Bidders for UL have no airline experience of international standards- Minister
Texas Pacific Group (TPG), a US based investment group is a frontrunner among three contenders to partner the state-run SriLankan Airlines, informed sources said.
It has complied with ‘all’ the requirements that the special committee appointed by the Cabinet, along with National Savings Bank (NSB) team which is the lead manager to this process under the aegis of the Ministry of Public Enterprises, have stipulated, they said. One such mandatory clause was to show audited accounts which the TPG has submitted.
State Enterprises Minister Kabir Hashim who convened a media conference at his ministry on Friday morning hot on the heels of a similar briefing a day earlier by PeaceAirways, one of the three shortlisted for taking the national carrier over, said that a committee which he will chair to seek a partner for the cash strapped SriLankan Airlines if the shortlisted candidates are not found suitable will include two ministers – Dr. Sarath Amunugama and Malik Samarawickrema.
“The report by the NSB was submitted to Prime Minister Ranil Wickremesinghe, and if we can’t find a suitable partner, the PM has appointed this committee to find another,” he told the media.
If it’s decided to not go ahead with the current three contenders, of which the third is Super Group, a Maldives-based consortium, the ministerial committee will start another process to seek a partner within 2-weeks, he added.
TPG, Peace Air and Super Group were shortlisted out of eight that responded to the ministry’s expression of interest. Mr. Hashim added that none of them has airline experience upto international standards. “TPG has experience in international restructuring,” he added.
Uproar on bidding
On Thursday, an agitated PeaceAirways Chairman Gamini Weetasinghe, going public with his proposal to ensure that everyone was aware of the bid, told media that PeaceAirways will remove the debt burden of SriLankan from the government, will infuse US$ 5.5 billion and that he wants to retain this national asset for those in Sri Lanka.
He said that they are vying for a 70 per cent stake in SriLankan. He noted that $1.25 billion will be used to purchase this stake, 90 per cent of SriLankan subsidiary Mihin Lanka airline shares and 100 per cent of the SriLankan Catering shares, of which $1 billion is for the settlement of the airline group’s debts. The rest will be used for further restructure.
Mr. Wethasinghe, critical of the bidding process, said it was unclear of the progress being made on the evaluations of the bids. A tense Mr. Wethasinghe said that he had been asked, to provide a ‘swift code’ for fund transfers. “Only us and the Super Group were told this, but not TPG,” he said.
He said that the national carrier carries 5 million passengers annually and posts a $1 billion turnover yearly. “This airline is making money, but the aircraft leases cut into their profits,” he said adding that many want to get ‘rid’ of this airline.
He charged that this airline had entered into operational leases of aircraft instead of outright purchase and aircraft leasing companies are siphoning the profits out of SriLankan.
“Please inform the public of our bids because someone is trying to hide our bids and our documents. No one gave comprehensive bids like us.”
He added that the government was supposed to open up SriLankan Airlines for due diligence from PeaceAirways and its consulting partners Lufthansa Consulting and Privatair way back in October last year, but that this is yet to happen. He said that the ‘money is in Switzerland’ as PeaceAirways has partnered a Swiss company, Nano Aviation.
“The government can’t invest money in this airline. So we have come in to do so. We’re willing to put in $ 5.5 billion. No one in their right mind would say no, unless there’s a better offer, and with 37 years of experience, I can say that this is the best offer,” said Mr. Wethasinghe confidently.
Insisting that his airline has adequate experience, he said that PeaceAirways has been in existence since 1992 and that it has operated in partnership with airlines in Europe, Middle East and Australia since 1998. He had left to Switzerland in 2000 with his operation when he was unfairly sidelined and his licence was revoked by the then regime.
Now his license is being revalidated, by the Civil Aviation Authority. Mr. Wethasinghe added that PeaceAirways is also bidding to purchase 80 per cent in Mattala International Airport for $ 200 million. “We will use Mattala as a hub for airline operation, cargo and logistics as well as maintenance and engineering,” he said adding that foreigners will be clueless as to whether it’s Mattala or ‘Wattala’. “It’s a fantastic airport.”
Mr. Wethasinghe told the Business Times by telephone on Friday that Deutsche Bank has said that they are willing to write to the local authorities saying that $5.5 billion will be allocated for the purchase of this airline.
He said that he hasn’t submitted audited accounts as they had them audited last in 2000. “Then our licence was revoked. Audited accounts show only the past that doesn’t mean that anyone has funds.”