ECONOMYNEXT – State-run SriLankan Airlines has defaulted on loans which have been backed by government, a Finance Ministry report has said.
"The Government bears contingent liabilities over the provision of guarantees for loans obtained from People’s Bank and Bank of Ceylon as well as Sovereign Guarantee issued for the International Bond," the report said.
"These have become obvious liabilities for the government…"
The report said SriLankan was unable to repay some installments with internally generated funds.
SriLankan has been making new borrowings to cover losses and the tax payer has also injected some funds since ex-President Mahinda Rajapaksa terminated a managing shareholder deal with Emirates.
SriLankan has a 175 million US dollar international bond guaranteed by the government which falls due on June 2019.
In 2018, long term loans went up from 26 billion rupees to 43.5 billion rupees.
SriLankan has also borrowed US dollar and rupee loans from state-run Bank of Ceylon, People’s Bank on Treaury letters of comfort. There also also loans from private banks taken against reciepts and assets.
A restructuring attempt of the airline with the help of an international consultant failed, with the airline accumulating more losses, the Treasury said.
"SLA has lost some of the valuable parking slots and routes which used to give indirect economic benefits by this attempt."
The Treasury said that a ‘severe restructuring’ of the airline is required, and that proposals made by an expert committee appointed by the President should be implemented immediately.
Airline de-regulation worldwide has allowed privately owned airlines to grow, and state-run airlines are not able compete effectively.
The airline had accumulated 186.6 billion rupees in losses up to March 2018 with a negative net worth of 132.2 million rupees, the finance ministry said.
In India, private airlines have also been hit by the collapse of the Indian rupee, and Jet Airways, which has rupee revenues and dollar leases went under.
Finance Minister Mangala Samaraweera last week said that there should be a debate on whether the government should even own SriLankan Airlines. (Colombo/Jun15/2019)
SriLankan Airlines has responed to the above story. Click on the link below to read the full statement.