New partner to decide on four remaining aircraft

SriLankan Airlines has cancelled an order to lease four, A350 long-range aircraft, paying US$170 million, with the prospective investment partner with which the national carrier hopes to tie-up, deciding on the remaining four planes.

"The four A350s are long range aircraft which this airline does not need," SriLankan Airlines Chairman Ajith Dias told a news conference last week.

"They were leased, contracts were signed.

We had to negotiate for almost a year and we are pleased to terminate the lease from October 4. There are four more A350s that have been contracted - the new partner will take a decision on that."

The remaining four planes are due to be delivered around 2020.

"The lease rate on the planes was not competitive," Dias said. "They were contracted for 12 years. We negotiated with the owner to terminate the contract for an acceptable termination fee," he said.

The government has to pay US$170 million to AerCap Holdings NV, the world's largest independent aircraft leasing company, for cancelling the lease on the four A350s signed by the former regime.

Finance Minister Ravi Karunanayake told parliament last week that Sri Lankan Airlines does not need A350s as their longest flight time is around 10 hours.

The airline's new board of directors "inherited quite a mess" when they took over and had drawn up a plan to restructure the airline to restore its profitability and make it more attractive to a partner, Dias said. "Our mandate was to reduce losses, improve productivity and the culture of the airline and prepare the airline for a public-private partnership. We have been able to improve productivity. Morale, which was at a low level, has improved to a significant level. We work closely with the unions."

The Government of Sri Lanka is negotiating with several prospective partners who have communicated their expressions of interest on the Public Private Partnership for SriLankan Airlines, Dias said.

The lead manager for the transaction is the National Savings Bank. "Our objective is to focus on re-structuring the airline in order to ensure a framework for sustainability is in place for a PPP that the shareholder will enter into," he said.

SriLankan Airlines also said that its Aviation College is steadily becoming a magnet for students from Sri Lanka and the region wanting to build a successful career in the aviation industry.

It is the only European Aviation Safety Agency (EASA) certified aviation college in the region offering engineering, ground handling and cabin crew training in-house.

"The airline's EASA certified MRO capability is held in high esteem with the airline being awarded contracts by several airlines for third party work, which is expected to grow in the future and be a significant source of revenue for the airline," a statement from the airline said.

"While a great deal of attention has been paid to the re-structuring efforts, the management has kept a close watch on service and standards which are the cornerstone of this industry.

The airline has continued to invest in people and training to maintain service standards to complement its product, which is on par with the best-in-class."