SriLankan Airlines is hoping the country's government will make a decision shortly on whether it wants to extend the carrier's management contract with Dubai-based Emirates.
The carrier has had expansion plans in place for two years, but has been frustrated in its ambitions by the long-awaited outcome of the government's deliberations over the future of its flag carrier. Emirates paid $70 million for a 43.6% stake in SriLankan in 1998 and began running it.
"What we are saying is you make up your mind if you want us to run it or if you want to run it," says Peter Hill, SriLankan's chief executive. Recent government signals have been positive the deal will be renewed.
The management contract expires at the end of March 2008. Emirates, which always takes the long-term view, wants the deal to continue, says Hill. He says that since Emirates bought into SriLankan, the government, which remains the majority shareholder, has not had to put any cash into the carrier. In fact it has "taken significant dividends" over the years, he says.
Emirates is not comfortable investing in new equipment for SriLankan with only 17 months of its contract to run, says Hill. At present the carrier operates a fleet of 14 Airbus A320, A330s and A340s. Terrorist attacks by Tamil guerillas destroyed four of its aircraft in 2001, but after tough cost-cutting measures the carrier recovered.
Although Sri Lanka has been suffering once again from terrorist activity on some parts of the island, which could cost its flag carrier some $30 million in lost revenue in its financial year to March, Hill believes this will be a short-term issue.
He wants the ownership situation to be sorted out so that SriLankan can grow as it wants to. "We've still got huge opportunities in India that are not available to others today," he says. "As soon as I have more aircraft I'll be doing Australia and South Africa, no question," he adds.
SriLankan made a net profit of $20 million on revenues of $607 million for the fiscal year ending March 2006.
Source: Airline Business
