BY SHWETA SHUKLA Courtesy Aviation A2Z

Emirates, which formerly held a 40 percent stake in SriLankan Airlines, might consider responding to the Sri Lankan government’s intention to privatize the airline.

Photo: By Oliver Holzbauer, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=53168656

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COLOMBO- According to CEO Richard Nuttall, SriLankan Airlines (UL), poised for privatization and having achieved an operating profit for the first time in 15 years, could become an attractive acquisition target for Gulf-based airlines such as Emirates (EK) and Indian Carrier Air India (AI).

Nuttall indicated that carriers from the Gulf region could capitalize on the airline’s favorable position among its neighboring Asian countries. He told this to The National.

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He emphasized that India is a significant market with great potential for expansion, presenting an appealing prospect for all interested parties.

Among the potential contenders, Nuttall suggested that Emirates, which formerly held a 40 percent stake in SriLankan Airlines, might consider responding to the Sri Lankan government’s intention to privatize the airline.

Emirates held partial ownership of SriLankan Airlines for a decade until the Sri Lankan government acquired all the airline’s shares in 2008. During that year, SriLankan reported a profit of approximately $30 million.

However, under government management over the subsequent seven years, the airline incurred losses amounting to $875 million.

When questioned about the potential involvement of Dubai-based Emirates in the bidding process, Mr. Nuttall clarified that he could not speculate on the intentions of Emirates or other entities from the Gulf.

He mentioned that the government’s approach is to seek expressions of interest within the next few months, and they are aiming for an expedited process.

Triple Trouble for Carrier

SriLankan Airlines has faced a triple blow due to the impact of the Covid-19 pandemic, the coordinated Easter suicide bombings in 2019 by Isis, and the financial disruptions experienced last year.

In spite of these challenges, Mr. Nuttall, who possesses experience with eight different airlines, has led the company to achieve an operating profit. This profit could have been notably substantial if not for the inherited debts.

He explained, With a turnover of $1 billion, the business generated a profit of $100 million. However, a major portion of this profit had to be allocated to cover finance charges.” He further emphasized the airline’s operational efficiency, expressing optimism that it will eventually become a profitable venture.

This profit marks the first time since the airline’s management by Emirates in 2008 that it has managed to stay out of the negative financial territory.

Further augmenting income is within reach, especially with the ambitious plan to increase the fleet size from 23 aircraft to 40 within three to five years.

Untapped Indian Market

According to the 57-year-old CEO hailing from Yorkshire, England, there are substantial gains awaiting in the untapped market of India.

During discussions at his Colombo office, he emphasized,

The grand opportunity lies in India. Collaborating with us opens the door to the Indian market from all angles. Hence, I believe this is a compelling attraction for Gulf carriers.”CEO Richard Nuttall, SriLankan Airlines (UL)

Despite India being the world’s most populous nation with 1.4 billion inhabitants, its commercial aircraft count stands at a mere 0.5 per million people. At the same time, China and the United States boast three and thirty aircraft, respectively.

Given the lengthy five-year wait for new commercial aircraft, forming a partnership with a major airline would be immensely advantageous in effectively capitalizing on the expansive Indian market.

We are geographically adjacent to the most densely populated country globally. If we secure an airline investment, it could potentially empower us with increased purchasing capabilities and expertise in specific domains.”CEO Richard Nuttall, SriLankan Airlines (UL)

Tata Air India Group potential Bidder?

While Gulf investors remain a potential option, Indian media sources have also indicated that Tata Enterprises, a prominent industrial conglomerate, might be considering investment following their recent acquisition of Indian Airlines.

With a background that includes roles at Saudi Airlines and Royal Jordanian, Mr. Nuttall proposed that an alliance with Tata Enterprises could be a strategically fitting arrangement.

This is due to Sri Lanka’s geographical proximity to India and its cultural understanding. Additionally, the airline presently serves 14 cities in India.

Highlighting Sri Lanka’s extensive pristine coastline, he emphasized that the country represents the nearest international-friendly beach to India by a considerable margin.”

Furthermore, the airline’s establishment could provide a Gulf carrier with a substantial hub in southern Asia, facilitating onward connections to China, Australia, and Southeast Asia.

Mr. Nuttall underscored that passengers in India who wish to fly east currently have to backtrack for three or four hours to major hubs like Mumbai or Delhi on the west coast before continuing eastward. In essence, we offer you a hub in the southeast, expanding your relevance in multiple directions for numerous cities.”

SriLankan Airlines Privatization Likely in Coming Year

n the previous year, the newly appointed Prime Minister of Sri Lanka, Ranil Wickremesinghe, made a commitment to privatize the airline due to its ongoing losses.

Even if we proceed with the privatization of SriLankan Airlines, this is a burden that we must share, even among the less affluent citizens of this nation who haven’t experienced air travel,” he remarked.

However, during a meeting this year, Ashok Pathirage, Chairman of SriLankan Airlines, stated that over the past three years, we have not received any financial support from the Treasury, not even a single dollar.”

It is understood that the government will determine the privatization steps in the forthcoming year.

SriLankan’s primary revenue sources encompass the substantial diaspora in the UK, Australia, and the Middle East, alongside the Indian market.

Additionally, its unique appeal lies in being situated in an unspoiled tourist destination with a welcoming local population, devoid of excessive development.

I have never encountered a place where so many people have shared, ‘Wow, the most wonderful vacation I’ve had was in Sri Lanka,’” conveyed Mr. Nuttall, who is married and has two teenage children. The people here are genuinely interested and hospitable, fostering a much more personal and human interaction than in other places.”

The new Sri Lankan government’s objective is for him to restore the airline to pre-Covid levels and then assess what potential buyers might desire beyond that.”

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