The Sri Lankan government has announced it will undertake a major restructuring of the national flag carrier, SriLankan Airlines, after repeated attempts to find a buyer for its management control ended in failure. President Anura Kumara Dissanayake made this significant revelation while presenting the national budget for 2025-26 on Friday.
No Buyers for the National Carrier
President Dissanayake, who also serves as the finance minister, delivered the sobering assessment that "there are no buyers" for the airline's management control. This statement highlights the challenging reality faced by successive governments that have tried to divest the government's management stake in the airline without success.
The urgency to address the airline's situation stems from the strict conditions attached to Sri Lanka's International Monetary Fund bailout package. The IMF extended nearly USD 3 billion in financial assistance to the island nation in 2023, following Sri Lanka's historic declaration of its first-ever sovereign default.
Restructuring Timeline and Contingency Plans
The government has set an ambitious timeline for the airline's transformation. President Dissanayake confirmed that management restructuring will begin by early next year, with the current management team instructed to prepare a comprehensive business plan for the restructuring process.
Interestingly, the President expressed hope that the restructuring could be completed even sooner, potentially by the end of December this year. However, he also issued a warning that "there will be alternative action" if the restructuring efforts fail, though he did not elaborate on what these alternative measures might entail.
The Staggering Financial Burden
The decision to restructure rather than shut down the airline completely reflects the government's continued resistance to closing the national carrier, despite its massive financial losses. Successive administrations have avoided completely shutting down the airline to prevent further bleeding of the national treasury.
The financial situation is indeed dire. According to an official report from the Auditor General, SriLankan Airlines accumulated losses reached SLRs 596,461 million (approximately USD 2 billion) as of March 31, 2025. President Dissanayake further revealed that the airline's defaulted debt stands at USD 210 million, which includes USD 175 million borrowed through a five-year bond that is now in arrears.
The International Monetary Fund has specifically identified SriLankan Airlines, along with Ceylon Petroleum Corporation and Ceylon Electricity Board, as loss-making State-Owned Enterprises (SOEs) that are placing a heavy burden on state finances. The IMF has emphasized that these enterprises are accumulating substantial debt and that their restructuring is essential for achieving fiscal sustainability and macroeconomic stability in Sri Lanka.
