SriLankan shares plan with government to privatise airline, claims not taken state funds for last 12 to 14 months

SriLankan Airlines flight (Representative image)

Sitting in his office in Colombo, Ashok Parthirage, chairman of SriLankan, is at pains to stress that the national flag carrier has not been “depending on the government or treasury for the last 12 to 14 months."

"We are running on our own money,” Parthirage said in an interview, as Sri Lanka battles its worst financial crisis ever, which has led to political unrest in the island nation.

Asked what percentage of SriLankan flights were operating, Parthirage replied: “Operating fully. Because if you look at it right now,  a lot of foreign airlines have cut down their flights. So,  basically, we are doing fairly well. In fact,  our turnover last month was $90 million.”

He added that the airline was profitable during December-March. Parthirage said May and June were “not very bad."

"I mean, we lost money.  Even July, we have lost money.  That is mainly due to aviation fuel (refuelling of SriLankan aircraft in India) for like $7 million and also impact in the country because of the unrest. Because of that we have suffered a little bit.”

Besides being chairman of Sri Lankan, Parthirage is a successful businessman and funder of conglomerate Softlogic Holdings Plc, of which he is the chairman and managing director. He is also chairman and managing director of a number of companies including Asiri Hospital Holdings Plc and Softlogic Capital Plc, which are public companies listed on the Colombo Stock Exchange. He is also involved with the MoveNPick hotel in Colombo. Edited excerpts from an interview.

In May, the then Prime Minister and now President (Ranil Wikremaasinghe) announced the privatisation of Sri Lankan. Has it been pin the ause mode as far as the airline is concerned? Have the routes been stopped? Has the expansion been stopped? Has the induction of aircraft stopped?

I think (it is)  high on the agenda with the new government, but having said that,  I have to say that the airline has not been depending on the government or treasury for the last 12 to 14 months. We are running on our own money.

You are generating enough revenue through your operations?

We have been doing fairly okay, but at the same time with the current situation in the country. Our business (has) also got impacted. There is $850 million of debt in the SriLankan balance sheet, most of which belongs to government entities like the two banks and petroleum corporation for aviation oil. The government had guaranteed a $ 135 million bond, but of course, it has defaulted now and SriLankan Airlines has paid the interest.

If you look at the overall group, is not only the airline, we are also in the catering business, which is a very profitable business. also in ground handling. (But) we are not doing any expansion because we are on the privatization board. The board of directors has given a proposal to the government (on)  how this can be done.

What does the proposal envisage?

There are a few ways we are looking (at). We can raise money through selling part of,  or the whole catering business, or even in ground handling, we can bring a partner. We have to reduce the airline’s debt before we privatise because otherwise, prospective investors might want the government to take part of the debt, like what has happened to Air India. Also, it may not be easy to sell the whole airline, because we have the rights to the airport, and landing rights,  which are all government-to-government right now. India doesn't have a problem, because the company which brought Air India is an Indian company. So, I see it as if it is a local consortium, I think.

Any timeframe for either the complete sale or for implementation of your proposal?

It can be staggered as long as the government, the airline, and the subsidiaries are not hurting. The government, in terms of depending on it for funding, and if they can find a way of reducing the debt, so the money can go into petroleum and the government banks. We can find a way of selling 51 percent to a prospective investor, or 49 percent can be sold to a prospective investor plus the management.

At this point, how many flights and routes are being operated vis-a-vis before the unrest in the country?

(We are) operating fully. Right now a lot of foreign airlines have cut down their flights but SriLankan is operating at 100 percent. We are doing fairly well. Our turnover last month was $90 million.

Is the $ 90 million turnover on an operating or net profit basis?

Probably we have a revenue of almost breaking even. But we are spending more money because we have to fly to India (a number of SriLankan aircraft fly to India for refueling and then continue their onward journeys or come back to fuel due to fuel shortages in Sri Lanka). We have spent here about $7 million extra per month because of that situation.  But  CPC (Ceylon Petroleum Corporation) has informed us that from the 15th of this month,  aviation fuel will be available. The oil prices had also been very high.  Now I think they have come down. So that also probably will have a positive impact on the airline.

How do you see SriLankan,  given the crisis globally, exploiting the open skies agreement with India, which offers you flights to 18 tourist destinations in India?

That's very important as India is our biggest market.

What tourist destination are you looking at right now as you're maxed out as far as capacity is concerned?

In terms of capacity, we are full. We can't fly any more routes because we don't have enough aircraft.  If we have to expand, we need to get more aircraft.

In the next 18 months, seven to eight aircraft will be going back, which will cut your fleet to almost half….

No, it will be cut to about 1/3rd.

How are you going to manage it?  Will you replace those aircraft?

These are on the lease, or second-hand, so there's no investment.  These are not new aircraft.

But you will be adding to your financial burden.

You can't say it's a burden. This airline is operationally profitable.  You have to understand that we have a debt of $850 million,  but on the operational level, we are profitable.

Will the government allow you to do that when you're being disinvested?

I don't know. The airline is very important for our national economy.  So I hope that they will allow us. Otherwise,  we are an island, we do not have a land route.  We are dependent a lot on tourism. In the near future, I think that our season will be very good. Who is going to bring these passengers? I am sure the government will think from that perspective. The airline may have lost about $50 million per annum but its contribution to the national economy is huge.

Our tourism pre-COVID was $4.5 to $5 billion.  Then there are our migrant workers who are going out of the country and coming back. In  COVID,  only SriLankan was flying. When there is an emergency, only the national carrier is there to safeguard economic interests.