SriLankan: Govt.’s litmus test for SOE restructuring?

• IMF is believed to have requested govt. to address issues at SriLankan before the release of further funds under EFF
• Govt. told to protect solvency and credit rating of two main state banks who are key funders of SriLankan
• Govt. appoints special ministerial committee and committee of officials to assist them to decide on SriLankan’s fate
• Official committee to start work on Dec. 11; submit report on Dec. 20 and recommend action executed on or before March 31, 2018 

The fate of the ailing national carrier, Sri Lankan Airlines, will be decided soon as the airline has now become a litmus test for the government to prove its commitment towards restructuring of loss making state-owned enterprises (SOEs)—one of the key conditions of the ongoing three-year programme Sri Lanka has with the International Monetary Fund (IMF). 

Mirror Business reliably learns that IMF has requested the government to immediately take appropriate measures to correct the course of the loss-making, debt-laden airline before the release of further funding under the Extended Fund Facility (EFF).

Although Sri Lanka has a number of loss-making SOEs, SriLankan Airlines is said to have been chosen as a test case of sorts.

Mirror Business also learns that it has been pointed out to the government that the solvency and credit rating of the two main state banks, who are the key funders of the airline, should be protected as anything that negatively affects the two banks will have an adverse impact on the balance sheet of the government.

The IMF’s request has prompted the government to set up a special ministerial committee, which includes Finance and Mass Media Minster Mangala Samaraweera, Special Assignments Minister Sarath Amunugama, Transport and Civil Aviation Minister Nimal Siripala de Silva, Public Enterprise Development Minister Kabir Hashim and Development Strategies and International Trade Minister Malik Samarawickrama. The committee is headed by Prime Minister Ranil Wickremesinghe. 

The ministerial committee is assisted by a committee of officials headed by Treasury Secretary Dr. R. H. S. Samaratunga, and consists of Secretary to the Ministry of Public Enterprise Development Ravindra Hewavitharana, Chairman of the National Agency for Public Private Partnership (Convenor) Thilan Wijesinghe, Senior Advisor to the Ministry of Finance and Mass Media Mano Tittawella, Director to the  Ministry of Public Enterprise Development Dr. Roshan Perera and Chairman and the Chief Executive Officer of SriLankan Airlines.

The committee of officials will start their work as early as next Monday (11th) to decide on the fate of the airline, which could range from finding an equity partner to the closure of the airline, and is expected to compile a preliminary report by December 20th as the entire way forward for the airline has to be implemented on or before March 31, 2018.

A statement by SriLankan Airlines yesterday said all the trade unions of the airline have expressed their solidarity to the management in supporting the restructuring efforts initiated by the government under the supervision of the Public Private Partnership (PPP) unit attached to the Ministry of Finance.

This was expressed by the representatives of the trade unions when they met SriLankan Airlines Chairman Ajith Dias, CEO Capt. Suren Ratwatte together with senior management of the airline and National Agency for the Public Private Partnership Chairman Thilan Wijesinghe on December 5th. 

“At the meeting, representatives of the trade unions comprising The Airline Pilots Guild, Flight Attendant Union (FAU), Licensed Aircraft Engineers, Technicians, Executive Association, SLNS, JSS and the Engineers Guild expressed their fullest support to the management on its restructuring efforts.

The securing of the future of the national carrier was acknowledged to be of paramount importance, irrespective of the professional or political affiliations of the unions,” the statement said. 

Trade unions have also been notified that the airline would not negotiate or enter into new collective agreements until March 2018, Mirror Business learns.