Turbulent skies greet SriLankan

PB who 'knows nothing about airlines'
appointed chairman

Staff exodus with Emirates'
exit leaves airline struggling

Loss of code share will drastically
cut SriLankan's visibility

Emirates could control SriLankan
from within and without

By Sonali Samarasinghe

In an atmosphere of declining business and insecure staff the Government of Sri Lanka will take over the management of SriLankan Airlines on Tuesday, April 1.

Precipitated last December by the failure of the national carrier to accommodate 35 members including President Mahinda Rajapakse on a fully booked flight from London to Colombo which would have resulted in off loading commercial customers, the ensuing rift between major shareholder Emirates and the Rajapakse government culminated in Emirates cocking a snook at a renewal of the management contract.

Back foot

The government will take over management of the national carrier on the back foot. It has no business plan or a way forward. It has ditched its former Chairman Harry Jayawardena and up until Friday, March 28 was still juggling names for the chairmanship and board. Thus it was that even as late as Friday morning the names of Secretary, Ministry of Aviation, Tilak Collure and Treasury Secretary P.B. Jayasundera were being bandied about.

Finally President Rajapakse appointed Punchibanda Jayasundera as chairman, a man who once told The Sunday Leader he knew nothing about airlines in relation to a question on his appointment as a director of Mihin Lanka. An appointment he later resigned fromon April 10, 2007.

The rest of the government appointees to the board are Nishantha Wickremasinghe, the brother-in-law of President Rajapakse, Lalith De Silva, earlier of Telecom during Thilanga Sumathipala's chairmanship and Central Bank Governor Nivard Cabraal's brother-in-law Sunil Wijesinghe who is also chairman of Dankotuwa Porcelain.

President's man

Informed sources however told The Sunday Leader newly appointed consultant Lalith de Silva, earlier of Sri Lanka Telecom and Saudi Telecom whohad been presenting himself as the President's man, had been pushing for the executive chairmanship of the company rather than as a figure head chairman under the Emirates management deal.

The fact that all executive decisions were being made by Emirates with the GOSL members not having executive powers was another contentious issue raised by the government in early December 2007 at a one-on-one discussion between Wickremasinghe and Emirates'TimClarke.

Knows nothing about airlines

Meanwhile Treasury Secretary Jayasundera is a man who may not know anything about airlines but is well versed in the sale of the national carrier to Emirates as it was he, as chairman, Public Enterprise Reform Commission (PERC) who clinched the controversial deal 10 years ago, widely regarded as one of the most corrupt scams perpetrated on the public weal by the then Chandrika Kumaratunga government of which Mahinda Rajapakse was an integral part. After all, Rajapakse was a part of the Chandrika led cabinet that approved the controversial deal in the first place.

On March 17 this year President Mahinda Rajapakse had called for the resignations in writing of the government nominated directors Harry Jayawardena (Chairman), Nishantha Wickremasinghe, Sanath Ukwatte and Raju Chandiram. The letter written at the behest of Rajapakse calling for their resignations was in fact signed by Punchi Banda Jayasundera himself, who has now clinched the top post to the detriment of Harry Jay. However informed sources said the government was looking for a full time chairman unlike Harry who ran his own business empire.

Saner counsel

Nishantha Wickremasinghe on behalf of the government flew to Dubai two weeks ago for last minute negotiations with the President of Emirates and Director, SriLankan Airlines, Tim Clarke, but Clarke indicated he was unable to meet him and directed Wickremasinghe to CEO, SriLankan, Peter Hill.

Earlier it was only Nishantha Wickremasinghe who emerged as a saner counsel in the chaos following the eviction of Peter Hill. Last week Wickremasinghe declined the chairmanship of the national carrier citing pressure of work.

With Wickremasinghe's refusal two other names were put forward, Singer Chairman Hemaka Amarasuriya and Tobacco Company's new Chairman Jayampathi Bandaranayake. However given the magnitude of the problems the airline was bound to face with the exit of Emirates there were few takers for the post. And here's why.

Exodus at SriLankan

A large number of staff are getting jittery about the future. Already 32 pilots are leaving, many going to Kingfisher Airlines while some 30 engineers have left, a large chunk of them to a maintenance outfit in Abu Dhabi called Gamco. Of the cabin crew some 40 have already left for more lucrative and stable prospects at Etihad and Emirates. Such an exodus would mean the airline would have to shrink its operations, reduce its frequencies and cut down on certain routes as the airline would not be able to operationally sustain itself.

No CEO yet

So far there is still no Chief Executive Officer or Chief Operating Officer appointed although the carrier had advertised internationally for the CEO post. Ironically this was despite the government making the appointment of expatriates as heads of departments, CEO - catering, engineering etcetera one of the primary contentious issues that led to the eventual parting of ways with Emirates.

Former Head of Commercial, Seelan, now country manager China , and Head of Worldwide Sales and brother of Sajin Vass, Manoj Vass Gunawardena have both applied for the post of COO while informed sources said Manoj had also applied for the post of CEO. Airline staff are more concerned about the post of CEO which they say has to be filled by a knowledgeable man with airline expertise unlike with the post of chairman which is more a political appointment with perks and benefits.

Staff are concerned that political appointments and a large exodus of staff will affect the credibility of the airline.

Changing the structure of the company

The seven member board consists of four government appointed directors and three Emirates Directors - Tim Clarke, Gary Chapman and Nigel Hopkins. Emirates owns 43.63 % of the shares while the GoSL owns 51.05% and employees hold 5.32% of the shares. The government will be unable to change the structure of the company without the approval of Emirates which will remain the national carrier's largest competitor in the skies. Mind you Emirates will also have access to SriLankan Airlines secrets including a huge data base of passengers, routes and agents.

Unsavory options

There are some unsavory options before the government. It can buy out Emirates but so far Emirates run by the astute businessman Tim Clarke is not selling. In January Emirates floated a sum in excess of US$150 million as the value of their stake in SriLankan Airlines but for the time being Clarke said it would retain its equity and maintain a board presence. And their lies the rub for the government.

Emirates bought the 40% stake plus full management control and exclusive rights for 10 years at a mere US$ 70 million.

At the time chief negotiator for the government was none other than P.B. Jayasundera. Perhaps he has been returned to the national carrier to make restitution for his follies 10 years ago.

EGM

While day to day activities and resolutions could be carried through with a 50 plus 1 majority at a board meeting, special resolutions may be passed as per the Companies Act only at an Extraordinary General Meeting and by a majority of 75% of those shareholders entitled to vote and voting on the question and where not less than 15 working days notice specifying the intention to propose the resolution as a special resolution has been duly given.

Special resolution

It would take a special resolution to change the structure of the company. A special resolution would be required to alter the company's Articles of Association, approve a major transaction, approve an amalgamation of the company, reduce the company's stated capital, wind up the company, and change the name or status of the company.

Diluting shares

If for instance the government intending to dilute the share slice of Emirates decided to increase its share capital, it would only be able to do so at an EGM and the special resolution to do so would require 75 percent under the Companies Act. However even international norms require a majority of two thirds that is 66% of the majority.

Unfortunately the government has only 51.05% shares. Even with the employees' shares the government can still only muster 56.37% of the majority and therefore Emirates will remain a formidable force within the company with the government rendered a eunuch.

Share purchase agreement 

Furthermore the Share Purchase Agreement between the government and Emirates will not end tomorrow, it will be only the management contract and Business Plan that will cease. Therefore the provisions of the Share Purchase Agreement will also come into play.

For instance if the government decides to sell its shares it is obligatory for the GOSL to offer first right of refusal to Emirates under the agreement and vis a versa.

Aircraft lessors

Maintaining the leases say SriLankan Airlines administrative sources would be one of the biggest challenges. In fact it is reliably learnt that airline leasing companies are already getting jittery about the Emirates pull out as questions arise whether SriLankan Airlines can stand alone surrounded by such huge financial commitments.

The uncertainty has placed the government in a very vulnerable position. The other issue is of guarantors for the leases when Emirates walks out.

Sale and lease back

Emirates operated on a sale and lease back policy of the fleet and therefore the company is cash rich at the moment and the government will not face any immediate monetary anxiety. The Emirates sale and lease approach made sure the company had an easy cash flow with a balance sheet that showed no liabilities and no assets. The government is however expected to face problems from the lessors who will no doubt call upon the government to at least obtain a guarantee from Emirates or come back with a principal operator of stature.

Banks and investors were willing to take risks or negotiate without collateral due to the stature of Emirates as a financial giant, however industry sources say it would be difficult for the Government of Sri Lanka or SriLankan Airlines alone to negotiate in the financial world of airlines at the same level of acceptance.

There was a great deal of economisation with Emirates acting as big brother but with SriLankan having to negotiate on its own probably having to pay cash up front the running will be tough. The government too may have resorted to the sale and lease method of its aircraft but that road has already been travelled by Emirates.

Capital infusion

The national carrier will not be able to stand alone if there is no capital infusion for expansion of fleet, redecoration of aircraft or increase in capacity and routes. With all the negatives in the country, a lack of a modern fleet, a lack of flatbed seats and the prevailing war situation, SriLankan Airlines will face many challenges as it goes it alone.

Company sources said sorely needed refurbishing of the aircraft which will cost a minimum of US$30-40 million or at least a redesign of the seats in business class which will again cost a heavy packet.

Offices

Offices of Emirates and SriLankan Airlines have been amalgamated in approximately 23 destinations and if SriLankan Airlines wants to move out after April 1 that too would involve a cost factor. Moreover station managers and staff would also have to be maintained by SriLankan Airlines further upping the cost factor.

 Skywards

Air Lanka had a frequent flyer programme called Serendib Club whereas Emirates at the time did not have such a system. Emirates following the 1998 deal took over the Serendib system, upgraded it into a more sophisticated programme and renamed it Skywards where Emirates became the dominant partner.

BOI Chairman Dammika Perera earlier lamented to The Sunday Leader the entire programme was controlled in Dubai and even the membership is not made known to the overseas SriLankan country managers.

Meanwhile Skywards members have already been informed in writing  of the key changes from April 1, 2008 as follows:

"Earning Miles: You can continue to earn Skywards Miles for travel on SriLankan Airlines until March 31, 2008. Any missing miles can be claimed within six months of the travel date.

"Reward tickets: Rewards on SriLankan Airlines should be redeemed by March 31, 2008 and will be valid for a period of one year from the date of issue. Assistance with any ticket changes will continue to be handled by Skywards service centres."

However now comes the crunch. With regard to Gold and Silver membership benefits starting April 1, 2008, the following benefits will only be available when flying with Emirates:

(1) Priority check-in at Business Class counters when travelling in Economy Class.

(2) Guaranteed excess baggage allowances.

(3) Guaranteed seat reservations for Gold members.

(4) Lounge access in Colombo when travelling in Economy Class for Gold members.

And from April 1, 2008, all Skywards queries are to be directed to  the Emirates office in Colombo.

Skywards of course continues to be internationally accepted and with Emirates' expansion to over 100 destinations worldwide, and a global network of partner airlines, hotels, car rentals and financial services, Skywards could be used not only for travel but for upgrades and inspirational shopping and a variety of exclusive holiday and leisure rewards.

SmiLes

 SriLankan Airlines meanwhile has commenced a frequent flyer programme called SmiLes. However industry sources say the scheme is localised and gives no value to the customer especially in the international market.

Locally oriented and more designed for a local budget carrier rather than an international airline, the quaint scheme offers exclusive privileges on SriLankan Airlines flights, free miles when you fly with SriLankan, airlines ticket purchases / partial payments, purchases on in-flight duty free, Serendib Treasures and purchases on holiday packages from SriLankan Holidays.

SmiLes members who reach the Silver Tier level can also opt to join the Baggage Plus or Baggage Premier programme. The Baggage Plus members will get an additional 25kgs and Baggage Premier members will get additional 35kgs. SmiLes Baggage Premier members will also have access to the airport lounge and guaranteed seating on economy class.

Meanwhile obviously Emirates is holding on to its huge customer base from Skywards courtesy SriLankan Airlines.

Code Share

Both carriers benefit from the code share agreements and given that SriLankan does not fly to many countries like US, Canada, Rome, Zurich, and code shares with Emirates including flights code shared to Singapore, two points in Germany other than Frankfurt and some lesser known points in the UK like Birmingham, this would be a major loss.

SriLankan's international visibility will drastically decline which will in turn affect its load. The loss of code share flights also means that customers are inconvenienced. Furthermore a code share Emirates flight gave SriLankan Airlines 25% of the fare which SriLankan would now lose.

Reservation system

SriLankan has been totally technologically integrated with Emirates. The national carrier shares the Emirates owned Mercator system which was upgraded at preferential rates of US$1-2 million.

Not only does Emirates have access to all SriLankan Airlines data they will either withdraw the service within six months or charge SriLankan the going commercial rates of US$5-6 million to remain. Mercator was an outgoing system from Emirates that was handed over to SriLankan.

Industry sources earlier told The Sunday Leader it was obvious Emirates had been getting ready for a pull out. By selling the two remaining aircraft owned by the national carrier and then leasing them back Emirates had successfully liquidated their assets. With 43.6% of the shares they would also have equal status on a future board and could be the biggest stumbling block in any decision. Emirates would remain SriLankan Airlines' formidable competitor in the skies with one advantage.

Emirates would be able to control SriLankan not only from within but also from without including through their IT reservation system with which SriLankan is now totally integrated.

Media in the eye of a storm

By Rupert De Alwis

Applications for the Journalism Awards for Excellence 2007 conducted by the Editor's Guild of Sri Lanka in association with the Sri Lanka Press Institute (SLPI) will close tomorrow (March 31) in the midst of controversy as the once prestigious awards head towards mediocrity.  

The controversy comes even as the Editors Guild and SLPI have deliberately shut out Leader Publications from participating in the awards scheme by including in the general entry rules a clause which makes it imperative for an editor to endorse that the newspaper from which a journalist makes an application subscribes to the Code of Ethics of the Guild and the Press Complaints Commission.

Editors working for Leader Publications, needless to say, are not members of the Editors Guild and the Group does not subscribe to the Press Complaints Commission or the mandate of the SLPI. 

Top awards

Ironically, the Leader Group has hitherto been the most successful newspaper group since the inception of the awards in 1998, sweeping the boards by winning practically all the top awards. Neither has the Leader Group ever had any connection of any sort with the management of the awards scheme nor the panel of judges.

  This group has won the top most award - The Journalist of the Year Award every year since the inception of the awards in 1998, except in 1998, 2001 and 2003. In 2003 the entire staff of the Leader Group decided not to participate in the awards to show solidarity with one of their colleagues - Frederica Jansz, who faced harassment by the Editors Guild regarding her application.

The Editors Guild of Sri Lanka had been conducting the Journalism Awards of Excellence for 10 years since 1998 but collaborated with the Sri Lanka Press Institute (SLPI) - an organisation fuelled primarily by Swedish funds in 2003.

Rich man's club

While the Press Institute is a private, rich man's club run by a select few businessmen who also run newspapers, the Leader Group and several other publications have not subscribed to the SLPI or to the Sri Lanka Press Complaints Commission, nor does it accept its mandate.

In fact this club is so exclusive that the Editors Guild has not yet invited Daily Mirror Editor, Champika Liyanarachchi to be a member even though the criteria to be invited as a board member is six months as an editor of a national newspaper. Liyanarachchi has been an editor since January 2007.  Ironically, however, she has to endorse the applications of any journalist of the Daily Mirror who wished to qualify for an award stating the newspaper subscribes to the Editors Guild Code of Ethics.

Meanwhile it is interesting that the Press Institute which has its own hierarchy is nevertheless controlled by Waruna Karunatilleke, a cameraman attached to Reuters, much to the discomfit of several high level board members. The Press Institute has two arms - the Press Complaints Commission and the Sri Lanka College of Journalism.

SLPI which is funded primarily by the Swedes has run into financial and administrative trouble as it continues to make executive changes due to an exodus of top level staff, and the Swedes deciding to now pull out their financial support, has compelled the SLPI management to look at appealing to the European Union to bail them out if possible. 

Shutting out the best

However shutting out the Leader Group which consists of three publications - The Sunday Leader, Irudina and The Morning Leader from the awards in order to force the hand of the Leader Group to join the rich man's club at the Sri Lanka Press Institute has backfired on the cash strapped Sri Lanka Press Institute. 

The reason SLPI needed the support of the Leader Group in particular was to not only justify their existence as an all encompassing, umbrella media organisation in the country but to also be able to peddle that line in order to ensure a steady, foreign cash flow.

No free lunch

But there's no such thing as a free lunch and foreign funding was available only if SLPI could showcase itself as a body that had in its clutches every single media group in the country. This was not to be as the Leader Group including several other publications would not subscribe to SLPI nor bow down to the dictates of a select, few, private businessmen who wished to control the newspaper industry in the country.

While SLPI started off as a body focusing on the print media they have now tried to encompass the electronic media as well. However, again SLPI has run into trouble with both the massive MTV/MBC network which owns the Sirasa, Shakthi and MTV TV channels and three radio channels, and Swarnavahini of the EAP Group, rejecting in writing, the mandate of the Press Complaints Commission (PCC).

Such was the desperation of the PCC to rope in for example the Maharaja electronic media group, that repeated appeals were made only to be rejected out of hand.

Desperate

Again so desperate was SLPI to have the membership of the Leader Group and show full control of the newspapers in order to attract foreign funds that it resorted to subterfuge by even including Leader Publications in its Press Complaints Commission Annual Report 2006.

Not only that, while it has shut out the Leader journalists from the awards of 2007, in its Annual Report 2007,  PCC unabashedly continues to abuse the Leader Publications name in order to showcase itself as an all encompassing body and to attract much needed foreign funding.

Even though the PCC told The Sunday Leader it had not yet fully prepared its 2007 report despite the fact a staff member had assured The Sunday Leader an  Annual Report 2007 could be collected from their office, the PCC official website has an Executive Summary of the Annual Report  2007.

False impression

There, in order to create a false impression that the Leader Group is part of SLPI and PCCSL among the several newspapers against whom it had received complaints, it also lists The Sunday Leader.

The Annual Report 2007 of  PCCSL does in the first paragraph acknowledge that several challenges remain for PCCSL such as securing the participation of The Sunday Leader, The Sunday Observer, The Morning Leader and Irudina newspapers. Nonetheless, by later including The Sunday Leader in its complaints list, it negates its own assertions in its first paragraph. 

However what is absurd is that admittedly, the only clout the PCCSL has in so far as it stands to influence the newspaper industry is that a newspaper subscribes to the PCCSL process when carrying a 'right of reply.' In laymen's language, this means that if a newspaper carries a right of reply it would acknowledge PCCSL at the end of it. This does not in anyway mean that PCCSL has any right to compel a newspaper to in fact carry a right of reply.

Deception

PCCSL also continues to communicate with the three editors of the Leader Group in order to create an impression of solidarity in the eyes of the public, its sponsors and foreign funders. 

This is despite the fact that Leader Publications has not subscribed to the mandate of the PCC or the Sri Lanka Press Institute and thereby does not wish to accept any communication from either the PCC or SLPI on any matter. Neither does Leader Publications recognise the authority of PCCSL.

It is interesting however that  PCCSL in its last report (2006) has attempted to mislead the public and the funders by noting down complaints received against The Sunday Leader, thereby creating the perception it subscribes to the SLPI/PCCSL mandate.

By not stating the Leader Group is not party to the PCC in its report, PCC has attempted to create the perception that Leader Publications also comes within its mandate.

Double deception 

This deception practiced by SLPI is all the more evident since the report referred to a complaint received against the Lanka newspaper and noted that the said newspaper does not accept the PCCSL mandate. Therefore by making specific reference to the Lanka newspaper not accepting its mandate, it has deliberately and wilfully created the impression that Leader Publications does subscribe to its mandate.

In fact in its complaint summary for February 2006 it states under the 'Action' column regarding Lanka newspaper - the JVP propaganda sheet;

 "03-02-2006: Forwarded to The Editor for necessary action on 07/02/2006. As Lanka newspaper is not a member newspaper the file closed on 28/03/2006."

However with regard to The Sunday Leader for instance, in the same column it says, "01/03/2006: Wrote to the Editor to take necessary action."

Certainly for an organisation consisting of a few kultur members that has taken upon itself the role of policing the media, its conduct raises serious issues of credibility.

While the Leader Group is not against self regulation which is rigorously practised within the group as much as the group respects the rule of law, good governance and democratic values of which Responsible Freedom of Expression is the bedrock, it is against a rich man's club attempting to manipulate the media industry to suit business interests and personal agendas.  

Code of Ethics

The Leader Group has since its inception subscribed to an International Code of Ethics, most particularly to speak to the other side at all times when writing a story. For this our journalists have had to suffer in remand as we saw in the case of young Arthur Wamanan.

 The Leader Group also holds its sources sacred and as a result we have on numerous occasions had to suffer the inconvenience of having CID officers grill our journalists and editors to reveal our sources. We have stood steadfast, informing the CID we are willing to face any challenge in court but will never reveal our sources.

The Leader Group also carries rights of reply. The only difference is we do not acknowledge the PCCSL at the bottom of the article.

Keeping the best out

Funnily, however, it is for this lack of acknowledgement that the Sri Lanka Press Institute which consists of The Editors Guild, The Publishers, The Working Journalists Association and the Free Media Movement, has now barred the journalists of the Leader Group from participating in the awards.

New rules

The general rules of entry inserted newly and specifically aimed at shutting out the Leader Group states that "all entries by journalists must carry the declaration by the journalist/s that they abide by The Code of Professional Practice (CPP) of The Editors Guild of Sri Lanka and by the Rules and Procedures of the Press Complaints Commission of Sri Lanka." 

CPP has nothing that is not already included in the internationally accepted General Code of Ethics for Journalists as expounded by the International Federation of Journalists and Article 19.

In any event the Leader Group does indeed subscribe to the contents of the Code of Professional Practice, though it does not acknowledge the authority of a chosen few rich men. Nor does it acknowledge SLPI or  PCCSL as having any validity in law or fact, especially as the conduct of SLPI has been in serious question with regard to various matters of the media.

The Leader Group bows only to the supreme law of the land. In every other instance it remains unbowed and unafraid.

Keeping the Leader Group out of the awards scheme for 2007 by bringing in new regulation was aimed at achieving two goals. Firstly to force the newspaper group into giving free advertising space to SLPI and to force the hand of the Leader management to accept the authority of SLPI, and secondly it was thought that it would create a split within the organisation with the journalists and staff upset that they would not be considered for the awards scheme due to a decision of the management. The thinking was that the anxiety of The Sunday Leader journalists would then force the group to subject itself to the dictates of the SLPI.

However this too backfired on SLPI with the journalists stating that if the organisation was being penalised and harassed they would not participate in the awards scheme. In fact even freelance journalists attached to The Sunday Leader were of the same view.

Ironically, for SLPI which is reeling under a lack of funds, the shutting out of the Leader Group from the awards scheme has only helped bring into sharp focus the absurdity of their existence in the eyes of their foreign donors and the fact that they are not in fact an all encompassing media body.

In the final analysis, by keeping the Leader Group that has consistently been the top award taker since the inception of the scheme in 1998, out of its Awards Scheme 2007, the organisers have only devalued the value of the awards for the remaining recipients.

It may prove a cake walk for mediocrity and will certainly be akin to holding a Cricket World Cup without Australia.

FMM frowns upon exclusion of Leader Group from Awards Scheme

Convener, FMM, Sunanda Deshapriya told The Sunday Leader that "Journalists should not be victimised when applying for awards on the basis of a decision taken by the management of a newspaper group. The Free Media Movement has decided that it is wrong to put such a condition. Secondly, this is a self regulatory body so we cannot impose ourselves on anyone. FMM decided therefore that we must have a discussion with Leader Publications on this matter in an effort to resolve the dispute. We could not do that, that is our weakness. In the same manner we also decided that we should discuss this matter with  SLPI. We had also informed the directors representing FMM at SLPI of our position on this matter.

FMM's position is that such awards schemes should be opened to embrace as many media organisations as possible rather than exclude anyone by imposing conditions such as that which has been put now. Because the intention of this award scheme is to promote quality journalism and for that we must attract the best quality applications. This is the principal objective and this can be achieved only by opening the doors for everyone.

As for the membership of PCC that is another issue that has to be resolved through negotiations with all the relevant parties."