Lankan airline offers stake to Jet, Kingfisher

SriLankan Airlines, the emerald island's national carrier in which Dubai-based Emirates has over 40% management stake, has approached leading private Indian carriers like Jet and Kingfisher for buying the Gulf carrier's shares. SriLankan had a 10-year management contract with Emirates that ends this April but due to sharp differences that erupted recently, the latter has made clear that it would not extend the same. The Gulf-based carrier is learnt to have evaluated its stake at nearly $150 million that is now up for garbs.

Kingfisher's executive V-P Hitesh Patel confirmed that the airline has approached them and some other Indian carriers. "We were offered that stake and SriLankan asked us if we were interested. We told them that as of now our hands are full with the Deccan merger and we are not interested at this point of time."

Jet Airways, however, maintained a "no comments" stand. Indian carriers are learnt to be offered a 43.6% stake. The Sri Lankan government holds a 51% stake in the airline, while employees have the rest.

Sri Lanka privatised its national carrier, Air Lanka, in April 1998 when it sold 40% stake to Emirates who agreed to manage the airline for a decade. Now the airline operates 100 flights a week to and from India and a majority of the traffic flying from here to Colombo takes connecting flights to Europe, Gulf or other parts of the world. "SriLankan acts just like a Gulf carrier who also take away traffic for onward connecting flights to Indian passengers," said an airline official.

Trouble erupted around last Christmas between SriLankan and Emirates when Sri Lanka's president Mahinda Rajapaska wanted to fly back from London to Colombo. SriLankan was asked to make available 35 business class seats. The airline's CEO, Peter Hill who was brought in by Emirates, said that these many seats couldn't be made available by offloading paid passengers unless an Presidential decree is issued. A Miffed government then ordered its low cost carrier Mihin to fly an A-320 to London in which the presidential party returned to Colombo.

Once the president returned, the government cancelled Hill's work permit. Then on January 6, Emirates president SriLankan MD Tim Clark issued a statement in Dubai, saying: "Emirates has notified the Government of Sri Lanka that it will not be renewing the shareholder's agreement which expires on March 31, 2008, and accordingly, with effect from April 1, management control of Sri Lankan Airlines will pass to the Government of Sri Lanka."

As a result, Sri Lanka is now looking for some experienced airline with deep pockets to run it. While with 100 flights a week, SriLankan could have been an attractive deal for big boys keen on expanding their global footprint like Naresh Goyal or Vijay Mallya, the troubled conditions in the island nation could keep them away.

Source: Times Of India