AirAsia keen to set up airline in Sri Lanka

Recommended for the JV, a 51 per cent stake to the Sri Lanka government and a 49 per cent stake to AirAsia

Malaysia’s LCC AirAsia is keen to set up a budget airline in Sri Lanka and last week made a pitch to a high-powered, official Sri Lankan committee.

A report in the local Sunday Times on Sunday said a team from AirAsia had presented the proposal to the Cabinet Committee on Economic Management (CCEM) chaired by prime minister Ranil Wickremesinghe on Wednesday recommending a 51 per cent stake to the Sri Lanka government and a 49 per cent stake to the Malaysian carrier. An official present at the meeting, but declined to be quoted, confirmed that such a proposal was made.

Recommended for the JV, a 51 per cent stake to the Sri Lanka government and a 49 per cent stake to AirAsia

The budget carrier currently operates daily flights to Colombo from Kuala Lumpur.

Industry analysts, who declined to be named, said the entry of a new airline competing with the heavy-losses SriLankan Airlines will create a major dent in the national carrier. According to the 2016-2107 annual report of SriLankan Airlines, the carrier’s accumulated losses was nearly US$200 million, from US$85 million the previous year. The airline has cut routes in Europe and focused mostly on Asia.

The newspaper report said AirAsia’s one-hour presentation involved bringing in five aircraft in the first year, and 25 in five years. It is learnt that SriLankan Airlines officials present at the briefing had raised objections to the proposal.

The national carrier has been seeking a management-cum-investment partner for the past two years without any success. Discussions have been held with Emirates, which earlier operated as a management partner of SriLankan, and Qatar Airways.

Analysts said AirAsia’s entry would entice more Sri Lankans to travel abroad with low fares and also encourage tourists on shoe-string budgets from across Asia.

The senior director of a foreign airline agent said 15 years ago the government called for bids to operate a second airline and at least five offers were made but no decisions taken. “At the end of the day, the market is too small for two airlines in Sri Lanka,” he said.

Local budget carrier, Mihin Air, a subsidiary of SriLankan Airlines, also failed and was recently shut down.

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