SriLankan Airlines (UL, Colombo International) has been taken to court in London after it backed out of an extension on the lease of three A330-200 aircraft from SASOF II Aviation Ireland, reports The Sunday Times of Sri Lanka. SriLankan maintains that the extension agreement was not legally binding, but SASOF contends that it represents a breach of contract.
In 2010, SriLankan leased three A330s – 4R-ALA (msn 303), 4R-ALB (msn 306), and 4R-ALC (msn 311) – from SASOF II with an expiration of January and February 2017. In 2016, SriLankan CEO Suren Ratwatte signed an agreement to extend the leases. This decision, SriLankan claims, went against the wishes of the board, which wanted to extend the contracts only if a separate dry-lease arrangement with PIA - Pakistan International Airlines (PK, Islamabad International) was secured. The PIA agreement did not go ahead as planned, and SriLankan advised SASOF that it would be returning the aircraft at the expiration of the original lease.
"Your purported notice is rejected and your intended action is a breach of contract," SASOF replied.
Should SriLankan be forced to fulfil the contract, it will come at a cost of USD225,000 per aircraft per month, or USD8.1 million per year.
Ratwatte says that the extension was agreed in order to avoid grounding the aircraft from August 2016 for lease return checks. "In order to forestall this (which is a very expensive exercise with no return on investment) and ensure the schedule could be flown, the decision was made to extend the leases on very favourable terms," he said. However, half of the SriLankan board says that Ratwatte exceeded his mandate, and arranged for the lease extension without their approval. The Ministry of Public Enterprise Development has requested a report into the matter.
SASOF II Aviation Ireland is a special purpose vehicle (SPV) for Apollo Aviation Group, an aviation investment management group. Though its various SPVs, Apollo manages 132 aircraft.
