By Rajeewa Jayaweera –
Rajeewa Jayaweera
‘News in Flight,’ a popular worldwide aviation publication recently carried a news report titled, ‘Emirates refrains from investing in foreign Airlines after a bad experience, Investing in SriLankan Airlines.’
Quoting Business Insider, an American financial and business news website, President Tim Clark is on record as stating, despite a profit of USD 762 million, Emirates decided to stay away from investments.
Clark has justified his decision to stay away from airline investments as buying equities in other airlines takes away management attention on Emirates. He has cited his experience in investing in government-owned loss-making Air Lanka in 1998. He felt political interference made his task difficult.
Emirates paid GoSL, USD 70 million for a 40% stake in the airline. It also received a 10-year management contract.
“I was down there between six and eight times a year. Sri Lankan politics was volatile. There was a war going on, and we had a lot of problems to deal with.”
Clark claimed, by the time the partnership ended in 2008, Emirates had managed to turn Sri Lankan around through great difficulty.
“The experience left a lasting impression on Emirates and its president. In short, he doesn’t think it’s worth it. What it taught us, in the end, was that the management time being soaked up in the M&A activity and the subsequent on-going management of these airlines to protect your investment was disproportionate to the return,”
Clark says Emirates has grown organically to a scale where equity acquisition would no longer make strategic sense for the airline.
Other recent airline acquisitions are; Delta holds significant stakes in Air France/KLM, Virgin Atlantic, China Eastern, AeroMexico, and Gol. American Airlines invested $US200 million in China Southern. United Airlines spent $US100 million on equity in Brazil’s Azul. Etihad purchased large chunks of Alitalia, Air Serbia, Jet Airways, Virgin Australia, and Air Seychelles. Qatar Airways hold major stakes in LATAM, Cathay Pacific, and IAG, the parent company of British Airways but has shunned investing in SriLankan Airlines.
The Yahapalana administration has been sourcing for a strategic partner with a view of offloading loss-making national carrier SriLankan Airlines, since voted into office in January 2015. Having failed to do so, it is now pursuing a Public-Private Partnership format.
It would be prudent to ponder over views expressed by Tim Clark and current logjam faced in finding a reliable investor/partner for the national carrier.
When Emirates invested in Air Lanka and secured management control of the company, other than President CBK and Finance Minister GL Peiris, the entire cabinet of ministers opposed the deal. The UNP led by Leader of Opposition Ranil Wickramasinghe vehemently objected to the partial privatization and handed over a letter to the local UN office expressing his intention of abrogating the deal once voted into office. A majority of staff were not in favor due to misplaced national feelings. Once in office in 2001, the new UNP administration sent a delegation (two of them are senior advisors and another, a cabinet minister today) to Dubai to renegotiate the agreement and returned virtually empty-handed. The government adopted an extremely negative stance towards the investor and the airline thereafter. The Rajapaksa regime which assumed office in 2005 made no secret of their unhappiness of a foreign company having a stake and managing the ‘national carrier.’ Matters came to a head in early 2008 when President Rajapaksa ordered the cancellation of the work permit of Emirates appointed CEO Peter Hill due to a refusal to offload all 28 ticketed Business class passengers in a flight from London to Colombo to make room for a Presidential delegation. Emirates called it a day on March 31, 2008, exactly 10-years from the date of their entry.
Unlike Sri Lankan voters who have very short memories, foreign investors, including airlines have long memories. GoSL’s unsuccessful attempts since January 2015 in finding a strategic partner may have a lot to do with hindrances faced by Emirates from successive governments during their unhappy association between 1998 and 2008. A further drawback may be the government’s insistence on retaining 51% stake in any new arrangement.
Meanwhile, the newly minted ‘Restructuring Board’ is beginning to take shape with the addition of two new directors last week. The new appointees are; Oxford educated Prof. Arjuna de Silva, Chairman of the Anti-Doping Agency and former Chairman of George Steuart Finance and Johann Wijesinghe, Managing Director of Leisure & Aviation at the Hayleys Group. Wijesinghe did two separate stints in the airline’s Commercial Division and is the first aviation professional to be appointed to the Board in 39 years. While applauding the concept in principle, it needs to be highlighted, Hayleys Leisure & Aviation are General Sales Agents in Sri Lanka for All Nippon Airways, British Airways, Hainan Airlines, Qantas, and Oman Air. Oman Air operate flights between Muscat and Colombo and are competitors of SriLankan Airlines in their Muscat, Middle Eastern and London routes. Having their local representative in the national carrier’s Board with access to sensitive data and individual route results could give rise to situations of conflict of interest.
Lankan one / May 22, 2018
It is our political inneptitude that make all problems for airline; banks: business and all other section..still people vote for them?
Why are the poltiicans corrupt or people or both of them ?
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Amarasiri / May 22, 2018
Rajeewa Jayaweera,
RE: Emirates Remembers, The World Remembers
“‘News in Flight,’ a popular worldwide aviation publication recently carried a news report titled, ‘Emirates refrains from investing in foreign Airlines after a bad experience, Investing in SriLankan Airlines.’”
So, the Sri Lankan Airlines former management , all cronies of Para Mahinda Rajapaksa, have extended their reputation internationally.
Well done! Now the Paras, mean IQ 79, will have to fix the Airline on its own.
There is a saying in Sinhala, “Thama Hisata Thama Atamaya Sevenella”
Its one’s own had provides shade to one’s own head.
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K.Anaga / May 22, 2018
Yes Emirates!
You are right. You are not running a government.but a business organization- You cannot partner a government more so with Srilanaka. They will not allow you to FLY HIGH..
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Naman / May 22, 2018
People have got no choice in voting for a really good clean incorruptible Politicians as all political parties in SL are corrupt.
These politicians steal in large sums from Central Bank/Overseas aids/deals and then give tiny bits to the voters to get themselves Elected!
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Jim softy / May 22, 2018
I also heard, that govt asked Emirates Air lines again and they said no. NowChinese air lines and one Indian Air line are interested. I don’t think any of those will be that gentlemanly as Emirates was. It would be the same if they leased it to the American Venture capital fund. they would simply suck every thing and leave it once it no loner usable. Mr. Jayaweera: It is no point of criticizing just one organization. the whole govt institutions are like this. Even the next govt will be like this. What is important is convert your emotions to change the system and get a new crew to the govt. In the present system Ranil, Maithriapal and Mahinda Rajapakse and their cabinets are one and the same. there are more thieves in waiting to come back when the next govt comes back. Since 1948, it is the same group what ever the name or the symbol.
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Lasith / May 23, 2018
Don’t you think that if these idiots put their act together and run Sri Lankan more efficiently we may attract partners readily?
If they can operate Sri Lankan better we may not even need to look for people to partner with in the first place.
Government has to be decisive and rout out corruption in Sri Lankan once and for all. Get rid of the rotten eggs and start afresh. Yes they will have to face over staffing issues, sack many unscrupulous elements, plug many loopholes in the system, who will do it for us. The government has to do it and get it overwith rather than look of a partner and leave the partner to do all the dirty work.
Lasith
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Jim softy / May 22, 2018
What you say about Mahinda Rajaoakse and Ranil are all correct. but, people do not have choice. wil they pay for the loss they made to the country. NEVER> they both wants to come back and there are many say yes at ever cost. YOu and many other can only complain. See MAgananda complained and now he is silent and some other opposition political groups are trying to use Nagananda for their benefit.
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Justice & Fairplay / May 22, 2018
Emirates’ sentiments will be shared by other investors as well. With such an unprincipled attitude towards foreign investment, and given the political volatility and lack of independence of the judiciary, Sri Lanka is a gone case, in my view.
The saddest part is, those in government do not see it.
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Shevan / May 22, 2018
Whether he is eminently qualified to be appointed as a Board member or not there certainly would be a conflict of interest as long as he employed with Hayleys .
Could his appointment perhaps be a precursor for possible involvement by Hayleys in the much talked about public/private joint venture to resurrect Sri Lankan Airlines ? If it is so perhaps it makes “some sense
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Rajeewa Jayaweera / May 22, 2018
Shevan
If that be the case, there must be transparency. A partner/investor gets a seat/s in the Board only after deal is sealed and agreed amount paid up. Not before.
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Shevan / May 23, 2018
Agreed.But since when have we seen any transparency even under this so called yahapalanaya?
Little that is known of this appointees capabilities whilst with Air lanka/Sri Lankan does hardly qualify him to be an expert in the industry as claimed.
As such the only plausible reason may be political .Whose hand is behind the move? There are too many players
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kolla / May 22, 2018
Ranil has been a disaster for the country and a catastrophe for the UNP ! Being a pretender, a bogus man and an manipulator to everything he picks up from here and there and then speaks in a high pitched tone like an expert, the last word on wisdom ! He opposed the privatization of SriLankan airline . The country ended up losing billions afterwards.
Mahendran is Ranil’s life time buddy and the best operative he knew. How can you misjudge a rascal like this with whom you have spent years ! How about Ranils Board at Srilankan this time ? All buddies, not appointed on any professional basis.
Mahinda is a yokel only interested in ego and thuggery. He has no idea of airlines except as place to earn commissions. Namal likes Srilanakn for other reasons. Mahinda’s brother in law, the joke Wickramasinghe thinks the airline is a condom factory !
This is our national leadership !
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Steve / May 22, 2018
Emirates is a prestigious award winning airline which can stand on its own. Sri Lankan is a politically and financially corrupt and bankrupt airline. The country cannot be proud of its national airline. The only way out is to completely stop political interference and run the airline purely as a profit making business. The taxpayers cannot bear the burden anymore.
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K.Pillai / May 22, 2018
Thank you Rajeewa Jayaweera for the informative article.
The reputation of Sri Lanka is tarnished and will need Herculean effort to regain our brand name.
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The incident quoted by Rajeewa is fresh in our minds ~ “…………Matters came to a head in early 2008 when President Rajapaksa ordered the cancellation of the work permit of Emirates appointed CEO Peter Hill due to a refusal to offload all 28 ticketed Business class passengers in a flight from London to Colombo to make room for a Presidential delegation……………”.
At that time MR family (and sycophants) thought that they owned Lanka. MR was hoping to be President for life. But things changed and if the present GoSL tries anything like the incident described, media will actively publicise it and there will be a furore.
Emirates started small but Tim Clark was given a free hand. He built Emirates to be one of the best and his satisfaction was that. Evidently he still leads a very simple private life. Peter Hill was as conscientious as Clark but the incident evoked a backlash we cannot buttress.
Political interference is still there but we have to wait and see how the new board performs.
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asela / May 22, 2018
Rajeewa I do agree with you on the point that you have raised CONFLICT OF INTEREST having Johanne Wijesinghe on the SriLankan Airlines Board. With due respect to Johanne having worked as a Country Manager In the Airlines with adequate knowledge in aviation is fairly a reasonable choice however his involvement in Heyleys chairing the biggest seat on Aviation will certainly have an impact on the national carrier. Unable to understand why the Government had ignored this vital issue when the appointment was made.
However I am not with you on Emirates bringing profits during their tenure. We all know how they did it.
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Rajeewa Jayaweera / May 22, 2018
Asela
That is not my opinion. I have quoted Tim Clark. Note the sentence starts ‘Clark claimed’. I have challenged its veracity in many of my articles.
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Sheriff / May 22, 2018
Sri Lankan Airline news has become a bitter pill or like a cup full of Arishta ( a native bitter herbal syrup). When ever you read about this airline it’s so unpleasant and leaves a bad taste in ones mouth. Add to the misery most actions taken or delayed by the GoSL and the company has resulted in further decline in standards and service levels. The blame game goes on and now with the Presidents commission more garbage and dead rats are coming out of the cupboard. All these further delayes the urgently required actions of cleaning up this mess . The staff must perform BODHI Puja and pray in the nearest church or Kovil thanking Gods that this country is not developing and booming economically. Whilst we waste time to write, investigate, blaming each other, the airline will be caught with it’s pants down. Soon more airlines will look at Sri Lanka with added frequencies and even a low cost airline will startup operations here . Similarly when Emirates management left in 2008 and the war ended in 2009. Sri Lankan Airlines top management was not prepared for the change in the economic front, never anticipated the growth in competition, other airline frequencies to increase, more tourists arrivals, kept blaming each other and pulled out of key European destinations, offering our inbound tourists passengers on a platter to the competition. A kind of accepting defeat shamefully purely due to the poor commercial foresight and inability. Just get on with it. Kick some asses and go back to business.
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Thondamany / May 22, 2018
Lets conduct a Bodhi Pooja and handover the Sri Lankan to the Hayleys…………….
That $ 70m sale not opposed by CBK & GL, could we have one of them or both speak or spill ?
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Faraj / May 22, 2018
After Emirates left only the belly fat of Srilankan hostesses grew along with their arrogant attitude towards passengers, nothing else.
MR thought SriLankan airline was his litter and Peter Hill was employed to carry that here and there with MR and his family in it. Employees of Srilankan think it is something they inherited. And the govt and the majority still think SL has got the guys to run an international airline successfully just because they are educated in UK/US.
Idiocy, lethargy, corruption and fake pride brought Srilanka(n) down.
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Daljit Singh / May 22, 2018
Let Air India take it over.
Then built the bridge over Adam’s bridge
Merge with Tamil Nadu economy: The first largest in India and a vibrant IT and Financial and Health sector based state. It also has a high manufacturing base.
Open migration of Indians and Ceylonese
Finally merge as the 30th state. Making it like a smaller USA.
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K.Pillai / May 22, 2018
Daljit Singh advice ~ “Let Air India take it over………..”.
AirIndia is struggling. First show that AirIndia can walk properly.
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Nande / May 23, 2018
Is the fixation that the Country has with a National Carrier warranted? Never have we had the where with all to manage an air line. It only serves to massage the egos of our ruling class, leaving the losses to be funded by the tax payers.
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Nicholas Alexander / May 23, 2018
Rajeewa , you periodic outbursts of rhetorics should also include your vision for the airline had you been selected as the CEO when you applied for the job. This may help the readers who are unfamiliar with the aviation industry understand the problem and the solution . Criticizing individuals is the most common pastime in Srilanka , loads of idle minds where even the devils dare not dwell in our country . No one comes forward to illustrate what needs to be done . I know another board has been appointed rationale of selection more baffling than before , the tight rectum CEO hangs in there for reasons known to nobody , Peter Hill well into his seventies being touted for the job and a consultant with hardly any ability to turnaround even a village grocery store but paid enormous amount , restructuring board with a person of the most dubious repute directing the board –The comedy gets worse . Shouting till we are hoarse does not help unless people who matter can rise and pull the swords out . I dont see that happening . Shut the airline down if you dare and let a privately run one emerge NO PPP will help
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Rajeewa Jayaweera / May 23, 2018
Nicholas Alexander
My vision for the airline has been clearly spelt out in the 20some articles I have published, namely, close down the airline and permit local and foreign investors to form a new airline. Presumably your uninformed outburst is due to not having read my articles.
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Tim Clark’s assertion only confirms position on the subject.
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On the issue of CEO’s position, suffice to state I would not have lasted two months in the job before being dismissed.
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Sheriff / May 23, 2018
We are missing the major part here. Please read the lines Sir Tim Clark spoke on Sri Lankan. This news item is all over the world news, especially in the Aviation forums. A statement coming from a man of this esteem in the aviation field “ highly volatile political situation” political interference “ it was a waste of their time in managing Sri Lankan” the impact of this few lines will be felt right across the industry. This could be the last nail on the coffin on anticipated airline investment, or could it be he smelled that a stronger contender is sniffing around Sri Lankan! Old Timmy knows the capability of Sri Lankan airlines staff strength and their reputation. This could be a strong regional competitor Put on the right track with the expected economic growth of the nation. Let’s look at these news with a broader spectrum and a foxy mind. Our action and restructuring has to be fast tracked as we are already 30 years late nation
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Lasith / May 23, 2018
What is destroying Srilankan airlines is the same thing that is bringing down the entire country, corruption and indiscipline.
To add to that the staff don’t help matters either as they have massive ego problems generally and show non-challance in their duty. Very condescending towards Sri Lankans particularly. Hardy professional in their ways.
Most of those flight attendants who were employed by Namal baby through the back door should be promptly kicked out and the entire staff should be retrained for starters. It is no surprise that between Father, Brother in Law and Son, and with Mihin leaning on Srilankan for everything, Srilankan crashed and burnt a long long time ago.
Even being a Sri Lankan, Srilankan airlines usually is my last option you can imagine how others must be feeling.
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UKCitizen / May 24, 2018
People need to understand the following about SriLankan Airlines.
The new airbus fleet is leased at above market rates, on 12 year leases. This represents a huge cost. The lease rates are so high that it is impossible to make money with these aircraft.
In addition it appears these contracts do not have a termination clause.
There are still 4 A350 aircraft on order from airbus. It appears these were purchased at full price (normally Airlines get up to 50% discount). There is still U$800 million due on this order.
Once again this order appears to not have a termination clause.
The combined future costs of both contracts will be in excess of $2 Billion – this is why nobody will buy the Airline. Nobody wants this liability.
Both orders are examples of Racketeering – a small group of people have pocketed a lot of money in Commissions.
There is no way out of this mess and there is no money to cover these massive liabilities.
Bankruptcy is all that remains.
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