SriLankan Airlines Airbus Aircraft Transactions & A350 Lease Cancellation
SriLankan Airlines Limited•Mahinda Rajapaksa Administration (2005–2015) / Yahapalana Government (2015–2019)
What Happened?
Strictly neutral, evidence-based factual reconstruction from state audit, parliamentary and court records.
Procurement of ten new aircraft (six Airbus A330-300s and four Airbus A350-900s) directly purchased, alongside arrangements to lease an additional four Airbus A350-900 aircraft through commercial lessors (AerCap and ILFC).
6 Airbus A330-300 aircraft (delivered) and 4 Airbus A350-900 long-haul widebody aircraft (contracted for direct purchase) plus 4 additional A350-900 aircraft contracted via operating leases.
To undertake a comprehensive fleet modernization to replace aging A340-300 and older A330 aircraft with modern fuel-efficient widebody aircraft between 2014 and 2021.
Following the change of government in 2015, the national carrier faced severe liquidity constraints and debt distress. A financial review determined the long-range A350-900 aircraft were commercially unviable for SriLankan Airlines' route network. The government decided to cancel the acquisition of eight A350-900 aircraft (four direct purchases and four operating leases). Substantial termination penalties were incurred.
SriLankan Airlines paid Rs. 17,058.1 million (approximately US$ 115 million equivalent at prevailing historical exchange rates) to revoke the operating leases for four A350-900 aircraft. Parliament's COPA report documented an agreed termination fee of US$ 98 million (reduced from an initial demand of US$ 154 million), consisting of a US$ 7.5 million forfeited security deposit and US$ 90.5 million cash settlement funded through state-guaranteed bank credit lines.
The Auditor General reported that procurement guidelines had not been adhered to for consultancy services, and the aircraft purchase decision had been made without Cabinet approval and without a proper cost-benefit analysis. Internationally, the UK Serious Fraud Office (SFO) determined in 2020 that Airbus employees had offered up to US$ 16.84 million in corrupt commissions to an intermediary company linked to the airline CEO's wife, of which US$ 2 million was actually paid. Domestic criminal charges under the Money Laundering Act were filed in the Colombo High Court.
The Original Deal
2013-06-28Staged pre-delivery payments (PDP) followed by commercial debt drawdowns and 12-year operating lease rentals commencing upon aircraft delivery dates (2014–2020).
Long-haul widebody aircraft fleet renewal and replacement of retiring Airbus A340-300 fleet.
The Actual Cost
SourcedDocumented Financial Consequence
Methodology note: The difference between original contracted fleet value and actual expenditure represents canceled capital expenditure, NOT financial loss. The documented financial loss is defined strictly as the unrecovered compensation paid for zero economic delivery: Rs. 17,058.1 million (US$ 98M negotiated settlement, including US$ 7.5M forfeited deposit + US$ 90.5M cash payment).
Follow the Money: SriLankan Airlines Airbus Aircraft Transactions & A350 Lease Cancellation
SriLankan Airlines Limited & Ministry of Civil Aviation
State carrier management and board propose complete widebody fleet renewal program.
SriLankan Airlines Board Minutes & Annual Report (p. 12)
Procurement Process & Approvals
NON COMPLIANT"SriLankan Airlines' 2018/19 annual report cites Auditor General observations that procurement guidelines had not been adhered to for consultancy services related to the 2013 aircraft transactions and that the board's aircraft purchase decision was made without Cabinet approval and without a proper cost-benefit analysis."
Auditor General Observations
NON COMPLIANCE"NON-COMPLIANCE: Procurement guidelines had not been adhered to for consultancy services related to the 2013 aircraft transactions, and the Board's aircraft purchase decision was made without Cabinet approval and without a proper cost-benefit analysis. Furthermore, Rs. 17,058.1 million was paid as compensation in the process of revoking the leases for four A350-900 aircraft without tangible asset receipt."
Ensure strict adherence to National Procurement Guidelines, mandate independent comprehensive feasibility and cost-benefit assessments for all major capital asset transactions, and establish stringent internal controls on contractual cancellation commitments.
Second Report of the Committee on Public Accounts on SriLankan Airlines Re-fleeting and Cancellation Liabilities
Parliament's COPA report describes a termination fee of US$ 154 million, renegotiated down to US$ 98 million on specified terms, with a US$ 7.5 million security deposit already forfeited and US$ 90.5 million in cash payment specified in the agreement. The committee noted that commercial bank loans guaranteed by the Treasury were drawn down to make the cash settlements.
COPE Committee Inquiry into Weliamuna Board of Inquiry Findings
COPE highlighted the Weliamuna Report findings regarding financial anomalies in the 2013 fleet transaction, irregular salary increments, and consultancy selections.
Failure of Airbus SE to prevent bribery contrary to Section 7 of the UK Bribery Act 2010 across multiple jurisdictions including Sri Lanka, Malaysia, Indonesia, Taiwan, and Ghana.
Indictment filed under the Prevention of Money Laundering Act No. 5 of 2006 alleging receipt and laundering of US$ 2 Million through BizLogic and related accounts in connection with aircraft procurement.
In 2013, European aircraft manufacturer Airbus engaged an intermediary registered in Brunei connected to the spouse of a SriLankan Airlines executive, offering up to US$ 16.84 Million, of which US$ 2 Million was paid in connection with aircraft orders.
Governance Context & Decision Authorities
Historical political leadership and responsible ministries are documented strictly for chronological and governance context. No personal wrongdoing or legal guilt is attributed merely from holding public office.
Board approved fleet acquisition without Cabinet approval or detailed independent feasibility study.
Cabinet of Ministers approved termination of four A350-900 operating leases on recommendation of Cabinet Committee on Economic Management.
Payments made to AerCap and international lessors using short-term state-guaranteed credit facilities from Bank of Ceylon and People's Bank.
US$ 2.0 Million commission payments transferred from Airbus bank accounts as cited in UK SFO Statement of Facts.
Audited total compensation paid in Sri Lankan Rupees for revoking leases for 4 A350-900 aircraft.
Contractual USD termination settlement: US$ 154M reduced to US$ 98M, composed of US$ 7.5M forfeited deposit + US$ 90.5M cash.
Sourced Chronological Timeline
Every milestone and date is indexed to verified state or judicial documentation.
Purchase and Lease Commitments Signed with Airbus
SriLankan Airlines signs definitive purchase agreement for 6 A330-300s, 4 A350-900s, and lease commitments for 4 additional A350-900s.
Weliamuna Board of Inquiry Formed
Prime Minister appoints Special Board of Inquiry led by J.C. Weliamuna PC to investigate governance and financial irregularities at SriLankan Airlines.
Cabinet Directs Cancellation of A350 Leases
Cabinet Committee on Economic Management approves revoking A350 lease agreements due to unsustainable operational debt projections.
Termination Settlement Finalized with Lessors
Agreement executed reducing US$ 154M liability to US$ 98M (US$ 7.5M forfeited deposit and US$ 90.5M cash payment installments).
Auditor General Confirms Rs. 17.058 Billion Compensation Paid
Auditor General publishes formal observation confirming Rs. 17,058.1 million paid as compensation for revoking leases for four A350-900 aircraft.
UK SFO Announces Airbus DPA Detailing Sri Lanka Bribes
UK High Court approves Deferred Prosecution Agreement documenting US$ 16.84M offered and US$ 2M paid to an intermediary company.
CID Arrests Former CEO Kapila Chandrasena
CID arrests Kapila Chandrasena and Priyanka Wijenayake on warrants issued by Colombo Fort Magistrate Court.
Attorney General Serves Indictment in High Court Trial-at-Bar
Indictments served before Colombo Permanent High Court Trial-at-Bar under the Prevention of Money Laundering Act.
Domestic Trial Ongoing; Total Audited Loss Remains Unrecovered
Colombo High Court trial continues. Compensation of Rs. 17,058.1 Million recorded in state enterprise balance sheet remains an unrecovered public liability.