Rs 13.5bn bailout for SriLankan Airlines

COLOMBO (News 1st) - Reports have emerged that two state banks are preparing to extend financial assistance of Rs. 13.5 billion to bail out the cash-strapped SriLankan Airlines. According to the Daily Mirror, Public Enterprise Development Minister Lakshman Kiriella had submitted the Cabinet memorandum in this regard. The newspaper also reports that the two state banks are expected to issue the Letters of Comfort in this regard, soon. It goes on to note, Finance Minister Mangala Samaraweera, in his observation on the Cabinet paper, has stressed the need to restructure the national career or find a new investor. At present, SriLankan Airlines owes the Ceylon Petroleum Corporation over Rs. 13 Billion. At a meeting held recently, both sides had agreed the airline would pay a sum of Rs. 800 Million this week and the remainder will be paid off using a loan from a Private Bank. Joint Cabinet Spokesperson Minister (Dr.) Rajitha Senaratne was questioned if a decision has been reached to obtain a loan. The Minister ins his response noted that the Treasury Secretary had given a guarantee which allowed the national carrier to obtain the loan from state banks. Meanwhile, Chairman of the Nidahas Sevaka Sangamaya of SriLankan Airlines, Janaka Wijepathiratne charges that the Government, over the past 3 years, has failed to introduce a proper business plan for the airline. While noting that the national carrier cannot be operated like a retail store, the trade union leader emphasized that obtaining more loans would turn a bad situation worse. Wasantha Kumarasiri - Former CEO of Air Niugini Limited of Papua New Guinea, speaking to News1st highlighted the need for SriLankan airlines to be able to recover their direct operating costs. He also called for need to take strong decisions like cutting back on the staff. According to the convenor of the "Voice Against Corruption" Wasantha Samarasinghe, the Rajapaksa relatives drove the airline to bankruptcy and the Government of Ranil Wickremesinghe is pushing it over the edge with more loans. Samarasinghe notes that SriLankan airlines is attempting to obtain money from state banks in a backdrop where the Government signed an agreement with the ADB noting that these state banks do not have the capital and shares have to be sold. Are the state banks being pushed by the Government to bail out SriLankan airlines? Has the national carrier provided a viable business model to satisfy the state banks that they are capable of returning the money that is being given out as a loan? What needs to be kept in mind is that the state banks are doling out money from their coffers in order for SriLankan airlines to cover their debts to the Ceylon Petroleum Corporation. Time will tell if this is the right decision for the country.