• New business model, possible PPP, formal timeline to follow upcoming Cabinet submission

The Government is preparing a restructuring plan for Sri Lanka’s National Carrier, which is expected to be finalised within the coming weeks before being submitted for Cabinet approval.

A formal timeline for the process will be established following the submission of the plan, according to Deputy Minister of Ports and Civil Aviation Janitha Ruwan Kodithuwakku. 

The remarks come against the backdrop of a request by SriLankan Airlines for an additional Rs. 10 billion in Treasury support to address mounting cash flow pressures threatening the National Carrier’s day-to-day operations. 

Speaking to The Sunday Morning on the airline’s financial health, Kodithuwakku explained that while a broader restructuring effort was underway, the immediate requirement stemmed from a liquidity crunch. 

“There is a problem with the cash flow, the money needed to maintain the airline, so SriLankan has requested additional funds,” Kodithuwakku explained. 

He also noted that the airline’s operating costs had increased, driven largely by global energy-related developments following the Israel-US war against Iran. 

“Our operational expenditure has increased slightly; fuel costs have doubled,” he said, adding that although the present funding requirement was substantial, the Government was closely monitoring the situation as “the price may change in the future as fuel prices decrease”. 

However, the Deputy Minister clarified that the Government was yet to release the requested funds. 

SriLankan Airlines reported a loss of Rs. 2.73 billion for the financial year ending 31 March 2025, compared with a profit of Rs. 7.9 billion the previous year, according to its Annual Report. 

The developments also come as Sri Lanka recently concluded its combined Fifth and Sixth Reviews under the International Monetary Fund (IMF) Extended Fund Facility (EFF), unlocking approximately $ 695 million in fresh financing. 

While the country’s economic indicators have improved, with 2025 growth reaching 5% and official reserves rising to $ 7 billion, the IMF has repeatedly pointed out the importance of restoring the financial viability of State-Owned Enterprises, particularly SriLankan Airlines and those in the energy sector.

Beyond short-term financial support, the ministry is also drafting a broader roadmap aimed at modernising the airline’s management structure. 

Kodithuwakku said that the carrier had continued to operate under the same institutional framework since its inception and required a fundamental shift in direction. “We are planning to restructure SriLankan Airlines and are moving this towards a more scientific, new business model,” he revealed. 

He stressed that the initial phase of the process focused on institutional reform and efficiency rather than an immediate sale. “The first stage is to restructure this institution in a way that makes it more efficient as an organisation,” he said.

Addressing the long-debated issue of privatisation, Kodithuwakku said the Government was considering multiple pathways to ensure the airline’s long-term sustainability, including a Public-Private Partnership (PPP) arrangement. 

“We are looking at whether a PPP model is necessary for this,” he stated, while stopping short of confirming a final policy direction. 

The restructuring process is expected to move quickly, with the Deputy Minister indicating that a timeline would be determined shortly after Cabinet consideration. 

“We will have a timeline finalised in a week or two. It has to be submitted to the Cabinet to move forward. That is when the timeline will be prepared,” he said. 

Meanwhile, Minister of Ports and Civil Aviation Anura Karunathilaka, speaking on a separate occasion, said that the airline was currently operating without a chairman or executive director, but assured that appointments would be made soon. 

According to the Minister, the interview process for a new chief executive officer is underway, while a candidate has already been proposed for the position of chairman. 

Earlier this month, briefing Parliament on the restructuring process, Karunathilaka revealed that the restructuring of Rs. 91.3 billion in loans obtained from State banks had been completed. 

Responding to a question raised by an Opposition MP, the Minister said that an agreement had been reached between the Treasury, the Banking Directorate, and SriLankan Airlines on a structured repayment mechanism. 

Under the arrangement, the Government continues to inject capital into the airline to facilitate repayments to State banks, with payments made twice annually in April and October. 

Karunathilaka further stated that the restructuring of a $ 175 million international sovereign bond guarantee was currently underway and expected to conclude by the end of 2026. 

He also referred to concerns raised by the Auditor General regarding the airline’s long-term viability as a profitable enterprise. 

In response, the Minister said that the Cabinet and the Treasury Secretary had provided written assurances that the Government would continue to extend the financial backing required for SriLankan Airlines’ operations. 

However, he emphasised that the Government did not intend to maintain the airline indefinitely in its present form. 

The Minister further disclosed that SriLankan Airlines’ total outstanding liabilities stood at $ 993.78 million at present.