How will Sri Lankan Airlines finance new leases without disclosed funding plans?

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Sri Lankan Airlines Faces Uncertainty Over Financing New Aircraft Leases Amidst National Debt Crisis

Sri Lankan Airlines has announced plans to lease up to 21 aircraft as part of a fleet expansion strategy over the next three years, despite the absence of disclosed funding plans and the nation's sovereign debt default. The airline intends to grow its fleet from 24 to 35 planes, a move that raises significant questions about financial viability given the country's severe economic downturn and the carrier's own substantial debt and accumulated losses.
Fleet Expansion Plans Announced Amidst Economic Hardship

The state-owned airline has issued four requests for proposals to lease up to 21 aircraft, aiming to support its long-term business strategy and replace aging jets. This expansion initiative is set against the backdrop of Sri Lanka's most profound economic crisis since its independence in 1948, marked by critical shortages of essential goods and widespread power outages. The government's recent announcement of a default on its US$51 billion foreign debt further compounds the challenging economic environment.
Airline's Financial Standing and Debt Burden

Sri Lankan Airlines' balance sheet reveals a significant financial burden, with a debt of US$1.7 billion and a carried forward loss of US$1.56 billion as of March 2020. The airline has not provided details on how it intends to finance the proposed aircraft leases, a crucial omission given the country's precarious financial situation and the ongoing negotiations for a debt restructure with the International Monetary Fund.
Downgraded Credit Rating and Default Concerns

Adding to the financial concerns, international ratings agency Fitch downgraded US$175 million in bonds issued by Sri Lankan Airlines from C to CC. Fitch indicated that the airline was "near default," aligning its new rating on debt due in June 2024 with Sri Lanka's broader sovereign default announcement. This credit rating downgrade suggests significant challenges for the airline in securing new financing.

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How will Sri Lankan Airlines finance new leases without disclosed funding plans?

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