Sri Lanka Government extends deadline for SriLankan Airlines restructuring amid debt crisis

SriLankan Airlines

The Sri Lankan government has taken significant steps to revitalize its national carrier, SriLankan Airlines, amidst mounting debt challenges.

Ports, Shipping, and Aviation Minister Nimal Siripala de Silva confirmed the decision to extend the bidding deadline for the restructuring process by 45 days, effective from today (March 05).

Minister de Silva further disclosed that the Cabinet has greenlit a proposal for the government to absorb a substantial portion of the airline’s outstanding debts, totaling USD 510 million.

This strategic maneuver forms part of a comprehensive approach to tackle the financial hurdles confronting SriLankan Airlines.

Elaborating on the airline’s dire financial state, Minister de Silva highlighted the hurdles faced by the restructuring unit, including challenges in attracting competitive offers or reputable airlines to assume management roles, given the monumental debt load of USD 1.2 billion, as communicated by the International Finance Corporation (IFC).

President Ranil Wickremesinghe, also serving as Finance Minister, has taken proactive measures to address the crisis.

He submitted a Cabinet memorandum stressing the urgent need for restructuring while safeguarding the job security of the airline’s 6,000 employees.

In a decisive move, President Wickremesinghe pledged to absorb significant portions of SriLankan Airlines’ debt, including liabilities owed to the Bank of Ceylon and People’s Bank, alongside international bonds supported by treasury guarantees.

This commitment equates to approximately 50% of the airline’s total debt burden.

With a goal to fast-track the restructuring process, the government aims for completion within six months.

Minister de Silva expressed confidence in revenue generation avenues, such as catering and ground handling services, along with restructuring fees, anticipating a yield of over USD 500 million.

SriLankan Airlines, Sri Lanka’s premier carrier, has grappled with financial hardships in recent times, prompting its inclusion in the state-owned enterprise (SOE) restructuring initiative.

Through concerted efforts, the government strives to ensure the resilience and sustainability of Sri Lanka’s aviation sector amid challenging economic conditions.