insisted on building a National Government  because it is only through the two main parties joining together that we can achieve our goals,” Wickremesinghe said, denying there was a balance of payment crisis looming for Sri Lanka.

“A balance of payment crisis is when a country cannot repay its debt. Sri Lanka has never defaulted on its debt repayments and has no intention of doing so. This is why the Government is spearheading an export and investment drive, so that we never have to face that kind of situation,” Special Assignments Minister Dr. Sarath Amunugama, who joined the Prime Minister for the press briefing, said.