SriLankan Airlines has been struggling financially for a long time, but the situation has gotten worse in the past several years, given Sri Lanka’s economic issues. Everything is pointing to the oneworld airline nearly being grounded, but we’ll see how it plays out…
SriLankan Airlines needs to be privatized
In May 2022, plans were announced for SriLankan Airlines to be privatized. The government owned airline had been losing money for years and was continuing to rack up debt. For some amount of time the government could sustain those losses, as a way of providing connectivity to the country, and transporting inbound tourists.
However, Sri Lanka has had a serious economic crisis that started in 2019, and which has only gotten worse. It’s the country’s worst economic crisis since it gained independence, in 1948. Sri Lanka has been bailed out by the International Monetary Fund (IMF), a move that came after the country had record low reserves, leading to significant inflation and currency depreciation.
One of the government’s biggest money losing enterprises is SriLankan Airlines, so the government has invited bids from companies to privatize the airline. The current deadline for interested parties to submit proposals is March 5, 2024.
However, that’s not looking so good, as Nimal Siripala de Silva, Sri Lanka’s Minister of Ports, Shipping and Aviation, has just issued an alarming warning:
“Deadline given to potential investors for submitting expressions to partner the national carrier ends on March 5. The information we have received as of now is that all those who have already expressed interest are planning to withdraw after the Sunday’s flight delay. We will have no option but to ground SriLankan airlines for good in this situation.”
For some background, there’s outrage in Sri Lanka, after four SriLankan Airlines flights were delayed on Sunday. Two flights were delayed because rats were found on the aircraft, while two other flights were delayed due to technical issues. Those problems were made worse by 15 ground handling staff being absent that day — three had applied for leave, while 12 just didn’t show up.
Now, admittedly withdrawing interest in acquiring an airline due to a bad day of delays seems like an overreaction. However, this has been a recurring issue at SriLankan Airlines, as the carrier has struggled to operate reliably.
Furthermore, SriLankan Airlines’ situation is dire — the government can’t keep supporting the airline, especially with the bailout it has received, so something needs to change. And that raises another question…
Who could even acquire SriLankan Airlines?
Most savvy entrepreneurs probably aren’t lining up to invest in any airline, let alone an airline in Sri Lanka with a bunch of debt and endless legacy issues.
So I have to imagine that any investment in SriLankan Airlines would be part of a larger strategy, and perhaps even be about soft political power. For example, in the late 1990s, Emirates owned a stake in SriLankan Airlines’ predecessor, and that was logical enough.
However, I think most Gulf carriers have gotten a little savvier since then — Etihad is no longer pursuing its strategy of lighting money on fire by exclusively investing in airlines that are sure to liquidate, Qatar Airways is conservative with the airlines it invests in, and this isn’t something that’s part of Emirates’ strategy anymore.
There had been some speculation that maybe Tata Group, which also recently acquired Air India, might be interested. However, that even seems like a long shot.
Bottom line
SriLankan Airlines is in a rough financial spot. The government owned airline needs to be privatized, and the deadline for that happening is March 5, 2024. Now one of the country’s ministers has stated that any interest that existed in privatizing the airline has been withdrawn.
It’s anyone’s guess how this plays out, but things aren’t looking good for SriLankan Airlines.
How do you see this SriLankan Airlines situation playing out?
Membership is free and takes no more information than commenting as a guest. Earn status points for good contributions, and see fewer ads as your status grows.