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Thursday December 1st, 2022

Sri Lanka ex-PM who failed to privatize SriLankan Airlines brings up sale idea in opposition

ECONOMYNEXT – Sri Lanka’s ex-Prime Minister Ranil Wickremesinghe who failed to privatize state-run Sri Lankan Airlines during almost five years in office has quoted a parliamentary oversight official as saying the airline should be sold.

SriLankan Airlines drew fire from the opposition when it called for proposals to lease 20 aircraft at a time when the country is facing a forex crisis due to money printing by economists who favour an unstable soft-pegged exchange rate regime which collapses suddenly.

“On the other day Chairman, Committee on Public Enterprise Charitha Herath said, all finances are being controlled,” ex-PM Wickremesinghe said in parliament.

“If you have control, how can the Air Lines lease 21 aircraft? He said this organization is making losses and needs to be sold.”

However, Wickremesinghe who headed an administration that critics say was suffering from policy fright, failed to privatize the airline during his term of office from 2015 to 2019, despite being a structural benchmark in an International Monetary Fund program.

During Wickremesinghe’s time, the economists who ran the central bank printed money and created two forex crises, driving the rupee down from 131 to 182 to the US dollar.

The central government borrowed sovereign bonds heavily and the Ceylon Petroleum Corporation which had no dollar revenues was also made to borrow from state banks like SriLankan.

Wickremesinghe also set up the National Medical Regulatory Authority which created shortages with price controls and was also charged by critics of helping create monopolies by restricting competition.

State Minister of Aviation and Export Zones Development, D.V.Chanka, however, said the proposal is not to lease aircraft immediately as it takes time and it had to replace 8 aircraft on which leases were expiring in the next three years.

The airline has said it made a profit in the quarter.

“Sri Lankan Airlines do not use government money to sustain themselves. When the new government came into power there were 27 aircraft in the airline’s fleet,” Chanka said.

“We have returned 3 aircraft out of that within this one and a half year due to the end of the lease period and we have reduced 25 million US dollars, approximately 8,250 million rupees after discussion with financial institutions who provided us the lease,”

He said, within the next three years the airline has to return 12 aircraft after the lease period ends and one of them is due to end by the end of this year.

“Out of 12 Wide-body aircraft we have to return 8 and also 4 narrow-body aircraft,” Chanaka said.

“We are not talking about getting them at this moment. According to the procurement processes it takes about 1.5 years and we are not using government money for these leases.”

The airline has been given tax breaks and also gets credit from the Ceylon Petroleum Corporation.

“For the first time we are paying Ceylon Petroleum corporation beforehand when purchasing fuel for the aircraft and for the last 8 months we are not sustaining with the government money,” Chanka said.

The airline has asked for proposals to lease-up 21 aircraft aiming to increase its fleet from the current 24 to 35 aircraft by 2025 while replacing equipment on which leases were expiring.

SriLankan said on April 18 said it had made a profit of 1.7 million US dollars in the March 2022 quarter, which was the first quarterly profit reported since 2006.

The airline said during 2021-22 financial year it had cut staff costs and overheads; renegotiated supplier contracts; increased cargo revenue and grew traffic to meet pent up demand.

Sri Lankan said passenger revenues had reached 75 percent of what they had in the fourth quarter of 2019-2020 after which the country closed airports due to the Coronavirus pandemic. (Colombo/May01/2022)

Comments (3)

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  1. Gajalakshmi Paramasivam says:

    Sri Lankan Airlines has the capability of operating successfully on commercial basis. It should not be sold but ought to be supported

  2. Keerthi Dissanayake says:

    Mr. Chairman please publish the annual report for the financial year 2021/22 to find out whether the airline is making a profit witout boasting about a quarterly report in isolation to hoodwink the government and the general public. All airlines in the world publish annual reports to give the financial status of the respective airlines. With an accumulated loss of Rs 326 Billion and net loss of 47 Billion as per Annual Report of 2019/20 and having recorded Serious Loss of Capital in 2020/2019/2015/2013 , how can the Chairman and the Board say that the airline is now profitable. Please do not make people laugh at you . In this backdrop how can anyone justify leasing up to 21 aircraft. Mr. Chairman and Board please understand that SriLanlan Airlines is Business Oriented Airline not a Service Oriented Airline like the SLTB/ SLR to name a few. You cannot simply expand the route network without carrying out a feasibility study to ascertain the profitability of such route epansion. This is public money average citizens do not travel often by SriLankan Airlines overseas. They use public to go to the workplace and back home.

  3. Bandu Abey says:

    He should have gone on retirement 20 years ago, with some dignity from his party.

View all comments (3)

Comments (3)

Cancel reply

Your email address will not be published. Required fields are marked *

  1. Gajalakshmi Paramasivam says:

    Sri Lankan Airlines has the capability of operating successfully on commercial basis. It should not be sold but ought to be supported

  2. Keerthi Dissanayake says:

    Mr. Chairman please publish the annual report for the financial year 2021/22 to find out whether the airline is making a profit witout boasting about a quarterly report in isolation to hoodwink the government and the general public. All airlines in the world publish annual reports to give the financial status of the respective airlines. With an accumulated loss of Rs 326 Billion and net loss of 47 Billion as per Annual Report of 2019/20 and having recorded Serious Loss of Capital in 2020/2019/2015/2013 , how can the Chairman and the Board say that the airline is now profitable. Please do not make people laugh at you . In this backdrop how can anyone justify leasing up to 21 aircraft. Mr. Chairman and Board please understand that SriLanlan Airlines is Business Oriented Airline not a Service Oriented Airline like the SLTB/ SLR to name a few. You cannot simply expand the route network without carrying out a feasibility study to ascertain the profitability of such route epansion. This is public money average citizens do not travel often by SriLankan Airlines overseas. They use public to go to the workplace and back home.

  3. Bandu Abey says:

    He should have gone on retirement 20 years ago, with some dignity from his party.

Sri Lanka China-backed port to welcome second cruise ship

ECONOMYNEXT – Sri Lanka’s China-backed Hambantota Port said it was getting ready to welcome MV Azamara Quest, a cruise ship, as another passenger vessel departed.

Mein Schiff 5, operated by TUI had departed Hambantota International Port for Pulau Penang Island, Malaysia on November.

“As well as being her maiden call at the port, Mein Schiff 5 is the first passenger cruise ship to call at the port since the pandemic began,” said Johnson Liu, CEO of Hambantota International Port Group (HIPG) said in a statement.

“It was undoubtedly a great boost for the tourist economy in the south when the vessel called at the Hambantota International Port.”

Mein Schiff 5’s passengers had also visited the Bundala National Park, Hambantota Botanical Gardens, Galle and Kataragama.

Passengers had explored Hambantota by tuk-tuk, while others had enjoyed the beaches in the Shangri La Hotel, the port said.

MV Azamara Quest will arrive in Hambanota on on December 05. (Colombo/Dec01/2022)

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Sri Lanka’s shares gain in mid market trade

EXONOMYNEXT- Sri Lanka’s shares gained in mid market trade on Thursday (1), pushed up by strong positive sentiments on interest rates easing in line with inflation and speculation on government to hold talks with multilateral creditors ADB and World Bank for a possible loan facility.

Market has continued to gain for the past four sessions.

“Shares were moving on positive strong sentiments flowing in from yesterday (30), we are seeing a rally in the hotels, while the retail favorites such as LIOC and Expolanka,” analysts said.

Positive investor sentiments have been established, from positive comments from the Governor of the Central Bank over market rates eventually seeing an ease despite the fears of a domestic debt restructuring as inflation falls, increased liquidity in dollar markets, and the inter-bank liquidity improves.

Analysts further stated that, Treasury related stocks are also activated due to downward movements in yield.

All Share Price Index (ASPI) gained by 1.4 percent or 123.41 points to 8,774.64, while the most liquid share gained by 1.31% or 35.68 points to 2,765.

The market generated a turnover of 1.6 billion rupees at 1130 hours. (Colombo/Dec1/2022)

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Sri Lanka electricity losses from overpriced fuel, no tariff hike considered: regulator

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Electricity Board’s high operating costs are partly due to excessive prices paid for fuel and no tariff hike is being considered, Chairman of the Public Utilities Commission of Sri Lanka, Janaka Ratnayake said.

The CEB itself does not buy fuel but depends on state-run Ceylon Petroleum Corporation and Lanka Coal, another state firm to buy fuel. Both firms are periodically caught in procurement scandals.

“They are paying about 385 plus rupees per litre for furnace oil,” Ratnayaka told EconomyNext.

“That is too much. From the global market we can buy it to much lower price. It can be imported below 200 rupees,”

“I ask the government to take the necessary steps to create a system to import furnace oil, like they did for fuel, to be imported at the lower price levels. If that happens, we can go without going for a price hike.”

Sri Lanka’s CEB generally gets furnace oil and residual oil from the domestic refinery and usually do not import furnace oil.

The refinery however is not regularly operating due to inability to get crude amidst the worst currency crisis in the history of the island’s intermediate regime central bank.

Ratnayake had earlier brought to light import costs of the CPC.

Pushing for operations efficiency of the CEB is a role of the regulator. Regulating costs based on global benchmark prices to push for procurement efficiencies is a standard practice. However the PUCSL is not the official regulator of the petroleum sector.

Related

Sri Lanka power tariff revisions sought in Jan and July: Minister

Power and Energy Minister Kanchana Wijesekera told parliament that cabinet approval was sought to twice yearly tariff hikes in January and July of each year.

No Electricity tariff hikes are being considered yet, Ratnayake said.

Wijesekera blamed the regulator as well as successive administrations for not regularly revising power prices and pushing the sector into crisis.

In Sri Lanka activists had also blocked cheap coal power. (Colombo/Dec01/2022)

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