Crisis-hit Sri Lanka to privatize national carrier as it runs out of cash
Sri Lanka said on Monday it would privatize the country’s loss-making national airline as the cash-strapped government “could no longer afford to inject money” into the airline’s management.
The government plans to sell a 49% stake in each of SriLankan Airlines’ catering and ground handling units in a bid to restructure the state carrier, while 51% will be kept under state control, the government said. Aviation Minister Nimal Siripala de Silva. told reporters here.
This restructuring is essential because the government can no longer afford to pump money into the management of the airline, he said.
Each year, the government has provided the airline between $80 billion and $200 billion to run its operations, de Silva said.
The minister said proceeds from the sale of the catering business could be used to pay off an $80 million debt secured by mortgaging his shares, along with other loans.
The airline’s debt currently stands at $1.226 billion (LKR 401 billion), he said.
The airline, established in 1979 as Air Lanka, was renamed Srilankan Airlines under the management control of Emirates in 1998. In 2007, the government regained control of it from the Emirates.
Srilankan Airlines is among more than 190 state-owned companies recording huge losses.
Without retaining a 51% stake in the airline, Sri Lanka could lose ownership of the companies for sale, the Economy Next news site quoted Minister de Silva as saying.
But if the investors are Sri Lankan nationals, we can opt for more. There are a lot of wealthy people in Sri Lanka, they can band together in unions or with airlines and come up with a deal, he said.
Sri Lankan President Ranil Wickremesinghe has called for much-needed reforms for the loss-making national carrier.
According to Colombo-based think tank Advocata, SriLankanAirlines has on numerous occasions required Treasury-backed loans to stay afloat and amassed over LKR 53.6 billion in collateral as of August 2021, according to the report.
Sri Lanka, a country of 22 million people, is in the grip of an unprecedented economic crisis, the worst in seven decades. The crisis that has left millions struggling to buy food, medicine, fuel and other basic necessities.
The island nation is currently scrambling to strike a staff-level deal with the International Monetary Fund (IMF) for a bailout package, which could be the antidote to the country’s current economic woes.
The country, facing an acute currency crisis that led to a foreign debt default, announced in April that it was suspending repayment of nearly $7 billion in foreign debt due for this year out of about 25 billions of dollars due until 2026.
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