SriLankan Airlines should be independent of political control to make commercial decisions, said State Minister of Finance Eran Wickramaratne in an interview with the Business Observer on restructuring the airlines, the forthcoming budget and the IMF team’s visit to Sri Lanka this week.
Minister Wickramaratne who heads the SriLankan Airlines Restructuring Committee, said making the airlines independent of politics, enabling it to act independently was a fundamental proposal by him in the report submitted to President Maithripala Sirisena early this month.
“When that is achieved, managing issues, such as cost of aviation fuel, cost of human resource development and fit between fleet to route can be addressed from a commercially viable point of view. The Committee has proposed a sustainable long term solution to make the airline more viable,” the minister said, adding that the recommendations were made from a shareholder’s point of view as it is not fair to ask them to put their money on loss making entities.
According to the minister, of the loss-making State Owned Enterprises (SOEs), five entities, such as the Ceylon Electricity Board (CEB), Ceylon Petroleum Corporation (CPC), Ceylon Transport Board (CTB), Mihin Lanka and SriLankan Airlines accounted for 90 percent of the losses from 2012-2017.
The economic argument put forward by CPC, CEB and CTB is that their operation cuts across many sectors and deals with all consumers which is not the case with SriLankan Airlines. “SriLankan Airlines is fighting for survival as it was under-capitalised for a long time by successive governments. “We could create a sustainable model as the country is cash strapped. From a financial point of view, there is no point in keeping it flying.
“Closure of the airlines is an option. However, we will introduce bankruptcy laws akin to the Chapter 11 of US bankruptcy laws which will be applied to all SOEs soon,” the minister said.
The other option proposed was for the airline to internally generate capital. You can spin off catering and ground handling operations and invite partners to it. The Airline can invite a partner while having a 51 percent stake in the ownership comprising the State and the private sector.
However, the minister said nothing of this is carved in stone. The President has to decide based on the report.
“The growing tourism industry which recorded 2.3 million arrivals and US$ 4.3 billion revenue last year is a compelling reason to revive the operations of the airline. The economic argument is that one third of the tourists are brought to the country by SriLankan Airlines. Sri Lanka Tourism and SriLankan Airlines must work together to achieve their objectives,” Wickramaratne said.
The State Minister said the challenge in the budget is to maintain fiscal discipline and at the same time create incentives for growth. Apart from macro-management, we need to focus on how to grow the economy.
The ‘Gamperaliya’ program was launched to support the local economy at village level through infrastructure development, such as renovating water ways, small tanks, roads, creating market access for entrepreneurs and developing rural schools.
The ‘Enterprise Sri Lanka’ loan scheme aims at encouraging entrepreneurship which is low in Sri Lanka. As a percentage, less than 3 percent of the working population in Sri Lanka are entrepreneurs whereas it is between 19-27% in Thailand and Vietnam and 11 percent in Bangladesh,” the Minister said.
The government has disbursed 35,000 loans amounting to Rs. 65.3 billion under the ‘Enterprise Sri Lanka’ scheme.
“The forthcoming budget will focus on improving education by expanding interest-free loan schemes with a longer grace period. The budget will also focus on investing in public health care, especially, the aging population. Social welfare schemes, such as ‘Samurdhi’, will be expanded and transportation will be improved,” the Minister said.
The government, according to Wickramaratne, will recalibrate the program with the IMF to achieve the mutually agreed objectives.
“We will discuss extending the program with the IMF during its officials’ visit to Sri Lanka this week. The country’s borrowing cost went up to over 200 basis points and resulted in the downgrading by rating agencies due to the upheaval caused by the 52-day government last year,” Wickramaratne said.