In Budget 2025, Rs. 3 billion was allocated towards modernising the country’s transport infrastructure, a longstanding issue that shackles productivity, stifles economic growth, and frustrates daily commuters.
From outdated public transport systems to inefficient road networks, decades of underinvestment have left the nation fighting congested streets, packed buses and trains, and unreliable transit options.
While transport modernisation, an important investment for the country’s economic growth, received Rs. 3 billion, another sector took a larger share of the budgetary pie – SriLankan Airlines. The Government has allocated a staggering Rs. 20 billion to service the airline’s legacy debt, once again bailing out the financially crippled National Carrier.
The contrast is appalling. On one hand, Rs. 3 billion has been allocated for a much-needed overhaul of public transport, which serves millions daily. On the other hand, a loss-making airline has received nearly seven times that amount, money that will not go towards settling past debts. This has left many questioning whether national pride is worth the persistent drain on taxpayers.
Yet another lifeline for SriLankan
For yet another year, the Government has stepped in to shoulder SriLankan Airlines’ financial burden.
In this instance, the Rs. 20 billion infusion is strictly for debt servicing; Rs. 10 billion has been allocated for loan capital repayment and another Rs. 10 billion for interest payments. The expectation is that once these obligations are settled, the airline will ensure operational profitability moving forward.
However, similar commitments have been made before, only for the cycle of losses and Government bailouts to continue. SriLankan Airlines reported a pre-tax loss of Rs. 1.96 billion for the seven months ending October 2024, a sharp reversal from the Rs. 4.13 billion profit during the same period the previous year. The Finance Ministry attributes this downturn to a 14.9% decline in net traffic revenue.
Efforts are underway to reverse the financial difficulties faced by SriLankan Airlines, with Government officials confirming the existence of a five-year strategic plan aimed at restoring profitability. However, obtaining official comments on the plan has proven challenging, as key Government representatives remain largely unavailable for direct statements.
While Ministry of Aviation Media Secretary Suranga Senevirathne acknowledged that various plans were in place, he directed inquiries to the Minister and Deputy Minister for further clarification.
Debt, defaults, and discontent
The bailout comes at a time when SriLankan Airlines is entangled in a web of financial woes that extend beyond domestic concerns.
A group of investors, holding 50% of a sovereign-guaranteed bond issued by the airline, has hired the US-based law firm Akin Gump Strauss Hauer & Feld to negotiate a settlement. The $ 175 million bond, issued in 2019 as a rollover of a previous five-year security, is now in default.
S&P Global Ratings has maintained the country’s sovereign rating at ‘Selective Default’ pending the outcome of the airline’s debt negotiations, while Fitch and Moody’s have moved Sri Lanka’s sovereign rating slightly out of default territory.
It should also be noted that the Treasury early last year said that it will absorb $ 512 million of debt owed by SriLankan Airlines.
Unpaid bills and unused aircraft
Deputy Minister of Finance and Planning Harshana Suriyapperuma disclosed that SriLankan Airlines had been paying $ 900,000 per month in instalments for three aircraft that have remained unused for years.
“This is the level of inefficiency that has drained our resources,” Suriyapperuma stated. “The lease agreements were signed under dubious circumstances and now we are stuck with payments for aircraft we don’t even use.”
The airline currently operates a fleet of 22 aircraft and employs more than 6,000 people across its main airline operations and strategic business units. The staff-to-aircraft ratio has long been a point of contention, with critics arguing that it far exceeds global standards.
In discussions regarding SriLankan Airlines’ financial restructuring with The Sunday Morning, a senior airline representative confirmed that a five-year strategic plan had been developed and presented to the Government.
The official noted that the State had allocated Rs. 20 billion to address the airline’s legacy debt as announced in the national Budget. However, he emphasised that no direct financial support would be provided for day-to-day operations.
“The Government has taken over the balance sheet problem, and I think the airline will definitely become profitable thereafter,” the official stated, highlighting that while SriLankan Airlines had been generating operating profits over the past three years, large financial outflows related to debt servicing continued to impact overall profitability.
When questioned about allegations concerning unused aircraft, the airline representative clarified that the grounding of certain planes was a global issue tied to the Covid-19 pandemic. “They are technically not ‘unused.’ There was a reason for it. Many aircraft worldwide were grounded due to technical and logistical challenges,” he explained.
Despite these responses, obtaining further details on the airline’s future operational strategy proved difficult.
Political interference and corruption
The company has been weighed down by years of political interference, questionable procurement decisions, and allegations of corruption, a matter that Deputy Minister Suriyapperuma addressed in Parliament.
“There is an ongoing case in international courts over claims that commissions were sought during the purchase of aircraft. Aircraft have been obtained on lease at exorbitant rates beyond existing market rates. This is not just mismanagement; this is corruption at an international level.”
This is not the first time such allegations have surfaced. A 2018 Presidential Commission of Inquiry found widespread irregularities, including procurement guideline violations and extravagant expenditures by senior executives.
In one of the most infamous cases, SriLankan Airlines was forced to pay $ 115 million in penalties after cancelling an order for Airbus A350s in 2013, a decision that continues to haunt the airline’s balance sheet.
A never-ending cycle of ‘turnaround plans’
The Government has now proposed a five-year plan, running from 2025 to 2030, to make SriLankan Airlines financially sustainable. This, too, is a familiar story.
Over the years, multiple restructuring committees have been formed, foreign consultancy firms have been hired, and ambitious turnaround strategies have been announced, none of which have stopped the bleeding.
Deputy Minister of Ports and Civil Aviation Janitha Ruwan Kodithuwakku confirmed that the Government had stepped in to shoulder SriLankan Airlines’ debt burden, a move aimed at making the National Carrier financially viable in the long run.
Speaking to The Sunday Morning, he stated that the airline could not operate efficiently under the weight of its debt, prompting the State to intervene.
“We are hoping to turn things around within the next four to five years. This Government is starting from zero and formulating a plan for everything,” he stated. “In SriLankan’s case, the debt was extreme, which is why the Government decided to take responsibility for it.”
Kodithuwakku also pointed to structural and managerial issues as key challenges affecting the airline’s performance. He attributed many of these problems to politically motivated appointments by previous administrations, which, he argued, had led to inefficiencies in management.
“We have management-related structural reforms in place. We have called for a chief operating officer with international experience,” he said, signalling an effort to introduce professional leadership into the airline’s administration.
Dispelling plans of privatisation, Kodithuwakku emphasised that the Government was committed to retaining SriLankan Airlines as a National Carrier. “We are not considering privatisation. We believe that we need a strong national airline to establish Sri Lanka as a tourism hub,” he stated.
What lies ahead?
Countries such as Singapore, the UAE, and Qatar have successfully leveraged their State-owned airlines – Singapore Airlines, Emirates, and Qatar Airways – to transform themselves into major aviation hubs. However, the success of these airlines has been built on strong financial backing, strategic route expansion, and service excellence.
In contrast, SriLankan Airlines has struggled with debt, mismanagement, and operational inefficiencies, raising concerns about whether it can fulfil a similar role.
The experience of other nations suggests that a strong national airline can be an asset, but it requires sound governance, competitive pricing, and superior service standards. Sri Lanka’s aviation infrastructure, centred around the Bandaranaike International Airport (BIA), still faces challenges in handling increased passenger traffic, improving efficiency, and attracting more transit passengers.
Competing hubs such as Dubai, Doha, and Singapore already dominate regional air travel, offering world-class facilities, extensive global networks, and transit experiences.
Tourist satisfaction with SriLankan Airlines has been mixed (as seen in the reviews included). While some travellers appreciate the airline’s hospitality and competitive fares, others have expressed frustration over delays, ageing aircraft, and inconsistent service quality.
Online reviews often highlight customer service issues and operational inefficiencies, which, if unaddressed, could deter repeat travellers and damage the country’s reputation as a convenient transit hub.
Globally, the trend of relying on a national carrier as the backbone of an aviation hub is shifting. Many countries, including India and Malaysia, have either partially privatised or restructured their national airlines to improve efficiency. In some cases, foreign partnerships have helped struggling carriers regain profitability.
Sri Lanka’s decision to rule out privatisation keeps the airline under Government control, but it also means the State must absorb financial risks and ensure the airline operates efficiently without becoming a long-term fiscal burden. Hopefully, SriLankan will eventually do justice to the public money it has been absorbing for years.