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Last year Prime Minister Ranil Wickremesinghe initiated the process of finding a new Sri Lankan counterpart, which culminated in the choice of TPG Capital, a US based US based privately owned group with a turnaround track of seven airlines ahead of other tenderers. However, on 5 May, Sri Lankan Chairman Ajith Dias informed employees that TPG had ended discussions to purchase a 49% interest in the airline following due diligence and that the conclusion was that prospective yields were less appealing than other investments.
Since 2009, the airline has been loosing cash and has disclosed short-term payables of 100 in its 2016 financial statements. Srilankan 26 billion rupees ($657. 3 million), doubling the balance sheet total. It was exacerbated by the devaluation of the value of the rupee against the US Dollar due to the airline's high spending in US Dollars and by cancellation of flights necessary for renovation work due to the daily closing of the Colombo Airport take-off and landing strip between January and March.
This step circumvents two tenderers who were initially short-listed by the TPG authorities but lack a successful record in global operation and turnaround. Frieden Air, a disused privately-owned airline that has promised to resume flight operation, had applied with the help of Lufthansa Consulting, an arm affiliated to the airline.
In March, Peace Air promised to take steps to ensure its expulsion from the due diligence procedure. A formal survey after the 2015 Sri Lankan election revealed that serious maladministration and bribery had wrecked Sri Lanka's financial system. Nishantha Wickramasinghe, chairwoman of Sri Lanka between 2010 and 2015 and a brother-in-law of Rajapaksa, was remunerated 500,000 rubles per months even though she had no skills.
The airline awarded him more than 700 free passes for a football competition and night motorsport in Colombo, the favourite project of Rajapaksa's siblings. In 2015, Weeratunga escaped from the land and is the object of an Interpol detention order. Japapaksa has disavowed that his administration has been plagued by rampant bribery.
In 2015, the governing coalition was forced to give $170 million to the airline lease AerCap Holdings as a fine for terminating a lease on four Airbus A350 planes. The 2015 chairman Dias said in October that he had got ten "quite a mess" and that "unnecessary aircraft" would be given back to financiers to reduce operational wastage.
Sri Lanka, with a 24 plane flotilla, has discontinued loss-making Paris and Frankfurt services and is concentrating on more profitable Asian and Middle Eastern itineraries. Over the next few month, it will be operating three services to India, the highest number of destination in India of any international airline.
In 1998, Air Lanka purchased 40% of the airline, then known as Air Lanka, for $70 million. Later, she raised her share holding to 43%, but finally resold her stock to the federal authorities for $53 million after Rajapaksa ordered the withdrawal of the visas of Peter Hill, the then airline's CEO, when he declined to accept a policy mission on an overseas plane.
The number of employees in Sri Lanka, which was 5,113 in 2008, had risen to 6,987 by 2015 due to politically motivated nominations. Harsch Vardhan, President of Starair Consulting, an aerospace consulting firm in New Delhi, said Sri Lanka is a prime example of how policy intervention and poor governance can destroy an organisation. "Sri Lanka was a great track record of public-private partnerships that fell prey to the policy of the ego," he said.
Airline employees are becoming more and more anxious about the safety of workplaces. Vijitha Herath, member of the People's Liberation Front Assembly, said blue-collar activists were alarmed at the potential effects of the airline's privatisation. Claimed that the airline's executive committee and officers would still benefit from flamboyant benefits, such as free upgrade from economics to executive school.
"There is no need to distribute such benefits to managers and other employees at a times when Sri Lanka is experiencing its most severe credit crunch," he said. "The airline needs good stewardship and good governance to guide the executive committee and employees, but the main issue is that there is no good governance.
"We are considering the commercialisation of the airline, which will be either a commercial alliance or a common venture," he said. However, it is still open whether the authorities can find a willing and able counterpart to work with their own benchmarks and take the risks of further policy interventions.