Rip-off at SriLankan?

A sudden decision of the Emirates controlled SriLankan management to sell the last three remaining company owned aircraft, the long range Airbus A-340s, to a firm registered in Mauritius and lease the same planes has raised a hornet’s nest within the carrier, with loud accusations of foul.

Those opposed to this decision coming at a time when some tough negotiations are taking place between the Government and the Emirates on renewing the ten year management contract which is due to expire in March next year, charge that no independent valuation had been done on the aircraft prior to the sale, which is expected to be concluded in the next few days
They alleged it was a case of the buyer itself doing the valuation, which amount is below the insured value of the aircraft. The three aircraft were purchased from the Airbus Industrie in Toulouse, France in the mid 1990s at a cost of more than US$100 million each as part of a controversial five aircraft deal entered into by the Premadasa Government in 1993. The other two aircraft - A-320s - were disposed of by the Emirates management earlier along with four Lockheed Tri-Star planes with an ample stock of spares.

Ports and Aviation Ministry Secretary D.T.P. Collure contacted in this regard claimed he was not aware of such a decision by the airline. “I don’t think a decision has been made, but it has to obtain the approval of the Board of Directors, where the Government has a majority with four State appointed directors”.

But critics accused some of these directors of having clear cut conflicts of interest with Chairman Harry Jayawardena, himself getting several hundred million rupees worth of insurance business from the airline for his company, the Sri Lanka Insurance Corporation. Another director too has got several million rupees worth of business for his family owned businesses.

A spokesman for the SriLankan management while maintaining that initial Board approval had been obtained to sell the aircraft, asked if those critics can come forward with a buyer willing to bid a higher price for the aircraft and at the same time lease them back to the airline for a lesser price.

He said while other State owned business undertakings were a drain on the Treasury, the national carrier had not received even a cent from the State since privatization. On the contrary SriLankan had managed to pay four dividends since Emirates took over the management of the national carrier nearly ten years ago, amidst several adverse disasters like the July 2001 terrorist attack on the BIA and the December 2004 tsunami.

Critics rejected arguments of the SriLankan management stating that it paid dividends by selling six of the nine aircraft that the carrier possessed at the time of privatization. And every time a disaster struck it was to the advantage of the national carrier as it virtually ensured it a monopoly status with most other international carriers withdrawing from the country.

In today’s context, the SriLankan spokesman said what mattered was not to hold on to ageing aircraft, but to implement measures to get the carrier’s cash flow improved and to keep its 6000 odd employees employed.

Asked why the Emirates was vehemently opposed to the Government’s wish to remove the lucrative ground handling and catering arms out of any new management contract, he said it was a simple case where when the airline was privatized and Emirates purchased a 40 per cent stake in these two ventures were part of that deal and if the Government wants them back, it would have to pay for them.

Several attempts made to contact Treasury Secretary P.B. Jayasundera, who also played a vital role in the privatization of the airline proved futile. Critics charged that politicians and officials who were tasked to watch the interests of the country while divesting State ventures had again blundered or had sold our interests away.