Airlanka Airways

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Complete privatisation or liquidation?

In line with practice since April 2008, the SriLankan Airlines domestic air company obtained its normal currency transfer as part of a $200 million credit facility from Credit Suisse agreed by the governments, $150 million long-term and $50 million short-term. In 1989-93 the company worked without treasury hand-outs, when it had most of the ageing population and the fees for three lease planes were low, and in 1998-2008, when Emirates ran the company.

Proceeds from the divestment of property, plant and equipment include the proceeds of R1 5.4 billion from the divestment and leaseback of three Airbus A340-300 airliners in 2007/08. "Without the sales of three planes, the company's net losses for the year would have been 1 billion crowns.

But the most crucial and basic topic that needs to be addressed is: "Does Sri Lanka need an airliner? It must be a rationale commercial choice and not an emotion choice rooted in the ancient concept of the country / country flagship carriers. Even more important is that each individual bears a public liability of more than 8,000 rupees on account of the nation's air carriers and it continues to grow.

With the exception of the USA, which mainly served non-commercial customers with an Air America 1950-76 financed by the CIA, most other countries in the West possessed and ran their own domestic airways. BOAC, Air France, KLM Royal Dutch Airlines, Lufthansa, Sabena, Swiss Air and Iberia were among the best-known companies. UTA French airlines, Pan American and TWA were private companies with worldwide outreach.

Ceylon, along with many nation states that gained their postwar autonomy, "aped" the west by starting their own nationals. This was a question of the nationality proud of the newly industrializing states. They were small airline companies. The management of airline companies was not complicated. The balloon cost and the resulting loss flooded the airline companies. By privatising domestic airline companies and watering down state property by taking on the roles of minorities, recent years have seen a number of westernised administrations rise to the challenges.

Professionals and skilled non-governmental managers took the place of heads of state. Relieved of the burdens of loss-making state-owned carriers, West German administrations have de-regulated the sector and promoted privately held carriers. Srilanka, its neighbours Bangladesh, India, Nepal and Pakistan as well as several Africans persistently adhered to the idea of the "National / Flagship Carrier". Unexpected domestic Pride kept regimes from recognising the adverse effects of declining air fares, increasing costs for fuels, airplanes and labour, the resulting damage to their businesses and the resulting damage to their bottom line.

Nearly all of these carriers were political rather than commercial. In addition to SriLankan Airways, Biman Bangladesh, Air India, Nepal Airways, PIA, Kenya Airways and South African Airways are today all loss-making worries and a heavy liability for their ministries of finance. Nigeria Airways discontinued operation in 2003. In the early 90s, our Heads of State and Government neglected to design and implement a bipartisan political air transport regime to help our countries cope with the challenge of de-regulation.

Instead, Sri Lanka pursued the death policy of a "national transport company" and insured the transport company's loss, which it could not finance. At the same time, transport authorisations were generously allocated, regardless of their effect on the domestic carriers. Akbar Al Baker, CEO of Qatar Airways, and Tim Clark, Managing Director of Emirates, paid a visit to the company and saw the Prime Minister, but nothing was achieved.

Acenture PLC, a Dublin-based multinational executive search and business development advisory and service provider, has been commissioned to provide advice on how best to move away from the Airbus aerospace business. Of the eight Airbus purchases, four are still on Airbus' order book. Nyras, an autonomous multi-national aerospace advisory located in London, has been commissioned to prepare a turnaround structure for the carrier.

Now is the turn for the authorities to take inventory of the current state of affairs and seriously consider the reason why, despite the effort of the last three years, they have not attracted a single overseas investor/partner. Einstein doesn't have to declare it enough to clear the deck alone with declarations of state debt cancellation, as Prime Minister Wickramasinghe said on April 26, 2016.

Following the devastation of the Rajapaksa administrative system and its loyaltyists, hope was high after 9 January 2015, when the new regime turned the airlines around. An investigative committee led by a President's Counsel conducted a cursory and restricted inquiry into misconduct during the term of the former Board and CEO.

After the submission of the final draft the new board and the administration have nothing to do with the results. Premier Bush pledged Singapore Airlines-style leadership and an organisation similar to Temasek, the Singapore Airlines holdings corporation that manages State Owned Enterprises (SoE) in Sri Lanka, which turned out to be a wet bang.

Soon thereafter, as in the past, intervention by the administration normalized. Governments have shown a preference for being implicated in day-to-day business affairs and for periodically overriding board decision making. Our present Management Board was nominated in February 2015 and in October 2015 became the newEO. One of the strange developments was that a board member who was nominated deputy chief executive officer was instructed to draw up an economic stimulus package instead of speeding up the process of recruiting the chief executive officer and COO and instructing them to develop such a package.

At the Extraordinary General Meeting of Shareholders on 16 June 2015, the Chairman said that the governments had yet to approve the proposed economic stimulus package. Upon request after seven month during the Annual General Meeting on 19 January 2016, the Chairman refused to disclose further information as only 80% of the plans had been authorised but the other 20% were still outstanding.

Declaring that the 80% authorised would be put into effect, he refused to react if the airline withdrew from its loss-making European and London services. What is the incremental implementation of an economic recovery plan, even without the authorised routing, which is crucial for deciding the number of aeroplanes needed in the fleets?

Finally, the authorities authorised the suspension of Paris, Frankfurt and Rome services, but managed to keep London services. Two Airbus A330-300s have to be serviced by the Airbus A330 to serve the London routes every day. Even more important is that it is an indicator; after three years in place, no basic question has been decided as to whether the air company should also be a full or low services or low costs airliner.

There are doubts as to whether an investor would assume the burdens of an air carrier with a 292-employee staff-to-plane relationship. Instable governments with several upcoming polls will not make sensible commercial choices necessary at this crucial point. Led and guided by the former inefficient chairman, the carrier signed several collective agreements (CBAs) with several trade union organisations.

The GoSL will face huge cuts that will occur if and when an investment is found and the company's business operations are transferred. The Minister of State for Enterprise Development on Thursday published his announcement of his intention to nominate a new chairman and board of directors, according to press coverage.