Mihin all set to piggyback on SriLankan
Manoj Gunawardena and Chamal Rajapakse
By Frederica Jansz
SriLankan Airlines has been muscled into
agreeing to a bail-out package which will
give Mihin Lanka another fresh lease of life
despite the multi billion rupee losses this
venture has so far incurred.
SriLankan Airlines confirmed to The Sunday
Leader that it will be procuring a narrow
bodied aircraft to be wet leased to Mihin
Lanka. However Mihin's Acting Chairman
claimed ignorance. Kapila Chandrasena, is
not only Mihin Lanka's Acting Chairman but
also on the SriLankan Airlines' board of
"To my knowledge I am not aware of any type
of agreement reached between Mihin and
SriLankan. I know nothing about it. But I
cannot speak on behalf of the government,"
Lies and deception are never too far away
when it comes to the government's budget
airline. We have it on record that
Chandrasena was indeed lying through his
teeth when he denied any knowledge of the
agreement as unimpeachable sources confirmed
to this newspaper that the Acting Chairman
was indeed present at a crucial meeting
where the modalities of the agreement were
The groundwork for this deal was done by
Chief Executive Officer, SriLankan, Manoj
Gunawardena. He submitted three options in
this regard following discussions he had
with Treasury officials. On February 11, he
forwarded a proposal containing the three
options on behalf of the board of directors
of SriLankan Airlines to his Minister,
Aircraft for Mihin
At the 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.
SriLankan Airlines (UL) Acting Chairman
Nishantha Wickramasinghe was unable to
attend the meeting. However, in a note to
Chamal Rajapakse, Wickramasinghe said he
recommends the second option out of three
stated in a proposal submitted by SriLankan
on the matter. It was this option that was
agreed upon and finalised at the meeting.
The other directors on the UL Board are, Dr.
U.N.B. Obeysekera, Nihal Jayamanne PC,
Sanath Ukwatte, Sunil Wijeysinghe and the
current Acting Chairman, Mihin Lanka, Kapila
Chandrasena, who maintains he knows nothing
of the deal.
SriLankan too has recorded massive losses.
The national carrier reported a full-year
operating loss of SLR 588 million ($5.5
million) on account of escalating fuel costs
in August last year.
Last Wednesday's decision follows on the
heels of Mihin Lanka having spent
approximately USD 4.8 million on the wet
lease of another 186 seat Boeing 737-800
which was the second aircraft leased for the
carrier from Transavia Airlines - a joint
subsidiary of KLM and Air France.
Mihin Lanka was re-launched on January 1
this year after the troubled budget airline
was grounded since May last year having
incurred heavy losses running into some Rs.
3.2 billion. The cash straddled carrier is
the pet project of President Mahinda
Rajapakse, reason why billions of rupees of
public funds have been channeled to it.
The deal with SriLankan is not without
conditions. Mihin Lanka has to pay USD 8
million (approx. SLR 896 million) up front
as a condition precedent.
The government has to also pay the existing
debt obligations of Mihin Lanka to SriLankan
Airlines amounting to USD 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
due 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 cannibalisation of traffic
Mihin Lanka will remain as a separate
company as a merger into SriLankan Airlines
cannot be considered yet, due to opposition
This deal however does require shareholder
approval as it would involve additional
financial exposure for SriLankan as well as
diluting its own revenue and branding.
Emirates Airlines which continues to hold a
43.6 percent share in UL and thus have two
directors on the board have not been
The two directors, Tim Clark and Gary
Chapman have not attended a single board
meeting at SriLankan since Emirates decided
to not renew its Shareholder's Agreement
Emirates in fact are currently reviewing its
stake in SriLankan Airlines. "We have yet
not taken a firm decision to sell all or
part of it. We are reviewing our options,"
an Emirates spokesperson was quoted telling
In January 2008, Emirates' President Tim
Clark had said the airline would consider
selling its 43.6 per cent holding in
SriLankan Airlines, and that it would seek
about $150 million (Dh551m) for the stake.
SriLankan's bailout package for Mihin is
despite the fact that Mihin Lanka still owes
the Bank of Ceylon over Rs. 1 billion, the
CPC over Rs. 640 million and SriLankan
Airlines Rs. 500 million.
In November last year, Chamal Rajapakse in a
bid to keep alive one of the most
purposeless projects of this government
submitted a cabinet paper which suggested
using for Mihin Rs. 1.1 million out of
unutilised funds from the 2008 budgetary
allocation from the Ports and Aviation
Ministry or from Airport & Aviation Services
Mihin intends to commence flights to Trichy
and Trivandrum, though landing rights to
India have still to be cleared.
In its inaugural flight to Dubai on January
1, this year with some 143 passengers it was
alleged that the flight was a mere turn
around flight which carried no revenue
yielding passengers but were all 'guests' of
Mihin given an all expenses paid about
trip. Mihin Lanka denied it was so,
insisting the flight carried revenue
At last Wednesday's meeting Minister Chamal
Rajapakse had voiced "concern" that
currently no one on the board of Mihin has
any expertise in aviation.
In addition to its disastrous financial
history internal squabbles have also plagued
the troubled carrier. In January this year
Mihin Lanka Chairman Raja Edirisuriya
resigned from his post citing his inability
to work with what he termed was an
inexperienced management team which oversaw
the operations of the budget airline.
Edirisuriya in fact cited differences with
Kapila Chandrasena who thereafter took over
as Acting Chairman.
Raja Edirisuriya was hand-picked by Defence
Secretary Gotabaya Rajapakse and recommended
to his brother Chamal Rajapakse. Edirisuriya
lives in the US and has worked as an
engineer in Los Angeles, California.
Meanwhile, SriLankan Chief Executive Officer
Manoj Gunawardena was overseas when
contacted by The Sunday Leader. Though
initially saying he did not know if a final
decision had been taken in this regard,
Gunawardena later confirmed that the deal
was indeed sealed on Wednesday, February 18.
He said SriLankan would lease the aircraft
to Mihin at regular commercial rates.
Acting Chairman, SriLankan, Nishantha
Wickramasinghe could not be contacted for