SriLankan Airlines: The big lie in the sky
A government-appointed committee into the crisis-hit SriLankan Airlines has called for criminal prosecutions against its former chairman Nishantha Wickramasinghe, CEO Kapila Chandrasena and some other heads of departments for blatant abuse of power along with a flawed US$ 2.3 billion re-fleeting exercise, frauds in the award of tenders for duty free deals and the appointment of General Sales Agents.
The Board of Inquiry (BoI) headed by lawyer J.C. Weliamuna, found that while Nishantha Wickramasinghe, brother-in-law of former President Mahinda Rajapaksa and Kapila Chandrasena, abused their authority, they also disliked each other. “But for inexplicable reasons, they appeared to have protected each other.”
The report – a copy of which was obtained by the Sunday Times – submitted to the Government this week disclosed that, “… both had worked closely to support each other in relation to their own interests such as emoluments, facilities, etc not to mention the re-fleeting exercise”.
It also refers to ex Chairman Wickramasinghe’s “penchant for young air hostesses” costing the debt-ridden airline even more problems and to ex CEO Chandrasena though unsuitable for the job paid a minimum monthly salary of Rs. 1.5 million on top of other perks from other appointments.
The report finds Mr. Wickramasinghe and Mr. Chandrasena to have falsified documents to lease a luxury sports utility vehicle for the use of the ex Chairman. This was in addition to a luxury Mercedes Benz and Prado super luxury vehicle that he was given.On the other hand, a London station manager who tried to stop the illegal practice of sending motor spare parts for the use of the former President’s son, Yoshitha had been suddenly transferred out on the direction of the former President.
Two staff members involved in human smuggling got off lightly raising issue if the few employees of the airline were involved in a human smuggling ring, while an inquiry into two senior pilots involved in flying mishaps was hushed up.
The BoI, recommending that there is enough grounds for criminal action, presented a report that is a veritable ‘can of worms” on how the national carrier was run; the ‘other’ activities between Mr. Wickramasinghe and some favoured female crew members; the suspicious purchase of an aircraft at Mihin Lanka while Mr. Chandrasena was CEO which should be investigated by both anti-bribery authorities and the police; and the collapse of the administration which contributed to the abuse of power.
The most damning indictment on the former management was the colossal capital commitment of USD2.3 billion (Rs.290 billion) on the re-fleeting and financing of new aircraft during 2010-2013 “when the airline had substantial accumulated losses and there appeared to be no real hope of breaking even and moving to profitability in the very short term”.
The airline’s bottom-line (financial situation) at the time were continuing losses of Rs. 32.4 billion (2014), Rs. 26.1 billion (2013) and Rs. 19.8 billion (2012) in addition to other several cash flow management challenges.
The BoI recommended a police investigation into the allegedly fraudulent issue of Rs.75,000 per month from April 2011 to November 2014 to a Madampe fuel station purportedly as reimbursement of fuel bills for the former Minister of Aviation.
One of the findings is that an air hostess was released from the airline to work at the Presidential Secretariat and she was engaged in MP Namal Rajapaksa’s political work. She continued to be paid by the airline and was even paid the cabin crew allowance. It was found that she has been over-paid Rs. 4.2 million.
The report recommends that the airline recover the overpaid amounts from staff members who have been identified in the report and direct prosecutions of those who authorized misappropriation of public finance.
Abuse of power was rampant, from the chairman, CEO, head of human resources to the newly-appointed head of group security who warned a more senior colleague that “I was appointed by Gota who wanted me to chase you out. Don’t try to be too smart. Lie low … I came here to clean (the) shit garbage.”
The BoI comprising Mr. Weliamuna, U.H. Pallihakara, B.A.W. Abeywardana and M.K. Bandara was appointed on February 16 to examine abuse of power by the board of directors and senior management and other irregularities. Eighty (80) people including Mr. Wickramasinghe, Mr. Chandrasena, Pradeepa Kekulawala (Head of Human Resources), Yasantha Dissanayake (Head of Finance), Capt. Druvi Perera (Chief Operations Officer) and Major Gen (Rtd.) Piyadi Chandrawansa (Head of Group Security) made statements. The committee said there were others who were interviewed but who requested anonymity fearing they could victimized later.
Here are a few extracts of the 136-page report:
On appointment of chairman:
- Nishantha Wickramasinghe was appointed chairman in May 2010 on full time basis though there was no apparent justification for a full time position. It was also revealed that he had taken over some of the duties of the CEO.
- In addition to a monthly allowance of Rs. 500,000, he was also given an unspecified housing allowance and the use of three houses, leased by the airline, at Jaela, Andiambalama and Seeduwa on the basis that he visits the office at night. However the BoI was told that Mr. Wickramasinghe didn’t live in these houses but used them for “other purposes”.
-The BoI found that there was blatant abuse of power by the chairman and there was no evidence to show that the CEO together with higher management took action to prevent such abuse. The corporate culture (prevailing) was to cover up such abuses.
- For example, on January 22, 2014, the direct UL flight 319 from Kuala Lumpur to Colombo was diverted to Singapore to pick up the chairman, his wife and Minister Sarath Amunugama causing severe financial loss.
-The former chairman had ‘inappropriate interest’ in certain members of the cabin crew and unusually participated in the interviews of (new recruitments) of cabin crew. He appointed cabin crew member Ms. Chaturika J. Muhandiram as SLA (SriLankan Airlines) Brand Ambassador when no such appointment or recognition was officially known to the SLA. He also tried to justify her accompanying him on official work abroad on the basis of competence, being related to him and knowing her from childhood.
- They had travelled together on business class tickets to Vietnam in 2014 for the APOT Asia forum while Ms. Muhandiram was also allowed free travel to several other countries. The couple has travelled with tickets purchased from other airlines as well. The BoI conclusively held that the former chairman’s association with Ms. Muhandiram exposed the airline to abuse of power, causing reputational risks as well as financial risks.
On former CEO Kapila Chandrasena:
- Mr. Wickramasinghe had said he was opposed to Mr. Chandrasena’s appointment made in May 2011 on the grounds that he had a ‘bad record’ and lacked airline experience. He had informed his brother in law (President Mahinda Rajapaksa) not to make the appointment but that request was ignored. The BOI said Mr. Chandrasena’s appointment could “most certainly have been part of a much bigger scheme”.
- Mr. Chandrasena’s appointment preceded an important episode at Mihin Lanka where he had then served as CEO. There was a suspicious purchase of an MA 60 aircraft and thereafter transferring those aircraft to the Sri Lanka Air force. There was prima facie evidence to show that this purchase failed to meet expected bona fide framework of transparency, competitive sourcing and accepted procurement standards. The BoI has already observed in its interim report that Mr. Chandrasena was not truthful with most of his evidence on the MA60 transaction which contradicted other documentary evidence and recommended that the police should investigate this transaction as a matter of priority and urgency.
- It was revealed that he was getting remuneration from both Mihin Lanka and SLA in 2013-2014; was acting CEO Mobitel from June 2013-June 2014 and was a Consultant Mobitel from June 2014 to January 2015. The BoI faulted Mr. Chandrasena for failing to disclose these interests while serving as SLA CEO.
- Mr. Chandrasena had also attempted to conceal certain relevant information pertaining to the former chairman’s salary, allowances, etc.
Appointment of Manoj Gunawardana as Director/Promotions Europe:
- BoI concludes that the former chairman and the former board possibly had reasons, not justified, on record to move Manoj Gunawardana, former CEO out of office with a sweetener in the form of a new position with attractive benefits operating out of London.
On procurement contracts:
- The BoI said there was unusual involvement by the former chairman in the appointment of GSAs bypassing the procedures as laid out in the GSA manual. The GSA in Hong Kong was solely decided by Mr. Wickramasinghe.
- The BoI observed that Udayanga Weeratunga, Sri Lanka’s Ambassador in Russia, had control over the management and administration of the SLA operation in Russia and the GSA appointed in Russia. Many employees told the BoI that Mr. Weeratunga wielded significant influence over the senior management and SLA directors due to being the first cousin of President Rajapaksa. The report also names Dilan Ariyawansa as being manipulations in the appointment of General sales Agents and recommends criminal investigations into their conduct.
Case of a crew member working at the Presidential Secretariat:
-Senanaya Samaranayaka, a senior cabin crew member, was appointed in June 2010 as Special Projects Coordinator to the Presidential Secretariat. She was released from SLA and continued to be paid by SLA while getting a special remuneration in the new assignment. The report said Ms. Samaranayaka was not in fact released for duty at the Presidential Secretariat but released for political work for Namal Rajapaksa, MP, with the full knowledge of President’s Secretary Lalith Weeratunga and the Chairman Wickramasinghe.
On sponsorships and advertisements:
- A sum of Rs. 74.1 million was spent by the SLA on sponsoring Carlton Rugby 7s between 2009 and 2014 which included the issue of 600 free air tickets. SLA also spent Rs. 12.3 million on the Colombo night races in 2012-2013 which included the provision of 119 free air tickets.
On operation of Air Taxis:
- The BoI faulted senior management with the failed operation of the airline’s Air Taxi service and said they should be held responsible for the failure and massive loss ($2.6 million or Rs. 338 million per annum). It said there was no transparency in the entire operation including the acquisition of aircrafts.
Re-fleeting of wide body aircrafts:
- In this move, the BoI said it failed to understand why there was a decision to re-fleet in a loss making context and no evidence of short term profitability and why it involved new aircraft when leasing would have been a more financially viable option.
- The BoI also asked why the Government through the Treasury or otherwise formally allow such a large purchase to be made when the airline was making huge losses (currently Rs. 105 billion of accumulated losses and Rs. 65 billion of negative net losses).
-The BoI said the SLA’s re-fleeting approach was irrational. The SLA’s approach was an aggressive one-on-one re-fleeting strategy instead of a more staggered approach. There was a business plan presented in 2010 by the then CEO Manoj Gunawardana which provided for a staggered re-fleeting approach. However former CEO Gunawardana’s untimely exit changed this approach with the induction of Chandrasena as CEO. It appears that Gunawardana’s exit was orchestrated in order to ensure the Government’s wishes were directly upheld, regardless of its effect on SriLankan Airlines.
The report meanwhile praises two senior pilots, Patrick Fernando and Ranga Amadoru who had resigned in protest of attempts to lower the pass marks of recruit pilots.
“Their resignations effectively prevented the selection of unsuitable candidates in the 2013 Cadet Pilot intake”, the report adds.