Sri Lanka has decided to scrap its plans to sell its heavily indebted national carrier, SriLankan Airlines, despite having shortlisted three potential buyers. The announcement came from the government’s privatization agency on Friday.
The government had sought to divest SriLankan Airlines as part of a broader effort to address its economic challenges, a key demand by the International Monetary Fund (IMF) for the $2.9 billion bailout granted last year. The airline, which owed over $2 billion by the end of the 2022/2023 financial year, had attracted initial interest from six firms. In April, three potential investors, including Malaysia’s AirAsia, were shortlisted.
On July 9, the cabinet of ministers decided to terminate the ongoing bidding process for the airline’s sale. The State Owned Enterprises Restructuring Unit issued a brief statement announcing the decision, but did not provide specific reasons for halting the sale. The government indicated that it would pursue an “alternate strategy” for divesting the airline, based on a new framework to be approved by the Cabinet.
SriLankan Airlines, with nearly 6,000 staff, has been a significant burden on the country’s budget, exacerbating Sri Lanka’s economic woes. The carrier has faced a history of mismanagement and interference, complicating efforts to find a viable buyer. Notably, in 1998, Emirates acquired a minority stake and managed the airline successfully until 2008, when the partnership ended under controversial circumstances.
Efforts to sell a 49 percent stake in the airline in 2017 were unsuccessful, with private equity firm TPG withdrawing its bid due to concerns over the airline’s operational viability.
The decision to abandon the sale plan reflects ongoing difficulties in resolving the airline’s financial and operational challenges. The government’s new strategy for managing SriLankan Airlines will be closely monitored, with stakeholders awaiting details on how it plans to address the carrier’s financial instability while meeting IMF requirements and broader economic goals.
