SRILANKAN AIRLINES – IS IT A PARADISE? – By Dr. Tilak S. Ferando
For the last few years, the SriLankan airline has been making a loss continuously. It is the consensus of everyone that the airline is overstaffed, particularly top-heavy, with millions of rupees to the senior management staff as salaries. Therefore, the only option would be to privatise the airline. During President Chandrika Kumaratunga’s rulership, one of the international airline multinational conglomerates, with its separate travel company, showed an interest in taking over SriLankan airways. Virgin Conglomerate’s Chairman, Mr Richard Branson, had discussions with President Kumaratunga. He had to return to the UK disappointed, only having placed Sri Lankan ginger beer for virgin flights.
SriLankan Airlines has gone through a metamorphosis of names in 42 years. Formally, it was known as the flag carrier of Ceylon under ‘Air Ceylon’. In 1979 Air Lanka commenced its operations from Bandaranaike Airport. Air Lanka was formerly managed by Singapore Airlines. Singapore airline’s motto to the flying staff was: ‘Smile from the heart.’ Indeed, it encouraged more passengers to use Air Lanka to run profitably.
In 1986 Presidential Commission discovered that the ‘Air Lanka Board was going through many mismanagement techniques.’ It was highlighted in the media that the late President Dingiri Banda Wijetunge appointed a retired General as Chairman cum MD with an Air Vice Marshal and a UNP attorney as Executive Director. None of them had previous experience in running a business airline! In 1979 the airline to was placed in charge by Captain Rakkitha Wickramanayake, and the board of Directors consisted of Industry Officials and Managers. A former Singaporean President was quoted as saying: “How could an airline pilot run an airline?”. Rakkitha Wickramanayake was formerly attached to Singapore airlines.
During Chandrika Kumaratunga’s Presidency, the airline entered into a management contract.
with Emirates Airlines. Its name was changed to Sri Lankan Airlines, with an all-white fuselage covered by lines and the tail adorned with the new corporate logo. From 1979 onwards, a unique design consisted of red stripes on a white fuselage. The tail was solid red and sported the corporate logo, and was stylised as ” Flying Peacock”. It tried to imitate King Ravana of the ancient episode of the famous “Ramayana” mythology. The five ‘tail feathers’ represented the “Five Precepts of Buddhism, and the three ‘crown feathers’ represented the “Triple Gem” of Buddhism. The Red colour reflected the predominant colour in the Sri Lankan national flag.
However, in 2008, Emirates notified the Sri Lankan Government that their management contract would not be renewed, which expired on 31 March 2008. Their refusal to renew the management contract was said that ‘the Sri Lankan government sought greater control over the day-to-day management of the airline.’ It was finalised in 2010, thus ending any affiliations between the two airlines with each other. At the time Sri Lankan Government pulled out of the Emirates management contract, the accumulated profit of Sri Lankan was Rs. 9.288 billion in that financial year. When the government administration took over to run the airline for 14 years, it ran into a total loss of 900 billion rupees up to April 2022 as a result of the collapse of the currency. The bulk of these appears to be debts to state banks and the CPC, wholly owned by the Government of Sri Lanka.
President Mahinda Rajapaksa’s regime introduced a subsidiary airline called Mihin Lanka operated from Mattala airport in Hambantota. The airline absorbed the operations of sister carrier Mihin Lanka in October 2016 in a bid to create a single stronger national airline for Sri Lanka. Accordingly, SriLankan took over two of Mihin Lanka’s aircraft and absorbed its route network, adding ten new destinations to Sri Lankan’s route network. Ultimately Mihin Lanka, too, had to be disbanded due to its constant losses. SriLankan joined the One world’ alliance on 1 May 2014.
Covid-19 Pandemic
During the COVID-19 pandemic, SriLankan performed cargo and operating relief flights only. The airline lost 36.3 billion rupees up to August 2020, and the government approved a voluntary retirement package for 560 employees at 1.46 billion rupees.
With the present fuel crisis in 2022, Sri Lanka faced a massive fuel shortage. Consequently, SriLankan’s long-haul flights had to make stopovers at the airports in India- Trivandrum, Chennai and Kochi to refuel.
Sri Lanka currently has no bankruptcy protection act; the only option for a closedown would be a complete liquidation. If the government shuts down the airline completely, it will be compelled to raise significant concerns about writing off this debt to the state banks and the Ceylon Petroleum Corporation. This could place the two-state banks by foreign rating agencies and seriously jeopardise the prospects of Sri Lanka’s entire banking sector. The Government as the guarantor would also be called upon for immediate repayment of the international bond worth US$175 million.
The Board has once reported widespread corruption and confirmed the allegations of Nishantha Wickremasinghe’s affairs as Chairman. He is related to Mahinda Rajapaksa’s wife. However, they denied the allegations and accused the report of being biased and invalid, accusing the head of the Committee of Publicly supporting the then government and lacking technical knowledge about the aviation industry.
Fraud was imminent
In October 2015, the Presidential Commission of Inquiry investigated and inquired into Serious Acts of Fraud, Corruption and Abuse of Power. State Resources and Privileges (PRECIFAC) attempted to summon Wickremasinghe to inquire about various irregularities in the Airline; however, they could not locate him, and his wife claimed he had not come home for three years and that she was unaware of his whereabouts. Later Wickremesinghe notified the PRECIFAC that he was abroad and could not give a statement.
Catering
SriLankan Catering, incorporated in 1979, is a wholly-owned subsidiary of SriLankan Airlines; it provides flight catering services to all airlines serving the Bandaranaike International Airport. It is the only subsidiary of SriLankan airlines which provides a profit by providing 25,000 meals per day. Critics request that a catering service should be allowed as an independent unit. All the gains made by catering services are absorbed into the overall loss of the airline.
Sri Lanka currently has no bankruptcy protection act, and the only option would be for a closedown in a complete liquidation. If the Government is to shut down the airline, it will be compelled to write off this debt to the State banks and the Ceylon Petroleum Corporation. This could raise significant concerns about the two-state banks’ liquidity by foreign rating agencies. It could seriously jeopardise the prospects of Sri Lanka’s entire banking sector. The Government as the guarantor would also be called upon for immediate repayment of the international bond worth US$175 million.
