Sri Lanka eyes Emirates stake in SriLankan

The Sri Lankan government has approached Emirates airline about buying the Dubai-based carrier's stake in state-controlled SriLankan Airlines.

“The government has decided to purchase,” SriLankan Airlines Chairman Nishanta Wickremasinghe said in an interview with Bloomberg. “They are negotiating,” he said, declining to elaborate.

The Emirates president confirmed the approach.

"They (the government) have put out feelers that's all ... to see whether we are interested," Tim Clark told Reuters on Wednesday, February 17.

“Emirates can confirm that the Sri Lankan government has been investigating the possibility of increasing their share in SriLankan Airlines,” the Middle East carrier said in a statement.

Clark said talks were not at an advanced stage but if the "price is right" Emirates would be open to a deal.

In April 2008, Emirates said it may consider selling its stake, after opting not to renew a management contract for the airline. At that time the Sri Lankan government took over the running of the airline.

Emirates currently holds a 43.6 percent stake in SriLankan Airlines, a holding which had previously been valued at about $150 million. The Middle East’s largest airline initially bought a 40 percent stake in the south Asian country’s biggest carrier in 1998 for $70 million.

The Arab world's largest airline, which has $55 billion of orders with Airbus and Boeing said earlier this month it expected to take delivery of 11 aircraft in 2010 as it pressed ahead with expansion into Europe, and funding its aircraft purchases was not a problem.

SriLankan Air slumped to a loss of 10 billion rupees (USD87 million) in the year ended March, hurt by dwindling tourist arrivals and the global recession.

Tourist arrivals in Sri Lanka have increased since June, helping the company to recoup losses and consider expanding a fleet of 12 aircraft, said Chief Executive Officer Manoj Gunawardena.

“We broke even in December 2009,” he said yesterday. The airline fills an average of 70 percent of its capacity, he said.

The airline added two new single-aisle Airbus SAS A320 planes in the year to March and acquired a third in the quarter to June 30. Two more single-aisle planes may be added as traffic grows and by October the airline will acquire a wide-bodied A330 or A340, Gunawardena said.

Sri Lanka's economy will grow 5.5 percent in 2010 due to improving domestic demand and potential export growth after a 25-year war ended in 2009 and as global recovery takes hold, the IMF said on Feb 10.

The $40 billion economy, hit by a balance of payment crisis early last year, has already received two tranches of a $2.6 billion IMF loan.