SriLankan Airlines PPP plans expose the NPP government’s policy reversal as debt, losses and IMF-backed reforms force a rethink.
The SriLankan Airlines PPP plan has become one of the biggest tests facing President Anura Kumara Dissanayake’s National People’s Power government.
SriLankan Airlines, once treated as a symbol of national pride, now stands at the centre of a major policy reversal. Less than two years after taking office on a pledge to protect state-owned enterprises from privatization, the NPP administration is steering the loss-making carrier toward a Public-Private Partnership.
The move marks one of the most dramatic shifts of the government’s tenure. It has not been driven by ideology. Instead, it has come from mounting financial pressure.
Despite occasional operational improvements and exchange-rate gains, SriLankan Airlines recorded a group loss of Rs. 2.73 billion in the 2024/25 financial year.
More seriously, accumulated losses have now exceeded Rs. 600 billion. That has left the airline technically insolvent and dependent on continuous government support.
SriLankan Airlines PPP Driven by Financial Pressure
The burden on taxpayers has become harder to defend.
The Treasury is expected to inject nearly Rs. 90 billion into the airline through 2030. Around Rs. 30 billion is expected to be allocated annually.
In mid-2026, the carrier sought another emergency allocation of Rs. 10 billion simply to continue day-to-day operations.
Even ministers within the government have publicly described the business model as “unsustainable.” They have also questioned why citizens who have never flown should keep financing the airline.
Faced with these realities, and commitments under Sri Lanka’s IMF-backed economic reform programme, the government has abandoned its earlier opposition to private investment.
The Ministry of Ports, Civil Aviation and Energy has confirmed that the State can no longer operate the airline alone.
The government is now preparing proposals to attract a strategic investor while retaining a minority ownership stake.
Debt Restructuring and Leadership Gaps
To improve the airline’s appeal, the government has launched sweeping debt restructuring.
In May 2026, it restructured Rs. 91.3 billion in loans owed to state banks. The Treasury assumed responsibility for repayments through periodic capital injections.
Internationally, creditors accepted a 16 percent haircut on the airline’s USD 175 million sovereign-guaranteed bond. That move eased part of its external debt burden.
However, financial restructuring alone cannot solve the airline’s deep governance problems.
For more than a year, SriLankan Airlines has operated without a permanent Chief Executive Officer.
A.K.D.D. Dimal Arandara was appointed permanent Chairman in June after serving in an acting role. However, executive leadership remains unsettled.
Yasantha Dissanayake continues as Acting CEO while an international recruitment process nears completion.
Fleet Shortages Add to Recovery Challenge
Operational pressure has made the recovery effort harder.
Global aircraft shortages have disrupted plans to expand the fleet. The airline needs at least seven additional aircraft but has struggled to secure even one dry lease.
Rising jet fuel prices have added another strain. Instability in the Middle East has helped push fuel costs higher.
Nevertheless, the government has maintained long-haul services to destinations such as London, Paris and Sydney.
It is betting that uninterrupted connectivity remains vital for Sri Lanka’s tourism recovery.
To oversee the transformation, the government has appointed a Strategic Review and Restructuring Committee.
Presidential Adviser Dr. Hans Wijayasuriya chairs the committee. It is working with the International Finance Corporation as transaction adviser.
Their mission is clear: secure investors and complete the transition to a commercially viable SriLankan Airlines PPP before the end of 2026.
Whether that plan finally ends decades of financial turbulence, or merely delays another bailout, remains the defining question.
