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Sri Lankan Airlines Airbuse leases from Aercap questioned on unseen penalties

ECONOMYNEXT – Though an earlier Board of state-run SriLankan Airlines had claimed they paid 115.7 million US dollars to Aercap, a leasing firm, to cancel four Airbus aircraft, the carrier had been committed to make additional payments via aircraft it was forced to acquire, it has been revealed.

One A330 aircraft SriLankan was forced to acquire was completely unusable, a parliamentary committee was told.

SriLankan Airlines had paid 17.5 million dollars to Aercap to cancel one A350-900 aircraft and 98 million US dollars for three others totaling 115.7 million dollars, the parliament’s Committee on Public Enterprises (COPE) was told.

Three aircraft had been leased from International Lease Finance Corporation which had later been acquired by Aercap.

Bribes

According to a UK investigation, 1.16 million dollars of bribes had been promised for the delivery of each A350 aircraft purchased from Airbus by SriLankan Airlines and 300,000 it if was leased to an agency set up by an ex-employee.

Legislator Harsha de Silva said people were asking questions about the cancellation as well.

Ministers of the then government had been told that it would cost 154 million dollars to cancel the aircraft, but it had apparently been negotiated down to 98 million dollars, members of the COPE said.

COPE members questioned whether the originally mentioned cancellation cost of 154 million dollars was actually negotiated down and if so how.

Officials said SriLankan had to acquire an unusable A330-200 aircraft as part of the cancellation in addition to the 115.7 million dollars paid in cash upfront and take over leases of two aircraft used by now-defunct Mihin Air.

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Current Chief Executive Vipula Gunatilleke had been hired after the controversial cancellations carried out during the tenure of Chief Executive Suren Ratwatte and Chairman Ajith Dias. Current Chairman Ashok Pathirage had been in office for only two months.

Additional Payments

Gunatilleka revealed said that Airbus A330-200 acquired as part of the settlement was unusable as the seat configuration could not be used by SriLankan.

It is not clear how many millions of dollars had been had been paid up to now as leases for the aircraft, which was grounded. It had also been leased to another airline for a time, which had defaulted.

Gunatilleke said following negotiations with the lessor, the seat configuration has been changed and the aircraft is due to enter service in July.

It is not clear why the previous management bought the aircraft with an unusable seat configuration and who is accountable for the debacle.

COPE member Wijedasa Rajapaksa said he recalled then Aviation Minister Kabir Hashim complaining to parliament that decision were made without his knowledge by the Board.

SriLankan officials said all transactions went through a committee on economic management coming under then Prime Minister Ranil Wickremesinghe.

Accountability

The deals were made without clear approval of either the Attorney General of the Cabinet, which appeared to have been informed subsequently, the COPE was told.

Auditor General W Wickramaratne said under Sri Lanka’s company’s law under which SriLankan Airlines operates, the Board members were liable.

It was the ‘usual practice’ not to consult the Attorney General when deals were made, SriLankan Airlines said.

COPE member Ajith Perera said various ‘practices’ had been devised at government linked companies and he had knowledge of what was going on in the power sector, where there was no accountability.

State enterprises are a easy target for corruption, as they come under looser financial regulations than government departments.

But state agencies coming under the Companies Act, operated even more loosely, though there were no majority private shareholders to question how the money is being used.

In the case of regular state enterprises, deals several hundred million rupees require cabinet approval, but in the case of SriLankan a 2.8 billion dollar deal had been entered into without any legal clearance of the attorney general, but the taxpayer was responsible for losses, COPE members said.

COPE chief Sunil Handunnetti said a representative of the Auditor General should be present at committee hearings so that they will know what is revealed and take action. (Colombo/Feb24/2020)

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