Professor Mohan Munasinghe praised by royalty in Japan – The Island

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By Amal Jayasinghe

Dozens of Sri Lankan state-owned companies employing tens of thousands of people could be restructured or closed as part of an IMF bailout of the bankrupt country, with the country’s airline top of the list for reform. With nearly 6,000 employees, SriLankan Airlines is the largest and most expensive of the haemorrhagic and ossified corporations that gutted the budget and deepened the worst financial crisis in national history.

According to Treasury figures, the carrier was losing $4.50 for every dollar earned at the start of this year. It hasn’t made a profit since 2008, when its chief executive was sacked for offending the country’s then leader.

“Even those who have never boarded a Sri Lankan plane are paying to subsidize the airline,” government spokesman Manusha Nanayakkara told reporters this month.

“We can’t go on like this.”

Sri Lanka defaulted on its $51 billion external debt in April and is now embroiled in the arduous process of renegotiating its obligations with its creditors. Its 22 million people suffered for months from food and fuel shortages, and at the height of the crisis, a furious mob stormed government buildings and drove Sri Lanka’s former president into exile. .

The International Monetary Fund (IMF) has given preliminary approval to a $2.9 billion rescue package, and the government hopes to be able to access the first tranche by the end of the year. Terms of the deal have yet to be released, but IMF liquidity is generally contingent on painful reforms, such as tax hikes, the removal of consumer subsidies, and the privatization or closure of poorly performing public enterprises.

The country has more than 300 state-owned enterprises, ranging from nut farms to fuel retailers, and the top 52 companies lost nearly $2.4 billion between January and April, or about $140 million a week.

The future of SriLankan Airline is the most pressing priority and the government last month instructed the Ministry of Finance to begin its restructuring, ideally by attracting outside investment.

But finding a company willing to inject cash into the airline will be extremely difficult, analysts say, given its history of interference, mismanagement and turbulent partnerships. In 1998, Emirates bought a minority stake in the carrier and took over management.

It remained in the black for most of the next decade, although one of its most profitable years was – ironically – 2001, when the separatist Tamil Tigers attacked the country’s main international airport. Several airline planes were destroyed in the July attack, but insurance payments and the removal of excess capacity offset a drop in ticket sales.

But the partnership was terminated and the chief executive sacked by then-president Mahinda Rajapaksa in 2008 after the carrier refused to move fare-paying passengers to make room for his family members returning from a London getaway. The leader packaged SriLankan’s leadership with relatives and loyalists, several of whom are now facing corruption charges, and the airline has been bleeding money ever since. Rajapaksa even launched a rival state-owned airline bearing his name, a colossal failure that was eventually merged into SriLankan with its accumulated losses.

Authorities attempted to sell a 49% stake in SriLankan in 2017, when the island nation’s tourism market was booming, but even then private equity firm TPG ultimately withdrew its offer after deciding that it was not a viable operation. Airlines are “generally not that attractive” to investors, Singapore-based aviation analyst Brendan Sobie told AFP, “especially airlines that are government-owned and have a lot of financial problems.” inheritance, have a lot of debt, like Sri Lanka”.

“There are not many foreign airlines, especially in this post-Covid environment, that are looking or even considering buying stakes in overseas airlines,” he added, and the track record of strategic investments in the sector was “very bad”.

“It’s very difficult,” he said. Sri Lankan President Ashok Pathirage acknowledges that the airline’s current track record is not an attractive proposition.

“If you try to privatize the whole thing, people will come and ask the government to take half the debt,” Pathirage told AFP.

But he said Sri Lanka could settle about half of its debts by splitting up and selling profitable business branches, including its virtual monopoly on catering and ground handling at Colombo airport. Union leaders and employees support a restructuring in this direction, provided that no jobs are lost.

“The airline is losing money not because of staff, but because of expensive leases and poor financial structures,” a cabin crew member, who requested anonymity, told AFP. the government.

Former state finance minister Eran Wickramaratne told AFP that if authorities do not find an investor, the airline should be grounded permanently before it weighs more on the public .

“We are a bankrupt country,” he said. “We haven’t been able to repay our debt and that reality has hit home.”

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