Sri Lanka has scrapped plans to sell off its indebted national airline despite shortlisting three potential buyers, the government’s privatisation agency said Friday.

Colombo called for bids in September to sell SriLankan Airlines, a key IMF demand when granting a bailout loan to the country last year.

Six firms had initially expressed interest in taking a stake in the airline, which owed more than $2.0 billion at the end of the 2022/2023 financial year.

The government announced in April a shortlist of three potential investors, including Malaysia’s Air Asia.

However, on Friday, the State Owned Enterprises Restructuring Unit said it had called off the sale.

“The cabinet of ministers at a meeting on July 9 decided to terminate the current bidding process with regard to the divestiture of SriLankan Airlines,” it said in a brief statement without giving any reasons for the decision.

It added that the government will follow an “alternate strategy to be decided shortly, to divest the airline base on a framework approved by Cabinet of Ministers” regarding the carrier.

The International Monetary Fund had singled out SriLankan for “restructuring” when granting the government a $2.9 billion bailout last year.

The bailout came after the country defaulted on its $46 billion external debt in April 2022 as it faced an unprecedented shortage of foreign exchange needed for essential imports.

With nearly 6,000 staff, SriLankan Airlines is the biggest and most expensive of the cash-haemorrhaging companies that are draining the budget and compounding Sri Lanka’s economic woes.

However, analysts had warned that finding a company willing to pour money into the carrier would be immensely challenging given its history of interference, mismanagement and turbulent partnerships.

In 1998, Emirates bought a minority stake and took over its management. It stayed in the black for most of the next decade, even in 2001 when several of the airline’s planes were destroyed in an attack on the main international airport by Tamil Tiger separatists.

But the partnership was terminated and the chief executive sacked by then-president Mahinda Rajapaksa in 2008 after the carrier refused to bump fare-paying passengers to make room for members of his family returning from a trip to London.

The authorities tried to sell a 49 percent stake in SriLankan in 2017 when tourism was booming, but private equity firm TPG eventually withdrew its bid after deciding it was not a viable operation.

Source: AFP
--Agencies