Sri Lankan carrier to buy 10 Airbus aircraft for $ 1.3 bn

Updated 25 May 2013
0

Sri Lankan carrier to buy 10 Airbus aircraft for $ 1.3 bn

COLOMBO: Sri Lankan Airlines has signed a provisional deal with Airbus worth $ 1.3 billion to buy six A330-300 and four A350-900 aircraft between 2014 and 2023 to replace aging aircraft, the firm’s CEO said.
The airline, seeking to modernize its fleet to cut fuel costs, will opt for Rolls-Royce Plc engines and use a lease-back arrangement to conserve cash, CEO Kapila Chandrasena said.
“The total cost altogether is going to be around $1.3 billion. But deliveries are progressively from 2014 to 2023 on a staggered basis,” he said.
The carrier signed a memorandum of understanding on the purchase with Airbus last Friday, he said.
Sri Lankan Airlines now operates with a 22-aircraft fleet including seven A320-200s, seven A330-300s, six A340-300s and two Twin Otters.
Chandrasena said the national carrier needs to replace all six A340-300s with A330-300 aircraft and all seven A330-300s with A350-900s.
Sri Lankan, which had been managed by Dubai’s Emirates Airline for a decade until 2008, aims to achieve a modern and fuel efficient twin-engine fleet by 2023.
The A340 has lost favor with airlines due to the cost of running four engines in an era of high fuel prices. Airlines are switching to lightweight new-technology airplanes such as the carbon-fiber A350 and Boeing Co’s Dreamliner, but sales of the older A330 have held up better than expected due to its availability and competitive pricing, aerospace analysts say.
Chandrasena said the airlines considered offers by both Airbus and Boeing.
“We looked at who is giving more value for us. In that discussion, it was apparent that the Airbus offer of A330-300s in the interim and long-term A350-900 is much more favorable than the Boeing,” he said. “Boeing did not have interim aircraft. They were only interested in the long-term offer, which was the 787.”
Sri Lankan Airlines estimates that it incurred a loss of $ 134.8 million in the 2012/13 financial year to March 31, similar to the previous year, and is finding it difficult to finance new aircraft purchases. “We don’t have cash,” Chandrasena said. “So what we are doing is a sale and lease.”
He said the airline would work with either a financial institution or a leasing firm that would buy the aircraft and lease them back to the carrier.
He said the national carrier would be looking at a lease period of 10 to 15 years, with a shorter period for the A330-300s and a longer period for the A350-900s.
“We are talking to various (leasing companies) right now about the sale and lease-back on the six 330-300s,” he said.

The airline operates about 253 flights a week out of Colombo to European, Middle Eastern and Asian destinations.
Chandrasena said in February that, with fuel comprising half the airline’s costs, its ageing, inefficient planes were a heavy drain on profit.
It has the extra burden of having to operate unprofitable European routes, because the country’s economy, hard-hit by a 26-year war that ended in 2009, relies heavily on tourism.
The airline, which is 51 percent state-owned, is expected to break even, or be close to that point, in the 2015/16 financial year.


US courts allies with free trade offers at G20, France resists

Updated 15 min 55 sec ago
0

US courts allies with free trade offers at G20, France resists

BUENOS AIRES: The US sought to woo Europe and Japan with free trade deals on Saturday to gain leverage in an escalating tariff war with China but its overtures faced stiff resistance from France at a G20 finance ministers meeting dominated by trade tensions.
US Treasury Secretary Steven Mnuchin told reporters at the gathering of the financial leaders of the world’s 20 largest economies in Buenos Aires that he was renewing President Donald Trump’s proposal that G7 allies drop trade barriers between them.
“If Europe believes in free trade, we’re ready to sign a free trade agreement,” Mnuchin said, adding that such a deal would require the elimination of tariffs, non-tariff barriers and subsidies. “It has to be all three issues.”
Trump has angered European allies by imposing import tariffs of 25 percent on steel and 10 percent on aluminum, causing the European Union to retaliate with similar amounts of tariffs on Harley-Davidson motorcycles, Kentucky bourbon and other products.
Trump, who frequently criticizes Europe’s 10 percent car tariffs, is also studying adding a 25 percent levy on automotive imports, which would hit both Europe and Japan hard.
French Finance Minister Bruno Le Maire said the European Union would not consider launching trade talks with the United States unless Trump first withdraws the steel and aluminum tariffs and stands down on a car tariff threat.
“We refuse to negotiate with a gun to our head,” Le Maire told reporters on the sidelines of the G20 meeting.
Trump has angered European allies by imposing import tariffs of 25 percent on steel and 10 percent on aluminum, causing the European Union to retaliate with similar amounts of tariffs on Harley-Davidson motorcycles, Kentucky bourbon and other products.
Trump, who frequently criticizes Europe’s 10 percent car tariffs, is also studying adding a 25 percent levy on automotive imports, which would hit both Europe and Japan hard.
French Finance Minister Bruno Le Maire said the European Union would not consider launching trade talks with the United States unless Trump first withdraws the steel and aluminum tariffs and stands down on a car tariff threat.
“We refuse to negotiate with a gun to our head,” Le Maire told reporters on the sidelines of the G20 meeting.
IMF Managing Director Christine Lagarde presented the G20 finance ministers and central bank governors meeting in Buenos Aires with a report warning that existing trade restrictions would reduce global output by 0.5 percent.
In the briefing note prepared for G20 ministers, the IMF said global economic growth may peak at 3.9 percent in 2018 and 2019, while downside risks have increased due to the growing trade conflict.
Lagarde’s presentation came shortly after Mnuchin said there was no “macro” effect yet on the US economy.
Mnuchin said that, while there were some “micro” effects such as retaliation against US-produced soybeans, lobsters and bourbon, he did not believe that tariffs would keep the United States from achieving sustained 3 percent growth this year.
The US dollar fell the most in three weeks on Friday against a basket of six major currencies .DXY after Trump complained again about the greenback’s strength and about Federal Reserve interest rate rises, halting a rally that had driven the dollar to its highest in a year.
The last G20 finance meeting in Buenos Aires in late March ended with no firm agreement by ministers on trade policy except for a commitment to “further dialogue.”
Brazilian Finance Minister Eduardo Guardia said participants agreed the risks to the global economy had increased since their last meeting, citing rising trade tensions and higher interest rates by major central banks.
He said the final communique would reflect the need for members, particularly in emerging markets that have been roiled by currency weakness, to undertake reforms to protect themselves against volatility.
German Finance Minister Olaf Scholz said he would use the meeting to advocate for a rules-based trading system, but that expectations were low.
“I don’t expect tangible progress to be made at this meeting,” Scholz told reporters on the plane to Buenos Aires.
The US tariffs will cost Germany up to 20 billion euros ($23.44 billion) in income this year, according to the head of German think-tank IMK.
Bank of Japan Governor Haruhiko Kuroda said he hoped the debate at the G20 gathering would lead to an easing of retaliatory trade measures.
“Trade protectionism benefits no one involved,” he said. “I think restraint will eventually take hold.”