Jet, Kingfisher mull stake in Sri Lankan Airlines | india | Hindustan Times
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Jet, Kingfisher mull stake in Sri Lankan Airlines

Aviation industry officials say both airlines are among a host of carriers looking at acquiring a 43.6 per cent stake in Sri Lankan Airlines.

india Updated: Jan 22, 2008 16:13 IST

Naresh Goyal-controlled Jet Airways and Vijay Mallya's Kingfisher Airlines are among a host of carriers looking at acquiring a 43.6 per cent stake in Sri Lankan Airlines, aviation industry officials said.

The two carriers will be looking at buying the stake presently held by Emirates Airlines in the Sri Lankan carrier once their 10-year shareholder pact expires April 1, the officials added.

The Sri Lankan government holds 51 percent stake in the carrier, while employees hold the rest.

When contacted, officials at both Jet Airways and Kingfisher declined comment on the matter. "We cannot confirm any development on this," Wolfgang Prock Schauer, chief executive officer of Jet Airways, told IANS.

"No comment," the Kingfisher spokesperson added.

The Sri Lankan government's relations with the Emirates management has not been particularly cordial and in fact deteriorated further when the work permit of the Sri Lankan Airways chief executive Peter Hill was withdrawn last month.

Officials said the reason was the failure on the part of the carrier to provide seats to President Mahinda Rajapaksa's 35-strong entourage on the London-Colombo sector.

For Indian carriers, some analysts maintain, a major attraction in acquiring a stake in Sri Lankan Airlines is the booming business from India to Colombo with over 100 flights a week.

According to industry sources, Emirates was looking at $150 million for selling its stake in the Sri Lankan carrier, which may be on the higher side and could force a rethink at the negotiating table.

"In my view, it's not worth $150 million," said Shukor Yusof, editorial director for aviation with rating agency and financial consultancy Standard and Poor's.

"I'm not sure if anyone has even thought of how to restructure Sri Lankan once Emirates isn't there. Chances of airlines going bust in this period of $100 a barrel oil certainly is possible," Yusof added.

Worsening domestic politics in the island nation, uncertainty over the airline's management and the volatile security situation that affects overseas tourist inflows also add to the downside risks that bring down the valuation.

This, the analysts add, is already affecting the carrier's bottomlines, which could take a further hit if it loses the key technical and management expertise that is currently available from Emirates.

"I suspect it won't be only pilots who are leaving to go to Emirates. Everyone else will be looking for a change of job," said Peter Harbison, chief executive of the Centre for Asia Pacific Aviation, a think tank for the industry.

"I believe there is some uncertainty over what assets the airline has, notably aircraft. This makes matters even more uncertain," Harbison told IANS.