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  News

Mihin to get fresh lease of life

By Frederica Jansz

SriLankan Airlines has been coerced by the government into providing a bailout package, which will give Mihin Lanka another fresh lease of life, despite the budget carrier having recorded a Rs. 3.2 billion loss.

SriLankan Airlines confirmed to The Sunday Leader that it will be procuring a narrow bodied aircraft to be wet leased to Mihin Lanka.

The airline in an official statement released to The Sunday Leader said, "SriLankan Airlines is presently in discussions to wet-lease a twin-engined Airbus A320 aircraft to Mihin Lanka from April 2009.

"The agreement is to be on commercial terms, with payment to be made to SriLankan on an up-front basis. Subject to this, Mihin Lanka will obtain an Airbus aircraft and crew suited to its current operations at a cost effective, financially viable way. The wet-leasing of aircraft includes the services of pilots."

Acting Chairman, Mihin Lanka, Kapila Chandrasena however claimed he knew nothing of the deal. Chandrasena, is not only Acting Chairman, Mihin Lanka but also on the Board of Directors of SriLankan Airlines. Chandrasena however said he could not speak for the government.

At a high level meeting Chaired by Ports and Aviation Minister Chamal Rajapakse, held on Wednesday, February 18, SriLankan Airlines agreed to procure an aircraft to be wet leased to Mihin Lanka.

Meanwhile The Sunday Leader has reliably learnt that Chandrasena was lying when he denied any knowledge of the deal to this newspaper as unimpeachable sources confirmed that the Acting Chairman was indeed present at the crucial meeting where the modalities of the agreement were discussed.

The deal with SriLankan is not without conditions. Mihin Lanka has to pay US$ 8 million (approx. SLR 896 million) up front as a condition precedent.

The government is to also pay the existing debt obligations of Mihin Lanka to SriLankan Airlines amounting to US$ 1.35 million (approx. SLR 151.2 million)

Mihin Lanka is to carry out its own commercial operations. The budget carrier has also been told to submit a Business Plan as a condition precedent to enable SriLankan Airlines to calculate wet lease charges.

SriLankan Airlines will hold the right to nominate up to two Directors including the Managing Director/CEO to the Board of Mihin Lanka. This condition is to ensure payments to SriLankan are protected.

The wet lease charge is for one year and will include aircraft lease rental as well as crew, maintenance, and insurance.

Flight routes and schedules of Mihin Lanka and SriLankan are to be coordinated to ensure that no cannibalization of traffic occurs.

Mihin Lanka will remain as a separate company as a merger into SriLankan Airlines cannot be considered yet, due to opposition from shareholders.

Emirates Airlines, which continues to hold a 43.6%, share in UL and thus have two Directors on the Board have not been consulted.

The two Directors, Tim Clark and Gary Chapman have not attended a single Board meeting at SriLankan since Emirates decided not to renew its Shareholder’s Agreement last March.

Manoj Gunawardena Chief Executive Officer for SriLankan was overseas when contacted by The Sunday Leader. Gunawardena confirmed that the deal was indeed sealed on Wednesday, February 18. He said SriLankan would lease the aircraft to Mihin at regular commercial rates.

 

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