The rumor mills have recently been operating nonstop.
The Indian Tata Group is reportedly interested in acquiring a sizeable share in SriLankan Airlines, according to recent rumors in local media outlets. Over the past few years, the state-owned flag carrier has struggled and racked up a significant amount of debt. The Sri Lankan government was forced to privatize the airline due to this and the country’s severe economic woes, a decision that the Indian government just made.
It’s interesting to note that SriLankan Airlines last experienced financial success prior to 2008, when Emirates controlled and owned a portion of the airline. The Emirates group sold its 43.63% ownership to the Sri Lankan government and incurred losses of more than $800 million in the first seven years of state control, which is when things started to go south.
From Sri Lanka to Tata?
While Sri Lanka’s future has appeared uncertain for some time, News Cutter has been able to corroborate a number of media stories that the island nation’s government is eyeing the Tata Group as a prospective buyer. The Tatas also acquired the losing Indian flag airline Air India a few years ago, and they have been working tirelessly to completely overhaul it.
The group also owns three additional Indian airlines in addition to the Maharaja: full-service carrier Vistara, AirAsia India, and Air India Express. We are aware that efforts are being made to combine Vistara with AI, and it appears that the two remaining subsidiaries will suffer a similar fate. To what extent SriLankan Airlines fits into the overall picture will be intriguing to watch.
Richard Nuttall, CEO of SriLankan, made a suggestion that the airline might be sold in part to the Tatas in an interview with Zawya, noting that it would be advantageous strategically given the proximity of the two South Asian countries. However, everything at this stage is just conjecture.
How beneficial is privatization?
In the modern aviation industry, state-owned airlines are rapidly being privatized. Airlines are tremendously difficult to run, and lawmakers may not always be the greatest candidates. Most of the time, governments have to learn this lesson the hard way, as the governments of South Africa, Italy, and India have recently done.
It’s important to remember that a lack of political will can be a significant barrier, leading governments to only explore privatization as a last resort. While choosing the ideal private player to manage it is crucial, privatization is usually thought to be helpful for the future of any airline.In a study by Mahdy I. Al-Jazzaf, six technical indicators were utilized to assess data on 10 recently privatized, formerly state-owned airlines. The results showed that all criteria had healthy growth following privatization, with the exception of short-term profitability. This is due to the fact that any recently privatized airline will incur large costs for facility upgrades, fleet modernization, expansion, and restructuring. The study’s conclusion, however, was that privatization, at least in the short term, had a beneficial overall impact on airline performance.
