Emirates near split with partner

Talks over SriLankan Airlines investment as minority relationship with the carrier has been rocky since the end of a management deal in 2008.

Emirates had bought a minority stake in SriLankan Airlines in 1998 for about $70 million.

Emirates Airline is drawing closer to selling its 43.6 per cent stake in SriLankan Airlines to the Sri Lankan government. The Dubai carrier's only foreign airline investment, undertaken in the late 1990s, delivered mixed results. Emirates has sought a buyer for its stake since ending its management contract with the Colombo-based carrier in 2008.

Attention had focused on the Sri Lankan government buying back the stake, and the two sides in February acknowledged that discussions were taking place. On Friday, the chairman of the airline, Nishanta Wickremesinghe, said in Colombo that the negotiations were progressing well. "The deal is close to being finalised," he said. "It is now between the government and Emirates." The Dubai airline could not be reached for comment yesterday. Last month, at a press conference announcing Emirates's US$964 million (Dh3.54 billion)profit for the financial year ending on March 31, executives suggested the company would have particular requirements for selling the SriLankan stake.

"We are willing to sell at the right price," said Sheikh Ahmed bin Saeed Al Maktoum, the chief executive and chairman of Emirates. Emirates experienced "a very difficult relationship" with the Sri Lankan government, Keith McMullan, the managing director of Aviation Economics, a consultancy based in London, said earlier this year. Many of the appointments at SriLankan were politically motivated, he said.

The breaking point came in December 2007 when Peter Hill, the chief executive installed by Emirates, refused to offload 35 passengers at the last minute to allow the president and his entourage to fly back to Sri Lanka from England, where the president had attended his son's graduation from Britannia Royal Naval College. Mr Hill's work permit was rescinded and, shortly after, Emirates announced it would not seek to renew its management contract with SriLankan.

Emirates bought the minority stake in 1998 for a reported $70m and in 2008 said it believed its share had grown in value to $150m. However, the economic downturn has battered airlines worldwide, and SriLankan recorded a loss of 10bn rupees (Dh776.2m) in the 12 months ending on March 31 last year. It attributed the loss to falling tourist numbers and the global economic downturn. More recently, Sri Lankan officials cited a much lower figure as the price the government was willing to pay for Emirates' stake.

"$55 million is the price we have indicated," PB Jayasundera, the finance ministry secretary, told Reuters. "We are looking for a strategic partner or somebody from the government to take [the stake] and maintain the commercial character of SriLankan." Emirates has not ventured back into foreign airline investments since its experience with SriLankan, although last November it agreed to help Senegal Airlines with its launch, including commercial support, technical expertise, training and aviation-related goods and services.

Since the SriLankan venture, Emirates has focused exclusively on its own growth at its hub at Dubai International Airport, where it has doubled in size every three to four years throughout its 25-year history. * with agencies [e-mail]