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Mihin Lanka seeks to go back on Boeing lease deal
Mihin Lanka is negotiating with a US aircraft leasing company to cancel orders for two Boeing 737-800 aircraft for which contracts have already been signed, authoritative aviation sources said.
The loss-making budget carrier is trying to modify its agreement with the California-based Air Lease Corporation (ALC) so that it can lease two Airbus planes instead. But ALC has not consented to this complex demand. “Talks are continuing,” an official source said.
It was only in May that ALC announced long term lease agreements with Mihin for two new Boeing 737-800 aircraft, to be delivered in 2015. ALC’s Senior Vice President Kishore Korde said the planes, which have “winglets” to reduce drag, will modernise the Mihin Lanka fleet. “We are pleased to expand our business relationship with Mihin Lanka and contribute to their fleet renewal strategy,” he is quoted by ALC as saying.
But Mihin, which is bleeding money, wants to reverse the deal to avoid the steep introduction costs it would incur in order to integrate Boeing into its fleet. “Mihin would have to spend a lot of money to get Boeing into their existing Airbus fleet,” a senior industry source said. “There are significant differences between Airbus and Boeing aircrafts so the pilots would need retraining. New licences would be required. The spare parts, manuals and maintenance requirements also differ. These are heavy investments for a struggling airline to make.”
ALC buys new commercial jet transport directly from manufacturers, such as Boeing and Airbus, and leases them to airlines. A request for a change in a signed agreement would, therefore, have implications for its dealings with manufacturers. For instance, ALC might already have placed the order with Boeing for the two aircraft.
The international jetliner market is dominated by the European Airbus and the American Boeing companies which are in intense competition with each other. Sri Lanka currently has no Boeings in the fleets of its budget or national carriers but there has been intense lobbying for a deal to go through. Ministerial sources said the US Embassy in Sri Lanka has played a key role in promoting Boeing.
In 2013, Civil Aviation Minister Priyankara Jayaratne was widely quoted as saying President Mahinda Rajapaksa had wanted Mihin Lanka to be re-fleeted with Boeing. Internal instructions were even issued to draw up a training programme for pilots and other staff.
Since then, however, there have been management changes at the budget carrier. Amidst stinging criticism about spiralling losses, Mihin is exploring ways and means to make the airline commercially viable.
The fourth interim report of the Committee on Public Enterprises (COPE) released in August listed Mihin Lanka as one of the government’s main loss-making companies. Its losses amounted to Rs. 3.2 billion in 2013. The Government announced the injection of a further US$ 50 million (Rs. 6,510,247,128) into Mihin in 2014.
It was long speculated that SriLankan Airlines would acquire Boeing aircraft but that plan has been shelved. The national carrier has already ordered six A330-300s and four A350-900s from Airbus on operating leases. One of the A330 aircraft will be delivered at the end of September while another will arrive in December.