Termination of Airbus lease: Cabinet approval obtained three weeks after signing agreement

COLOMBO (The Island/ANN) – Government refrained from initiating an inquiry into the termination of aircraft leasing agreements, that cost SriLankan Airlines millions of dollars, despite Cabinet briefing in October 2016, by then Public Enterprise Development Minister.

A Simmering controversy over massive kickbacks received by former CEO of SriLankan Airlines Kapila Chandrasena and his wife Priyanka Niyomali Wijenayaka to influence the acquisition of 10 airbuses and leasing of four other aircraft and the subsequent termination of the leasing agreements for three aircraft, A 350-900, has taken a new turn with a revelation that the then Public Enterprise Minister Kabir Hashim informed the Cabinet that the national carrier on Oct 04, 2016, had finalized three early termination agreements without the approval of the line ministry (Public Enterprise Development), the Cabinet and the Attorney General.

Chandrasena and his wife are in remand pending investigations. They are to be produced before the Fort Magistrate’s court again on Feb. 19.

Sources said that the national carrier had sought Cabinet approval on Oct 28, 2016, to terminate leasing agreements, more than three weeks after finalising them.

The total amount of compensation paid to AerCap leasing Company was not known yet though SriLankan referred to USD 98 mn as the payment in case certain conditions were met by the airline, but the paper presented by the airline placed the amount at USD 154 mn, sources said.

The national carrier initiated re-fleeting project during the 2010-2015 Rajapaksa administration and the termination of leasing contracts on three aircraft was effected during the Sirisena-Wickremesinghe administration.

Although Public Enterprise Development Minister Hashim, on President Maithripala Sirisena’s advice, on Feb 02, 2017, briefed the Cabinet on the termination of aircraft leasing agreements, the government refrained from initiating an inquiry.

UNP MP Mujibur Rahman recently called for the setting up of a Presidential Commission of Inquiry to probe the Sri Lankan re-fleeting plan.

SriLankan negotiated with AerCap though original agreements had been reached with International Lease Finance Corporation (ILFC). Neither the line ministry nor the Cabinet was not informed why SriLankan had negotiated with AerCap in the absence of any provision to do so in terms of the original agreements with the ILFC.

All papers related to the termination of leasing agreements hadn’t been submitted to Cabinet Committee on Economic Management (CCEM) and the Cabinet.

According a memorandum dated Feb 08, 2017 submitted to the Cabinet, in response to President Sirisena’s directive, the Finance Ministry, on Oct 26, 2016, outlined the process followed by the national carrier in termination of the lease agreements. However, the line ministry hadn’t been involved in the decision making process, sources said, adding that SriLankan was on record as having informed the Cabinet that it gone ahead with the termination as the Finance Ministry raised no objections.

SriLankan also claimed that the Prime Minister, too, had approved the process, according to the Cabinet paper dated Feb 02, 2020.

The line ministry received a copy of the termination agreement late January 2017, three months after the signing of it.

AerCap forfeited USD 7.5 mn paid as a security deposit. Inquiries revealed that the aircraft lease termination had been carried out under controversial circumstances with the line ministry informing the Cabinet that commercial agreements entered into by the national carrier didn’t require approval the Attorney General’s approval.


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