18 September, 2021

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Where Eagles Dare….

By Ravi Perera

Ravi Perera

Ravi Perera

“The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright brothers. Indeed, if a far-sighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favour by shooting Orville down”- Warren Buffett, famed investor known world over as the oracle of Omaha

Sri Lankan Airline…you are our world…” Sri Lankan Airline advertisement

Obviously among our population there are only a handful that can claim a sound knowledge of business or economic realities. On the contrary, many seem to have a distorted vision of how and why things happen.  The vast majority in this country would have no concept of how public money, which is collected through various taxes on the people, is utilized and accounted for. That every telephone call made from a government owned telephone to every car used by the government is paid for with his money is an idea which will appear far-fetched to the average Sri Lankan  who according to statistics earns only  about US$ 3000 an year ( In fact many would envy  an annual income amounting to $ 3000 !). He little realizes that the parliament, to which he elects a member   periodically, is the ultimate authority in accounting for public money.

But despite his woeful ignorance of the workings of the financial structure, there is hardly a person who is not aware of the fact that our State owned Airline, The Sri Lankan is a huge loss maker. Its losses are in the billions of rupees. As if one loss making airline was not enough, sometime back the government floated another airline named Mihin Air.  From the beginning this too became a heavy charge on the public purse.

Sri Lankan Airlines | File photo

Sri Lankan Airlines | File photo

It has been said that the amounts of money lost through these two government-owned airlines would have been sufficient to maintain several universities and hospitals. A healthier and better educated society is potentially a lot more of an asset than an airline. But our government has decided otherwise, and seems determined to prove Warren Buffett wrong in his assessment of airlines as a business prospect.

The Chief Executive of the Sri Lankan airline is exulting that US dollar bonds worth 500 Million (US$) issued by his airline evinced interest among international investors. Although the issue is carrying a government guarantee, the airline nevertheless is paying 5.3% which is markedly higher than what an average 5 year US dollar sovereign bond would fetch.

If Warren Buffett was looking at investing in bonds issued by various third world countries, he would surely take an interest in the bonds of the Sri Lankan Airline. There are two features of these bonds that will draw his attention straight away. The return on the Sri Lankan Airline bonds is   more than the average for such bonds, a superior return being one of Buffett priorities. More important, Buffett hates to lose his money. Since the Government of Sri Lanka is guaranteeing the bond issue there is no risk of losing his money either.

But that is from an investor’s point of view. How does it look from the stand point of the borrowers, who are after all the people of this country?

We are told that this huge sum is being raised in US dollars for re-fleeting the airline and also to modernize it. This means new aero-planes and high value equipment which are the standard wherewithal of this business. In many countries, particularly third world countries where transparency in large government procurement is low or non-existent, such transactions often attract suspicions of commissions and kick-backs.

That aside, there are many other worrying aspects to our foray into the big world of airline business. The sheer size of the investment required warns against acting on a whim. These are not ventures to move into merely because someone else is doing it, one has some vague notion about it or want to make a statement.

In the early days of newly won independence for former colonies, mainly in the heady 1950s and60s, many countries went into creating national carriers. We, always up with the trends, created Air Ceylon. The larger countries like India, Pakistan and Malaysia had domestic needs which ensured a certain amount of business. The smaller countries had to depend solely on international traffic. Most of them failed, an exception being the iconic Singapore Airlines which went on to become an international brand and a true eagle among competing airlines.

Obviously every county, in geography, in financial strength, in human resources and culture are differently endowed. At the time of independence, Singapore, home to three large ethnic groups (Chinese, Malay, and Indian), no natural resources to speak of, high unemployment and little money did not look like a story with a good ending. But although nature did not favour Singapore with natural resources it did gift it with a man called Lee Kuan Yew. Within a short period of about three decades this man took Singapore from a third world shanty town to the ranks of the first world. Today the quality of life for the average Singaporean is on par with the best.

Singapore Airlines came into being in 1972 when the former Malaysia-Singapore Airlines split somewhat   acrimoniously. At the time Singapore was working determinedly to make itself a financial centre in South East Asia. It was opening up industrial parks and other facilities, developing a duty free port and adjusting its tax regime to attract maximum investments to the country. The City State had three small (former) RAF air fields. After much consideration, Changi was chosen as the site to develop the then largest airport in Asia. Committing an investment of US $ 1.5 Billion the Changi Airport was opened in 1981.In 2013 more than 53 million passengers passed through the Changi airport. Nearly 1000 planes land there on a daily basis.

The story of the Singapore Airlines and Changi Airport go in tandem. In the words of Lee Kuan Yew “I spelt out the need for the Singapore Airline to be competitive and self-supporting; it would close down if it incurred losses. We could not afford to run an airline just to show the flag like other countries did.”

How they did it, the extremely high quality of its management, the forward planning, careful route selection, obtaining lucrative landing rights, attention to detail and outstanding service quality of the Singapore Airline are long and complex stories which bear close study and cannot be discussed in one short article. Nor can we explain the success of the Singapore Airline without examining the overall success of that island city.  Such gigantic achievements do not happen by accident. Words of Lee Kuan Yew even picked randomly, give a clue to the spirit in which he approached the transformation of Singapore. (From Third World to First-2000)

“No critic has been able to fault the Singapore government for corruption, nepotism or immorality”

“The single decisive factor that made Singapore’s development was the ability of its ministers and the high quality of the civil servants who supported them”

“Corruption, nepotism and cronyism in Asia were condemned by the Western critics as proof of the fundamental weakness of ‘Asian values’. There are many different value systems in Asia-Hindu, Muslim, Buddhist, and Confucianist. I am able to discuss only Confucian values. Corruption and nepotism are a debasement of Confucian values.”

“In a debate on the Budget in March 1985, I took the opposition to task for opposing ministerial pay increases. J.B.  Jeyaratnam of the Workers Party had contrasted my monthly salary of S$29,000 with that of the Prime Minister of Malaysia who was paid S$10,000, but took only S$9000. I went further to compare salaries of Philippines President Marcos at 100,000 pesos yearly ,or just over S$1000 a month and President of Indonesia governing 150 million people at a salary of 1.2 million rupiahs or just S$2500. However, they were all wealthier than I was!”

“In Singapore, Customs officers would receive bribes to speed up the checking of vehicles smuggling prohibited goods. Personnel in the Central Supplies provided information on tender bids for a fee. Officers in the Import and Export Department received bribes to hasten the issue of permits. Contractors bribed clerks of works to allow short piling. Principals and teachers received commissions from stationary suppliers. Human ingenuity is infinite when translating power and discretion into personal gain.” This was before Lee Kuan Yew declared war on corruption and the setting up of the CPIB.

“ It was the high standards we maintained that made Prime Minister Goh Chok Tong order an investigation into purchases in 1995 of two properties each made by my wife on my behalf and by my son Lee Hsien Loong , the Deputy Prime Minister”

As we know Singapore with a population of little more than 5 million commands a GDP of approximately US$ 270 Billion today. In Sri Lanka, with a population of more than 20 million we have a GDP of about US$ 60 Billion. Even if we maintain an impossible annual growth rate of 10% it will be a long time before we catch up with the island State.

As Singapore rises higher and still higher in its national voyage we are reminded of the old jingle of the Singapore Airline “Singapore girl…you are a great way to fly”

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Latest comments

  • 9
    2

    Thanks Ravi for the informative article but im more keen on K A Sumanasekeras (LEELA’s) school of thought in this matter as he is an expert on money matters (wink wink)

    Also he seems to know a bit of inhabitants earning a dollar a day and our way of life of the majority inhabitants

    so lets open the floor to the great and one only K A Sumansekera (LEELA)!

    • 8
      1

      “Sri Lankan who according to statistics earns only about US$ 3000 an year ( In fact many would envy an annual income amounting to $ 3000 !).”

      Actually average of Srilankan is less than US$1000. rest of the money siphoned off from the projects end up with the royal family pocket that goes to their swiss bank accounts.

      thats why governement installed a high commission in Seychelles and Bank of ceylon to do the money laundering.

    • 4
      0

      little tale of my experiences on rules and laws of singapore,

      when I was working in Singapore with a Chinese company at Yeshun. myself and my Chinese driver stopped by the Trans Island Express way
      [ TIE ]traffic police,
      and fined 500 S $ for High speed Driving.
      after issuing the ticket, my driver was chatting with the policeman for few minutes and returned to the car with big smile.

      I asked him why you are smiling, and he told me saying [ Chee bai, a filthy word in Chinese] that, today he got an invitation to attend a birth day dinner party from the Police man,
      Who happened to be his own Younger Brother.

      So I was astonished as if that happened in My mother country,
      AASIYAWE AASCHARYA.

    • 3
      1

      Peace Lover

      “K A Sumanasekeras (LEELA’s) school of thought in this matter as he is an expert on money matters (wink wink)”

      Is K A Sumanasekeras (LEELA’s)=Jim Softy =Lorenzo = Other Avtars?

      Which Avtars?

    • 3
      1

      Ravi Perera –

      “As we know Singapore with a population of little more than 5 million commands a GDP of approximately US$ 270 Billion today. In Sri Lanka, with a population of more than 20 million we have a GDP of about US$ 60 Billion. Even if we maintain an impossible annual growth rate of 10% it will be a long time before we catch up with the island State.”

      You Forgot to mention the Differences.

      1. Sri Lanka has 15 Million Sinhalese Buddhists who wants to learn Pali and Sinhalese so that chant in front of monks. The Muslims want to pray too all day long, instead of English, a Global Language.

      2. Almost All the sri Lankans, are paras from South India, but it should not be a problem, they want to learn Pali, Sinhala and Tamil, mostly, unlike in Singapore, they do it in English.

      3. Singapore did not have a Monk Maahanama, D.S. Senanayaka, SWRD, Srima, JR. and Mahinda plus their invention LTTE VP with Sinhala Only or Tamil only. They had English all along.

      4. They had fewer Sinhala Buddhist Monks.

      5. What Else? No racist language war. No Myth based Religion war.

  • 7
    1

    Ravi,

    Thanks for the well timed comparison. While eagles for soaring in Sri Lanka, the vultures were descending on Sri Lanka!

    Dr.Rajasingham Narendran

  • 4
    1

    Correction: While eagles were soaring in Singapore, vultures were descending in Sri. Lanka .

    Dr.RN

  • 7
    1

    .
    But unlike Lee Kuan Yew, MaRa has a big family to support.

    :-)

    • 6
      1

      Hahaha very true. And an utterly dumb family to support too!

  • 9
    1

    “In the words of Lee Kuan Yew “I spelt out the need for the Singapore Airline to be competitive and self-supporting; it would close down if it incurred losses. We could not afford to run an airline just to show the flag like other countries did.”

    Sri Lankan airlines or Mihin can come even close to Singapore Air capability.
    SIA is run very good management who know how to run an airline.

    In Sri Lanka the air lines are run by royal family relatives and their only plan is how to get commission from airline deal or project.

    What they should do if close down Mihin and pass Sri Lankan airlines to John Keels or some other private comapnies to manage it. Create a airforce one plane MR for his official visists and not to touch Sri Lankan airlines for his visits.

    • 12
      2

      Singapore is built upon a culture of ecellence nurtured from independence.

      Whereas Sri Lanka has nurtured racism since independence, the mediocre rise to the top, and top talents are driven out of the country.

      • 0
        9

        tamil separatist terrorist bull!
        singapore is a police state run by chinese to hood wink the world.

        Go read LKY as you have grown senile half brother of tamilchelva the sotthi.

  • 1
    7

    Gazans are paying for the crimes of SL Muslims.

    • 0
      5

      I wish I knew!!

      Gaza and its SL Islamic support . 80 sec video.

      Israel left the best of horticulture at Gaza(green houses in the world but the Muslims ate it wholesale)

      http://www.bbc.co.uk/news/world-middle-east-28294498

    • 2
      0

      Hey Fathima (lorenso of lankaweb) where does gazans fall into the subject of the article?

  • 5
    0

    Our two airlines have a common chairman , an OLevel educated former planter – close relative of the president.
    What can one expect?
    The massive losses notwithstanding,a loan is obtained for re-fleeting!
    The president with a massive entourage flies all over the world and does not have to wait for available flights, like on commercial airlines.
    These junkets are also for VVIPs – recently, the First Lady flew to China to inspect a primary school.

    This is the main reason for maintaining these two ‘white elephants’.

    The massive losses of the two airlines do not appear to bother the Committee On Public Enterprises of Parliament.

    P.S Sometimes, puppies are transported in the cockpits of aircraft for VIPP’s wives.

  • 2
    0

    Thanks. That was a revealing article on a comparative analysis of two national Airlines of two countries. LKY was great statesman and thanks to him Singaporeans live together as one nation minus the display of differences towards the many cultures brought into the mix by Malays, Chinese and Singaporeans, including a diversity of many religions. Today they are one of the most highly computerized nations in the world. Of course this has both it good and bad points, but that is a different matter in itself.

    In SL it was cheap and dirty politics based along ethnic, religious and language divides which destroyed the nation and still continues to destroy what remains of it. The people never seem to learn from past mistakes and keep repeatedly going back to petty politics by creating racial disharmony and religious tension to win votes.

    Too bad our present day political leaders don’t know any other style of governance, and they run the country like running a village boutique (gamey kadey) with bullying and intimidation (chandi part) to frighten and chase away any competition. They want total domination. Their very survival depends on unmatched levels of thuggery and liquidating their opponents who become a threat to their very existence. Absolutely no class in them.

  • 2
    2

    Very well written article..though small it contain information to write thesis about Sri Lanka Economy now run by 3 Idiots…

    however one must also not forget the fact that Sri Lankan economy was ailing since 1983 July 23rd due to ethnic violence and rising of JVP anti imperialist slogans that destroyed the South in 1987-1989…those were the 2 key issues that drove away the promised US investments to Malaysia…Singapore…

    The position Singapore holds today in the global economy infact belongs to Sri Lanka…just see the time difference ..5.30 + east…5.30 – west…very fertile island surrounded by sea.. with a Natural Harbour..we had a better educated Society at that time in the Country…Sri Lanka also allocated lands for Industrial Parks…

    However the development of Singapore / Malaysia over the 30 years could not have been achieved if not for the iron fisted ruling of LKY and Dr. MM………BUT THEY CERTAINLY THRIEVED ON THE MOTTO..” YOUR PAIN IS OUR GAIN…” well, only history will tell who were actually behind the LTTE…because we still hear the operatives surfacing from Malaysia…

    Today Sri Lanka is ruled by the 3D….

    • 1
      2

      well, only history will tell who were actually behind the LTTEbecause we still hear the operatives surfacing from Malaysia… Today Sri Lanka is ruled by the 3D….JVPJHU Cockup!”

      Divorced and Desperate Dias, Doing the Twirly =
      Call Centre Call Girl‏;

      Watchaaa 5F

      Fat, Fair, Female, Forty Five,

      Fu fu fukushima Doo Doo!

  • 1
    2

    As the friendly lady TG said . 2nd largest container yard on earth is at Switzerland a landlocked country (hear all say little dear rory boyo!)
    Comparison is east/west the best in shale Amen!!

    Oh the past what a bas’ar be thou present – in obirit dont chench ; forget not the missionary hands of lankian welcome.

  • 1
    0

    An excellent article on the corruption & nepotism that continues to prevail in our little island; I guess it is also because of the Asian value system which shows no sign of change.The writer’s revealing comparison of the 2 airlines further enlightens us on the foolhardy decisions made by those in power.At this rate, I fear there may be no light at the end of the tunnel for us citizens.

  • 0
    0

    As Lee Kwan Yew set about civilising Singapore, the Western nations ostracised him, labelling him a ‘communist’. We on the other hand kowtowed to the West and absorbed everything that we thought was the norm from them, and paid the price, and still do.

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