By Mandana Ismail Abeywickrema The country’s national carrier, SriLankan Airlines, has been dealt a severe blow to its restructuring process by the arrival of an Airbus A330-200 aircraft that was taken on lease as part of the termination agreement reached by the previous board of the airline on the leasing of three A350-900 wide-bodied aircrafts. The leasing of three A350-900 wide-bodied aircrafts from International Lease Finance Corporation of the US was reached by the SriLankan Airlines board, chaired by Nishantha Wickremasinghe, during the previous regime. The lease agreement was signed on 27 September, 2013. However, it was the airline’s board under the chairmanship of Ajith Dias that entered into the termination agreement with the foreign lease company. The termination agreement was signed on 4 October, 2016. Signed by former Chief Executive Officer (CEO) of SriLankan Airlines Suren Ratwatte, the termination agreement stipulates that in order to cancel the lease agreement for the three A350-900 wide-bodied aircrafts, SriLankan Airlines would have to pay a penalty of $ 115 million as well as the extension of an existing lease contract on an A330-200 and the signing of a new lease for another A330-200 aircraft. Also, The Sunday Morning learnt that the amounts agreed as lease payments for the two aircrafts were higher than the market price. The Government was unaware of the details of the termination agreement signed by SriLankan Airlines in 2016 until 2017. A letter from the Ministry of Finance to the Secretary of the Ministry of Public Finance on 4 October, 2016 states that the Ministry does not have any objections to the termination of the SriLankan lease agreement on the A350s, but to seek the advice from the Attorney General before terminating the agreement. Be that as it may, at the time of signing of the termination agreement by SriLankan Airlines, they had not received approval from either the line ministry or the Cabinet. It was on 8 November, 2016 that the Cabinet agreed for SriLankan Airlines to proceed with the termination agreement subject to the line ministry presenting a Cabinet Paper on the matter. Sources at SriLankan Airlines told The Sunday Morning that the airline had sublet the two A330 aircrafts forced on SriLankan as part of the termination agreement and one of the aircrafts was returned to Sri Lanka this month following the end of its sublet period. The aircraft in question was subleased to a Portuguese company by the airline and following the end of the period of the sublease, the Portuguese company had informed SriLankan Airlines to take over the aircraft. The Sunday Morning learnt that the aircraft was inspected by engineers of SriLankan Airlines who reported that it was in a dilapidated state and was not in line with the configurations of the rest of the airline’s fleet. However, once the lease period expired in late September this year, the aircraft was flown down to Sri Lanka a few weeks back and is currently stationed at the Katunayake Airport. Sources told The Sunday Morning that the airline would have to incur heavy expenditure on the grounded aircraft since the airline would now have to pay the lease payment as there is no sublease payment due to the carrier. SriLankan Airlines is yet to determine the next course of action on the aircraft. SriLankan Airlines Chairman Ranjith Fernando said the airline is currently inspecting the aircraft to determine its condition. He told The Sunday Morning that until the airline determined the condition of the aircraft and decided its next course of action, SriLankan Airlines would have to bear the cost of the lease payment for the respective airline. When asked how much the airline would have to pay the lessor for the aircraft while grounded, Fernando was unable to give a figure off-hand. He explained that when an aircraft is returned after a lease, it should be in the condition stipulated in the lease agreement and if not, the lessee will have to bear the cost of bringing the aircraft into proper condition. “Therefore, if the aircraft is not in proper condition, the lessee is legally bound to rectify the situation. It would not be a burden on the airline,” Fernando said. Nevertheless, the airline will have to bear the cost of the lease until the grounded aircraft is either sublet or fixed to be used alongside the rest of the SriLankan fleet. Enterprise Development Minister Lakshman Kiriella, the subject minister for SriLankan Airlines, told The Sunday Morning that if the authorities had agreed to take charge of the aircraft, then SriLankan Airlines was bound to honour it. “If the agreement (the original termination agreement) is violated, we will have to pay a heavy penalty,” the Minister said. However, Kiriella observed that after discussing the matter with the Ministry Secretary, he requested the Secretary to study the agreement and see what could be done. The Sunday Morning tried to contact former SriLankan Airlines Chairman Ajith Dias but was unable to speak to him even by the time of going to print. SriLankan Airlines is currently drawing plans to form a joint venture with a foreign aviation company under a 49:51 partnership, similar to the airline’s previous partnership with the Emirates Group. In April this year, a new board of directors headed by Ranjith Fernando was appointed to SriLankan Airlines with the aim of carrying out the restructuring programme and preparing the entity to be in form to set up a joint venture. According to Minister Kiriella, the State would absorb the losses of SriLankan Airlines in order to make it attractive to form a joint venture.