Indian companies keen on acquiring stake in Sri Lanka’s national carrier
The Hindu Business line: Indian companies have shown interest in acquiring a stake in Sri Lankan Airlines, an official overseeing the divestment of the government-owned carrier reported The Hindu Business line on 1 November.
On Tuesday (31 October), the Sri Lankan Government issued a request for qualification for privatization of its national carrier. The Sri Lankan Government holds over 99% stake in the airline and aims to conclude its sale by next June.
“Interest is being shown by both aviation and non-aviation companies. They are based in many countries, including India,” Sri Lanka’s state-owned enterprise (SOE) restructuring unit Director General Suresh Shah said in an emailed response.
A media report in September had named Tata Sons, Adani group and Emirates as possible suitors for Sri Lankan Airlines. Air India’s Managing Director and CEO Campbell Wilson, however, denied that the airline is looking at buying Sri Lankan Airlines.
The Adani group too has denied interest in its emailed reply. InterGlobe Enterprises which owns IndiGo did not respond to a query.
Sri Lankan Airlines has 23 Airbus aircraft and flies to 39 destinations globally. It flies 77 weekly flights to nine cities in India. Interestingly, the Sri Lankan Government has highlighted the access to the rapidly growing Indian aviation market to attract investors. An investment opportunity teaser accompanying the bid document details the airline’s strengths such as its diversified network and dominant position in Lanka’s international traffic. It pitches the Indian aviation growth story. Investment in Sri Lankan Airlines would give its owners access to India which is the third largest domestic aviation market in the world.
It also highlights the potential of Sri Lanka as a hub for connecting India with South East Asia and Australia.
“A Sri Lankan Airlines hub could be established in Colombo airport to serve this purpose. The development of this hub would be feasible based on the already existing critical mass of origin and destination traffic to and from Sri Lanka, which could cross-subsidies lower-yield connecting traffic. The airline could be able to achieve larger economies of scale, which in turn would reduce its operating costs per passenger,” the teaser said.
“The air services agreement between Sri Lanka and India is highly liberal, allowing Sri Lankan designated carriers unrestricted frequencies to the majority of Indian cities, including metros, along with fifth freedom traffic rights connecting SAARC countries,” it said.
Shah said flights to and from Sri Lanka are expected to increase rapidly in the years ahead due to growth in tourism, external trade, foreign direct investment and ongoing development of the Colombo airport.
Earlier this month the Sri Lankan Government waived visa fees for citizens of India and six other countries as a part of its drive to boost tourist inflows. India is the largest source market for Sri Lanka’s tourism. Over two lakh Indians have visited the island nation till September accounting for 20% of overall tourist arrivals.
OSL take:
Sri Lanka and India enjoy strong bilateral, business and trade ties that have been further strengthened by an operational free trade agreement (FTA). India is also one of Sri Lanka’s main development partners engaged in providing funding, expertise and services for the country’s development programmed. Many Indian businesses have also set up businesses in Sri Lanka that have shown strength, growth and profits. It is in such a backdrop that Indian businesses are also looking at more business ventures in Sri Lanka. The government of Sri Lanka’s programmed to reform the state-owned enterprises (SOEs) had presented a host of new business/investment opportunities. Given Sri Lanka’s close proximity to India, the geographical placement in the Indian Ocean and the strong trade ties, Sri Lanka presents an ideal business/investment destination for Indian businesses/investors. Indian businesses could also look at forming partnerships or joint ventures with local businesses with the aim of further expansion.
| Article Code : | VBS/AT/20231116/Z_2 |