SriLankan on crash course to profitability in 3 years
The new board of directors at the struggling national carrier has assured that plans are underway to turnaround the organisation in three years.
Directors from left: Mano Tittawela, Ranjit Fernando and Air Force Commander Air Marshal Kapila Jayampathi at the briefing. Pic by Amila Gamage.
SriLankan Airlines new Chairman Ranjit Fernando said that according to the Consultant Nyras they were assured of bringing profits to the carrier. He made this announcement at the media briefing held at the airline’s office in Colombo on Thursday. The new Chairman is a former banker, a former Secretary to the Ministry of Industries and former Chairman of the Urban Development Authority.
The carrier is currently faced with losses amounting to US $100 million for the FY ending March 31, 2018 he said noting that they were faced with a “crisis situation.”
He added that the debts were running to $750 million and pointed out that the carrier had purchased aircraft not suited for the routes it was plying on. Budgeted loss estimated for next year is $160 million.
Restructuring Plans
Nyras have given the new board three options: Do nothing and close down the airline in a few years; adopt procedures to take up the matter in court where an officer would be appointed to look at what to do with the airline; or restructure the carrier.
The airline which believes that they are “already late in implementing the restructuring plans” said that they would be getting things off the ground within two months. At present the board is studying the restructuring proposal.
“We are keen to make changes,” he said adding that they would also look at about 2000 staff cuts as this was the excess that the airline was carrying from the total of 7000 employees.
These staff reductions would be carried out according to the contracts the employees have with the company, he noted.
Nyras has recommended staff cuts as this was imperative to cutting down on excessive costs.
“We will take the airline from being a burden to the government to a profitable venture,” he said adding that they hope to find an improved image of the carrier in the media in this respect as well.
Management changes were also in line, Mr. Fernando said as part of the restructuring plans that is currently being studied.
Identifying the new board, as part of the reinventing of the airline, Mr. Fernando said that they hope to “resurrect the airline and bring it to a profitable business”.
With little knowledge about airline business, Mr. Fernando noted they were a big management team and were faced with a big challenge and insisted they would not obtain any salary or remuneration until the carrier becomes a profitable venture.
The new Chairman also said that they would be looking at the possibility of joining hands with an international partner but that in order to do so they must ensure the carrier becomes profitable as otherwise it would not be picked up.
Previous bids were noted to have not concluded successfully as a result of which the new board would be taking a fresh look at the restructuring plans.
Accounting for the losses
Commenting on the losses incurred by the carrier, it was blamed on the huge interest charged on borrowings made on the carrier; using unsuitable wide bodied aircraft without narrow bodied aircraft; commitment on lease agreements that are over the market prices; and over payments made.
Currently four wide bodied A350 aircraft delivered in 2015 were considered not affordable and in this regard, the carrier is currently having direct negotiations with Airbus and re-negotiating.
SriLankan Airlines Director and also a senior advisor to the Finance Ministry, Mano Tittawella pointed out that while the new team was supportive of restructuring the airline they would ensure that the main shareholder, the Treasury should be able to obtain a long term return on the investment made.
In this respect, the time for doles and hand-outs were over, he said adding that within a period of 3-4 years the airline would gain profitability.
The airline said that they would not be implementing the Weliamuna report and that it would be left to the Presidential Commission of Inquiry that was established to look into these matters.
Director Susantha Katugampola, a Sri Lankan-origin immigration lawyer based in Melbourne and Air Force Commander Air Marshal Kapila Jayampathi are on the board.
Board member Dr. Roshan Perera, the only female on the board and from the Central Bank, has been involved with matters pertaining to the SriLankan Airlines’ restructuring plans. Head of the Public Private Partnership unit Thilan Wijesinghe who is currently also involved in the restructuring process and heads that committee as well, was also present at the briefing.