SriLankan Airlines is getting a $500 million equity infusion from the government.
The country's Cabinet approved the plan on 28 July and the money will be disbursed over five years starting from 2012, said an airline spokeswoman.
This will allow the state-owned carrier to improve its operations and pay for new aircraft, she added.
SriLankan has 17 aircraft, including six Airbus A320s, five Airbus A330-200s and six Airbus A340-300s. Its SriLankan Air Taxi subsidiary operates two de Havilland Canada Twin Otter floatplanes.
The airline plans to add five A320s on an operating lease by 2015 and two more Twin Otters for the subsidiary.
This move comes after SriLankan Airlines appointed Kapila Chandrasena as its new CEO in late July. Chandrasena, who assumed the role on 1 August, is also concurrently the CEO of state-owned low-cost carrier Mihin Lanka.