Who Owns Sri Lankan Airlines?

by Ruwantissa Abeyratne

( February 26, 2015, Montreal, Sri Lanka Guardian) The latest issue of The Economist(February 21st to 27th, 2015) states: ” For many Sri Lankans the most remarkable feature of Maithripala Sirisena’s four day trip to India this week, his first as president after a stunningly unexpected election victory in January, was that he took a commercial flight.  His predecessor, Mahinda Rajapaksa – who, with his family, had given the impression of intending to rule for the long run, usually poached an aircraft from the national fleet“.  Elsewhere, in South East  Asia, another new President – Joko Widodo (Jokowi), is reported to have sat on an economy class seat in a scheduled commercial flight from Jakarta to Singapore, on his way to attend his son’s graduation from a Singaporean university.

I am sure many of us would wonder in retrospect (and indeed in prospect) who owns Sri Lankan Airlines.  For an answer to this question, one has to look into the airline as a legal person.  Sri Lankan Airlines is by definition a public limited liability company (PLC).   The standard legal designation of a PLC is that it is  a company which has offered shares to the general public and has limited liability. A Public Limited Company’s stock can be acquired by anyone and holders are only limited to potentially lose the amount paid for the shares. It is a legal form more commonly used in the United Kingdom . Two or more people are required to form such a company, assuming it has a lawful purpose.

The latest Annual Report of Sri Lankan Airlines available (to the author) is the Report for 2012-2013 according to which the share distribution of the company is as follows:  Government of Sri Lanka 26,275,436 51.06%; Bank of Ceylon 12,115,570 23.54%; People’s Bank 4,236,135 8.23%;

National Savings Bank 4,236,135 8.23%; Employees Provident Fund 1,863,676 3.62%; Others 2,736,511 5.32% (This share information  is excluding the Rs. 26.89 billion advance towards share capital made by The Government of Sri Lanka).

According to this information the major shareholder of Sri Lankan airlines is the Government of Sri Lanka and its instrumentalities. Therefore, the airline is a government owned company. There is no standard definition of a government-owned corporation (GOC) or state-owned enterprise (SOE), although the two terms can be used interchangeably. The defining characteristics are that they have a distinct legal form and they are established to operate in commercial affairs. While they may also have public policy objectives, GOCs should be differentiated from other forms of government agencies or state entities established to pursue purely non-financial objectives.

This brings to bear the incontrovertible fact that Sri Lanka Airlines has ” a distinct legal form and has been  established to operate in commercial affairs”.

This fact is also made abundantly clear in the airline’s mission statement : “We are in the air transportation business (my emphasis). We provide our customers with a reliable and pleasant travel experience. We provide our business partners with a variety of innovative, professional and mutually profitable services. We meet Shareholder expectations of profitably marketing Sri Lanka and contributing towards the well-being of Society. We are a competent, proactive and diligent team. Our contribution is recognized and rewarded”.

The airline’s vision is “to be the most preferred airline in Asia“.

These statements make it abundantly clear that Sri Lankan Airlines is a common carrier.  The judiciary in the 1925 United States case of Burnet v. Riter defined a “common carrier” as “one who engages in the transportation of persons or things from place to place for hire, and who holds himself out to the public as ready and willing to serve the public, indifferently, in the particular line in which he is engaged“.

Logically, therefore, one could infer that the owner of Sri Lankan Airlines is the Government of Sri Lanka, which follows that the true owner of Sri Lankan Airlines is the “owner” of the Government of Sri Lanka.  So who owns a government?  The government is derived of the people of a nation who votes for it.  The government is broadly regarded as an overall process of governance, and in the Commonwealth of Nations (of which Sri Lanka is a member) a government is considered to be a group of persons who yield legislative and executive power.

The issue is finally settled by Article 3 in Chapter 1 of the Constitution of Sri Lanka of 1978 – the supreme law of the land –  which states: ” In the Republic of Sri Lanka, sovereignty is in the people and is inalienable  Sovereignty includes the powers of government, fundamental rights and the franchise“

In the ultimate analysis therefore, the “owner” of Sri Lankan Airlines is the people of Sri Lanka.  The airline is a common carrier operating under commercial principles and its aircraft that are scheduled for  commercial flights cannot be “appropriated” by a group of people for State purposes or personal travel. The only way out would be to charter an aircraft under commercial principles paying the commercial fare of the airline.  This would then be an unscheduled flight.

The inherent danger in such an exercise would be that the aircraft operating the  unscheduled flight would be considered a “State” aircraft (as against a “civil” aircraft usually operated by Sri Lankan Airlines’ scheduled flights) the determinant being the purpose for which the aircraft operates.  This would in turn have insurance implications and the insurance broker would have to be notified and special coverage obtained prior to the flight, as ordinary insurance coverage is for scheduled or unscheduled operation of civil commercial flights.

It is said that the difference between a leader and a manager is that a manager does things right and a leader does the right thing.  Apparently Maithri and Jokowi did the right thing.

The author is former Manager, International Relations and Insurance, Air Lanka (8 years) and Senior Legal Officer, International Civil Aviation Organization (24 years).  He is currently an aviation consultant running his own company and Senior Associate, Air Law and Policy, at Aviation Strategies International based in Montreal.