Sri Lanka scraps plan to sell loss-making national airline

COLOMBO

Sri Lanka has scrapped plans to sell off its indebted national airline despite shortlisting three potential buyers, the government's privatisation agency said on July 19.

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 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 July 19, 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" regarding the carrier.

The IMF 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.