Sri Lanka is divesting its flag bearer as it has invited bids for SriLankan Airlines , as the country looks to reduce losses incurred by government-owned enterprises under a $2.9 billion International Monetary Fund (IMF) programme.
The South Asian country secured a staff level IMF agreement on the first review of its bailout recently but it still needs approval from the IMF's Executive Board.
The economy is gradually recovering from a crisis last year caused by record low reserves, leading to sky-rocketing inflation and currency depreciation.
SriLankan Airlines racked up operational losses of $575 million since 2015 but posted an operational profit of $93 million this year, financial information disclosed as part of the bid documents showed.
SriLanka’s government is in the process of restructuring or removing debts or liabilities which are on the latest financial statements of the Company and progress will be notified, the notice said.
The deadline to submit bids to qualify investors is 1400 hours December 05 , Qualified investors will have to submit bids by February 2024, with the transaction expected to be completed by June 2024.
Founded in 1979, SLA currently operates with a fleet of 24 Airbus A320 and A330 aircraft and has a route network of 126 destinations in 61 countries
Pre-pandemic SLA carried around 5 million passengers and 100,000 tons of cargo annually, with 15,000 flights annually.
The network of international destinations served by SLA has expanded from 37 destinations in 2019 to 39 in 2023. It has extensive landing rights in many Indian cities.
Male, Chennai, London, and Singapore are the largest destinations served, contributing to a combined 25% of the airline’s seats
The Air Services Agreement between Sri Lanka and India is highly liberal, allowing SriLankan designated carriers unrestricted frequencies to the majority of Indian cities, including metros, along with fifth freedom traffic rights connecting SAARC countries.
Holder of IATA Operational Safety Audit (IOSA) certification, SLA is a predominantlyforeign exchange earning business, expected to generate USD 1.1 billion in revenue from airline operations in 2023/2024
Holder of IATA Safety Audit for Ground Operations (ISAGO) certification, SLA is the sole ground handling operator at Colombo airport, expected to generate USD 60m in revenue in 2023/24
SLA’s subsidiary “Srilankan Catering” is the exclusive provider of catering services in SriLanka, expecting to generate over USD 40m in revenue in 2023/24.
Since 2015, SriLankan Airlines has entered into a financial turbulence, from where it's unable to find a way out. Its losses amounting to around $575 million despite an operational profit of $93 million in the current year, has not been able to convince the SriLankan government to bail it out.
The government, unable to cope up with the airline’s sustained losses, has now decided to divest the carrier, a decision that is ease the burden on the public finances , and inject a breath of private sector funding into the struggling carrier.
Throughout the process, the International Finance Corporation (IFC), a member of the World Bank Group, is guiding the government through this intricate transaction.
The COVID-19 pandemic, along with the economic crisis of the country, has levelled a crushing blow on the SriLankan aviation industry. Its fleet of Airbus aircraft, once operating a network of 111 destinations in 56 countries, now grapples with plummeting tourism and declining revenue. The divestment, therefore, also emerges as a strategic response to the global crisis, an attempt to secure the airline’s future in an uncertain landscape.
The successful divestment of SriLankan Airlines would have implications far beyond the airline’s balance sheet. A revitalized national carrier can bolster tourism, enhance trade, and make Sri Lanka more competitive on the global stage.
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