Armed with a restructuring plan, Emirates Airlines has stepped in as a strategic investor for Air Lanka.

The Sri Lankan government has sold a 40 per cent stake in Air Lanka to Emirates for US$70 million in cash. Sri Lankan aviation minister Dharmasiri Senanayake says Emirates has already paid $45 million for the immediate transfer of an initial 26 per cent stake, while $25 million will be paid over the next two years for the remaining 14 per cent.

Under the agreement, Emirates is to manage Air Lanka for 10 years and implement a long-term business plan. The Sri Lankan government is to retain management control, however, as the aviation minister will appoint the chairman and three directors to the board while Emirates will nominate three directors, says Senanayake.

The key focus of Air Lanka's restructuring programme will be a US$550 million re-fleeting project, involving the acquisition of six new Airbus A330-220s, says Emirates chairman Sheikh Ahmed bin Saeed Al Maktoum. New services will be introduced to Australasia and Africa and frequencies will be increased to Europe.

Senanayake says that the government was forced to find a strategic partner for Air Lanka as it did not have sufficient funds to alleviate the airline's debts of some US$59.3 million.

Local opposition parties, notably the main opposition United National Party, protest that the government sold the equity for less than the $85 million price suggested by the government's chief valuer.

But Senanayake brushes aside any criticism, insisting that 'it is a very good deal. It is very much in our favour'.

Source: Airline Business