Sri Lankan Government has scrapped plans to sell off its indebted national airline despite shortlisting three potential buyers, the government’s privatisation agency said Friday.
The Goverment had floated bids in the month of September last year to sell SriLankan Airlines, which was a key IMF requirement to grant a bailout loan to the country.
Six firms had initially expressed interest in taking a stake in the airline, which owed more than $2.0 billion at the end of the 2022/2023 financial year.
The government announced in April a shortlist of potential investors, including Malaysia’s AirAsia Consulting, that had submitted a request for qualification from potential investors for the acquisition of shares in SriLankan Airlines Limited.
The document also named Dharshaan Elite Investment Holding (Pvt) Ltd, FITS Aviation (Private) Limited, Sherisha Technologies Private Limited, Treasure Republic Guardians Limited and local conglomerate Hayleys PLC as the other bidders.
However, on Friday, the State Owned Enterprises Restructuring Unit said it had called off the sale.
“The cabinet of ministers at a meeting on July 9 decided to terminate the current bidding process with regard to the divestiture of SriLankan Airlines,” it said in a brief statement without giving any reasons for the decision.
The government “will now follow an alternate strategy, to be decided on shortly, to divest the airline based on a framework approved by the Cabinet of Ministers,” the statement added.
From those six parties, who responded to the initial call for expressions of interest, none of them were pre-qualified.
The International Monetary Fund had singled out SriLankan for “restructuring” when granting the government a $2.9 billion bailout last year.
The bailout came after the country defaulted on its $46 billion external debt in April 2022 as it faced an unprecedented shortage of foreign exchange needed for essential imports.
With nearly 6,000 staff, SriLankan Airlines is the biggest and most expensive of the cash-haemorrhaging companies that are draining the budget and compounding Sri Lanka’s economic woes.
However, analysts had warned that finding a company willing to pour money into the carrier would be immensely challenging given its history of interference, mismanagement and turbulent partnerships.
Sri Lanka “would like to see a Sri Lankan entrepreneur or consortium” buying into the airline but there was no firm interest, Aviation Minister Nimal Siripala de Silva said on July 03.
Things were never this bad for the carrier — SriLankan Airlines is the award-winning national carrier of the Island country Sri Lanka. Launched in 1979, and formerly known as Air Ceylon, SriLankan once became a major player in South Asian aviation establishing a reputation for service, comfort, safety, reliability, and punctuality. SriLankan had joined the oneworld airline alliance in 2014 as the first carrier from the Indian Sub-continent.
However, the authorities tried to sell a 49 percent stake in SriLankan in 2017 when tourism was booming, but private equity firm TPG eventually withdrew its bid after deciding it was not a viable operation.
However, time is tough for the airline business now, there is not an airline in the world over that has not faced difficulties in the wake of Covid-19. Fuel costs have also been a challenge for everyone.
Srilankan Airlines case is unique , as the carrier was emerging from these challenges with a strong return to operations and profit, Sri Lanka was also on the brink of an economic crisis , multiple factors affected the recovery process.
Sri Lanka was also in talks with Washington-based International Finance Corporation to help re-structure SriLankan Airlines and two other firms listed for divestiture.
In another development recently, Fitch Ratings announced it has chosen to withdraw the rating of SriLankan Airlines for commercial reasons and therefore will no longer provide ratings or analytical coverage for the national carrier.
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