The Committee on Public Enterprises (COPE) report submitted to Parliament on Wednesday (August 21) revealed since the SriLankan Airlines had terminated the agreements relevant for obtaining four A 350 aircraft on operational lease, without an adequate cost-benefit analysis, the Company had to incur Rs.17, 058.1 million in losses.
The Committee has concluded that the management which held office during the period relevant to this whole process shall be responsible for the total loss, including the loss of Rs.17, 058.1 million paid in the process of revocation of lease agreements for obtaining four A 350 aircraft on lease.
It was observed by the Committee that attention should have been drawn on the adverse impact that can create upon the country’s economy by having to pay a large sum of USD 115.7 million (or Rs.17, 058.1 million) as compensation when it was decided to terminate the agreements to acquire aircraft while running as an institution that had net assets at a negative level.
Opposition lawmaker and COPE Chairman Sunil Handunneththi in his report tabled in Parliament says that “the Airbus deal had not been conducted in a transparent manner, we assigned the Auditor General to prepare a detailed report in this regard and submit it to this Committee with relevant documents. Anybody who peruses this report will understand the extent to which the SriLankan Airlines and political authorities had acted without forethought in purchasing and the subsequent cancellation of the agreement.”
Presenting the COPE report, Handunneththi proposed an independent inquiry to punish those who were responsible for the huge losses. He said “the total operational losses of the Airline so far stands at Rs. 116 billion and the total loss for the period 2009 – 2019 is Rs. 240 billion. At the same time, in addition to the losses concerned, the total amount of loans that are owned by the SriLankan Airlines to state banks and state institutions including the Ceylon Petroleum Corporation (CPC) is Rs.146 billion.
COPE Chairman Handunneththi also requested a debate in Parliament as the Government and the public had to suffer massive losses in procuring aircraft and terminating agreements. Leader of the House Minister Lakshman Kiriella said the Government agrees to it.
He said the aircraft purchasing agreements in the years 2013, 2014, 2016 and 2017 as well as the process of cancelling the agreements both alike prove the fact that it is not only due to management inefficiencies that SriLankan Airlines has sustained losses but also due to political interferences carried out by the political authority.
The COPE report had revealed that SriLankan Airlines had not taken any action to adhere the requirements of the procurement procedure in obtaining consultancy services, selecting companies for purchasing and leasing aircraft in the re-fleeting process of aircraft. The report concluded that the decision had been taken by the top Manager of the Company to add 14 modern aircraft to the fleet within eight years without obtaining the approval of the Cabinet of Ministers or without making a proper cost benefit analysis.
The Committee has observed that the opinion of the Attorney General had not been sought to terminate the agreement to acquire aircraft and the termination agreement had been prepared under the guidance of ‘Aviation Legal Experts’, a ‘legal consultant firm’ in UK.
The Committee has also observed that only the officials from the Finance Ministry and SriLankan Airlines had taken part in the discussion held to terminate the agreement to acquire aircraft but no official from the Ministry of Public Enterprise Development (which is the subject Ministry) had participated in the discussion.
Meanwhile, the current financial situation of SriLankan Airlines was probed during the COPE hearing which was opened to the media for the first time on Tuesday (August 20). The Board of directors of SriLankan Airlines and the Secretary to the Ministry of Finance appeared at the COPE hearing.
COPE Chairman Handunneththi stated that the outstanding debt of SriLankan Airlines to two state banks and Ceylon Petroleum Corporation (CPC) amounts to Rs 102 billion and inquired about the other state entities to which the national carrier is indebted. CEO of SriLankan Airlines Vipula Gunatilleka who responded to the query said that the airline should settle USD 140 million to the CPC and added that however they can only repay about USD 50 million. He said they have an issue repaying this due to lease rentals that they have committed for aircraft acquired in 2013. There are seven aircraft for which we cannot break the lease, he said.
Finance Ministry Secretary Dr. R.H.S. Samaratunga told the COPE that they have two major issues; the first one is someone has to pay this debt off, and the second is that even if someone repays the debt, there should be an investor to maintain the entity. Later, COPE chairman Handunneththi gave instructions to collect the money owed to SriLankan Airlines from Government institutions including the Presidential Secretariat.