Professionalism at SriLankan, SLT

It’s most likely that by the time you read this column on Sunday, the fate of SriLankan Airlines and Sri Lanka Telecom (SLT), both partly-government owned institutions, would have been sealed in the most important events next week.

Come tomorrow (March 31), Emirates will exit from full management control of the national carrier while Japan’s NTT would have sold most of its stake in Sri Lanka’s biggest telecommunications operator.

However in the public eye, questions are still being asked as to the future of the airline and the future profitability of the telecom operator and along with that the privatisation model of offloading stakes in national companies and bringing in superior management to run these institutions in competition with global players. In both institutions, the CEO had full management control and didn’t need board approval in decision-making.

Earlier both were national companies holding a monopoly and now compete with other players, particularly in the telecom market where Dialog, whose majority stakeholder is Telekom Malaysia, is the leader in the mobile communications industry. With a major part of NTT shares soon to be acquired by Maxis, another Malaysian telecom giant, it would be interesting to see how the two top telcos in Malaysia compete against each on foreign soil.

There is also uncertainty as to whether NTT will sell its entire 35.2 percent stake or 25.3 percent as already reported.

There is also speculation that Maxis, whose wealthy Sri Lankan-origin owner Ananda Krishnan made a flying visit to Sri Lanka last weekend for negotiations, may want to retain the NTT CEO as the head of SLT operations due to their expertise so far in the Sri Lankan market. On the other hand, it doesn’t make sense for SLT to permit this when it should have management control and is already restructuring to become a global player -- unless of course the main shareholder, the Treasury, agrees to allow Maxis full management of the entity.

There have been rumblings of discontent at SLT in recent times over the new restructure, which the company’s head of legal and HR explains in an interview in another section of the newspaper, and procurements, etc. The sale of the NTT stake to Maxis was also held up until the AGM on Friday to reap the benefits of the approval of the dividend of Rs 1 per share which would put the former nicely placed with an additional Rs 625 million.

Transparency in the SriLankan Airlines transaction has been much better in terms of the exit of Emirates.

However there is confusion over the future direction of the airline. While there are at least three contenders (all Sri Lankans) for the post of CEO, the question of whether the airline would be guided by the board of directors – as the case was before Emirates took over management – or by the CEO in full control is being raised. The airline was turned into a profitable and efficiently management carrier under Emirates compared to the period when AirLanka was in operation but the Dubai-based airline also reaped a lot of benefits in many ways including access to destinations where it didn’t have landing rights.

The benefit to Emirates was far greater than what the Sri Lankan government got out of the alliance. While locals are capable managers and have skills in many highly technical and sophisticated marketing fields, the crunch comes when independent decisions have to be made. And this is where the problem lay even during the days of AirLanka and the recent drama over SriLankan CEO Peter Hill and the presidential entourage, which resulted in Hill being stripped of his work permit. In the competitive world, independent decision-making is a must even in state agencies that have to work as viable units.

Now will the authorities – with Dr P.B. Jayasundera named as the new chairman of the airline -- interfere in the independent decision-making at SriLankan under a state-controlled management structure or allow professionals – with many of them working at the airline – to run the show in the most efficient manner? The sale of stakes in SriLankan and SLT were the biggest privatisation exercises by the then Chandrika Kumaratunga government in the late 1990s.Thus the success of management at these two institutions and/or transfer of its privately-owned stakes is crucial to the success and future of privatisation in the country.