Sri Lanka cancels sale of National Airline, plans new strategy

Sri Lanka has decided not to sell its national airline, SriLankan Airlines, even though it had shortlisted three potential buyers.

The government had initially called for bids in September to sell the airline, as required by the IMF when they provided a bailout loan last year.

Six companies showed interest, and by April, three were shortlisted, including Malaysia’s AirAsia. However, on Friday, the State Owned Enterprises Restructuring Unit announced that the sale process had been stopped.

The cabinet of ministers decided on July 9 to end the current bidding process without providing any reasons.

The government plans to find a new strategy to sell the airline based on a framework approved by the cabinet.

The IMF had identified SriLankan Airlines for restructuring when it granted the country a $2.9 billion bailout last year.

This bailout followed Sri Lanka’s default on its $46 billion external debt in April 2022 due to a severe shortage of foreign exchange.

SriLankan Airlines, with nearly 6,000 staff, is the largest and costliest of the state-owned companies draining the budget and worsening the country’s economic problems.

Analysts had warned that it would be very difficult to find a company willing to invest in the airline due to its history of mismanagement and problematic partnerships.

In 1998, Emirates bought a minority stake and managed the airline, keeping it profitable for most of the next decade.

However, the partnership ended in 2008 when then-president Mahinda Rajapaksa sacked the chief executive after the airline refused to prioritize his family members on a flight from London.

In 2017, an attempt to sell a 49 percent stake in SriLankan Airlines also failed when private equity firm TPG withdrew its bid, deeming the operation unviable.

(Courtesy: AFP)