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Saturday June 3rd, 2023

SriLankan Airlines drained by high commissions paid to GSAs owned by one person

ECONOMYNEXT- SriLankan Airlines had been drained by unusually high commissions paid to general sales agencies operating in several countries owned one person, amid interference by a former chief executive and chairman in agent appointments, a commission of inquiry heard.

Agencies controlled by one Dilan Ariywansa, had been given the General Sales Agency (GSA) for SriLankan Airlines in key revenue markets and contracts extended in some cases despite failing to meet targets, a Presidential commission investigating irregularities at loss-making state-run carriers SriLankan Airlines and now-defund Mihin Lanka was told.

Then Chief Executive Kapila Chandrasena, and then-Chairman Nishantha Wickramasinghe interfered in the appointment of GSA’s in many territories against regulations, a witnesses said.

A board of inquiry headed by lawyer J C Weliamuna had earlier said there was a ‘clear violation’ of procedures in appointing GSAs.

"Special attention was paid to theGSA appointment in Russia and Australia, especially since there was a clear attempt toconceal the real beneficial owners of such GSAs," the report of the Board said.

"The BoI observed the involvement offormer Ambassador to Russia Udayanga Weeratunga’s with the GSA in Russia, and Dilan Ariyawansa’s involvement in both Russia and Australia questionable and suspicious."

Anna Korolkova, listed as General Manager for the agency, was an employee of the Russian Embassy, the report said.

At the Presidential Commission of Inquiry, Industry Affairs Manager Shiromi Cooraysaid GSAs owned by Ariyawansa had enjoyed higher commissions than allowed in company manuals.

Cooray said that Ariyawansa’s Sri Lankan LLC, the airline’s GSA in Russia, had received 5.5 percent commissions on passenger tickets and 5 percent cargo commissions, initially, which was much above the 2.5 percent ceiling for passenger commissions and 3 percent for cargo set in the 2009 manual.

In 2014, the terms were changed to 4 percent commission and fuel surcharge fees, as well as 1 percent online sales commissions, despite fuel surcharges and online sales commissions not being a part of the 2009 manual, Cooray said.

She said that the GSA agreement was extended for 3 years in 2014, despite Sri Lankan LLC performing below targets given by the airline.

“I personally would not have recommended to extend the agreement if the performance was so bad,” Cooray said.

She had not been in charge of Industry Affairs during this period.

Cooray said that the national carrier had not considered switching to another GSA prior to continuing with Sri Lankan LLC.

Then chief executive Kapila Chandrasena had approved the extension, violating regulations which state
that a review panel should decide on extending a GSA contract or calling for a new round of bidders, Cooray said.

She said the Russian GSA had prematurely cancelled the agreement in January 2015. There was also a letter in the file stating Ariyawansa had wanted to sell his shares in the GSA, she said.

When Sri Lankan LLC cancelled the agreement, a parcel of required documents was sent through the Sri Lankan embassy in Russia, signed by First Commercial Secretary ChandimaKiriwandala, Cooray said.

Ariyawansa had also operated the North American GSA for the US, Canada and the Caribbean since 2005, Cooray said.

Cargo revenue from the North American GSA had been 74 percent below targets in 2010/11 and 72 percent below targets in 2011/12, she said.

Passenger revenue targets for Canada were not reached although overall, passenger revenue targets for the three regions were achieved, she said.

However, after the Canada GSA was separated from the North American Ariyawansa’s Sri Lankan Travel Inc. was re-appointed as the GSA in 2012, she said.

Cooray said the Canada GSA was split off as SriLankan wanted to appoint another GSA for the country if and when required.

She was not aware of the reasons for the decision.

Prior to 2009 Ariyawansa’s North American operations had charged 75 US dollars per ticket sold and after the practice was stopped, Sri Lankan Travel Inc. had attempted to reinstate the charge later, she said.

However, this request was denied, Cooray said.

Sri Lankan Travel Inc. had enjoyed 5.5 percent commission rates for the US and the Caribbean, and 7 percent for Canada between 2012 and 2015, she said.

A re-negotiation in 2015 saw the commission rates fall to 5 percent despite a request from Ariyawansa’s company to increase commissions to 7 percent, she said.

Yasmin Majeed the former Industrial Affairs Manager, testified that Ariyawansa’s Sri Lankan Aviation Ltd was appointed the GSA for Australia in 2014 by Wickremesinghe against both the 2009 manual as well the amendments which were not approved by the board of directors.

Majeed said the Australia GSA received a 5 percent commission initially, which was increased to 7 percent within months, without a cost-benefit analysis. She said as far as she was aware, no evaluation was done on Ariyawansa’s GSA before increasing the commission.

A new board of directors appointed in 2015 had directed the airline to readvertise and appoint GSAs for Far East, Australia and Dubai using proper procedures.

Despite Ariyawansa’s GSA scoring the highest marks, the second place travel agency was given the GSA as it had a better distribution network, Majeed said.

However, she said with SriLankan starting direct flights to Australia, the winner had terminated the contract, and Ariyawansa’s GSA was reappointed and continues operations to this day.

It had then agreed to a 4 percent commission inclusive of fuel surcharges, as well as 2.5 percent commission on online sales, Majeed said.

This was against a 3 percent commission and 1 percent online commission ceiling set in the 2015 manual, she said.

The manual was amended to give 2.5 percent commission on online sales if such sales made up more than 30 percent of total revenue, however, this wasn’t included in the new Australia GSA agreement, she said.

She said that the US, Canada, Russia and Australia markets were heavy revenue generators for SriLankan Airlines. (COLOMBO, 24 August, 2018)



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Sri Lanka to ramp up weekend fuel deliveries after petrol price cut

More deaths reported at Sri Lanka fuel queues

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation will be operating on the weekend to complete all fuel deliveries to end vehicle queues forming outside fuel stations after the price revision earlier in the week, Energy Minister Kanchana Wijesekera said.

“Instructions have been given to CPC and Ceylon Petroleum Storage Terminals to continue fuel deliveries on Saturday and Sunday this week to supply sufficient stocks to all fuel stations,” Minister Wijesekera said in a TWITTER.COM MESSAGE

“To reduce expenses on overtime, CPC and CPSTL have not been operating on Sundays and public holidays in the last 4 months,” Wijesekera said.

“Non-placement of orders by fuel stations from last Saturday, anticipating a price reduction, not maintaining minimum stocks, immediate increase in demand by consumers after the price revision, and quota increase have created shortages in the fuel stations.”

The Minister in April 2023 said all fuel stations would be required to maintain a minimum of 50 percent of stock tank capacity.

“I have asked CPC to review and suspend the license of fuel stations that had not maintained minimum stocks.” (Colombo/ June 02/ 2023)

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Sri Lanka bonds yield up at close, rupee at 291.75/292.50 against the US dollar

ECONOMYNEXT – Sri Lanka’s bonds closed steady on Friday, dealers said, following the central bank’s decision to cut its main policy rate by 250 basis points.

The Spot US dollar closed at 291.75/292.50 rupees, dealers said.

The rupee opened at 290.25/75 to the US dollar Thursday and closed at 292.50/295.50 to the US dollar.

A bond maturing on 15.09.2027 closed at 24.70/90 percent up from 24.50/90 percent a day earlier, dealers said.

A bond maturing on 15.05.2026 closed at 25.75/26.25 percent up from 25.00/26.00 percent a day earlier.

A bond maturing on 01.05.2025 closed at 27.00/30 percent, up from 26.30/27.00 per cent at last close.

A bond maturing on 01.07.2032 closed at 20.25/21.00 percent, up from 20.00/40 per cent at last close.
(Colombo/ June 02/2023)

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Sri Lanka’s shares edge up on positive macroeconomic sentiments

ECONOMYNEXT – Sri Lanka’s shares closed higher in trade on Friday, over positive macro-sentiments encouraging investors to redeem their interest towards buying, an analyst said.

The main All Share Price Index was up 0.72 percent or 62.19 points to 8,753.80,  while the most liquid index S&P SL20 was up 0.68 percent or 16.87 points to 2,487.29.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

Prior to the Monetary Policy investors were quite optimistic that inflation is to lower and interest rates will decrease and since exp, an analyst said.

Sri Lanka Central Bank is waiting for the government proposal on the domestic debt restructuring (DDR), the central bank governor Nandalal Weerasinghe said amid uncertainty over DDR and speculations over instability in the banking sector.

“On debt restructuring, the borrower is the ministry of finance’s treasury. Certainly we will announce what the strategy will be. We are waiting for a government proposal,” Weerasinghe said.

Sri Lanka’s investors are waiting on assurances to be made on debt restructuring and optimization, Central Bank Governor Nandalal Weerasinghe said, “It is up to the government to clear the uncertainty, because from our side we have done that part.”

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

The speculation of DDR has hit the market and the risk premium has kept the market lending rates well above the central bank’s policy rates. The government has yet to present its plans on DDR.

Weerasinghe said the central bank has done its best to reduce the risk premium through bringing down the market lending rates while keeping the policy rates unchanged.

Sri Lanka’s President Ranil Wickremesinghe has discussed progress of International Monetary Fund program and debt restructuring during a visit of Deputy Managing Director Kenji Okamura, statement said.

“The discussion primarily focused on the progress of the IMF program between Sri Lanka and the IMF,” a statement from President’s office said.

“Attention was also paid to the on-going debt restructuring negotiations.”

However Officials from IMF have said Sri Lanka has to focus on expanding taxes.

“We discussed the importance of fiscal measures, in particular revenue measures, for a return to macroeconomic stability,” Deputy Managing Director Kenji Okamura said in a statement.

The finance ministry this week issued rules requiring everyone above 18 year of age to register to pay income tax.

“I was encouraged by the authorities’ commitment to negotiate a debt strategy in a timely and transparent manner.

The market generated a revenue of 738 million rupees, while the daily average was 1 billion rupees.

Top gainers in trade were Vallibel One, LOLC Finance and Browns Investment. (Colombo/June02/2023)

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