VZCZCXRO7386
RR RUEHLMC
DE RUEHLM #0559/01 1000539
ZNR UUUUU ZZH
R 100539Z APR 06
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC 3055
RUCPDOC/USDOC WASHDC
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUEHNE/AMEMBASSY NEW DELHI 9467
RUEHKA/AMEMBASSY DHAKA 9083
RUEHIL/AMEMBASSY ISLAMABAD 5972
RUEHKT/AMEMBASSY KATHMANDU 4006
RUEHCG/AMCONSUL CHENNAI 6518
RUEHML/AMEMBASSY MANILA 1514
RUEHLMC/MILLENNIUM CHALLENGE CORP

UNCLAS SECTION 01 OF 02 COLOMBO 000559 
 
SIPDIS 
 
STATE FOR SA/INS; MANILA FOR USADB; MCC FOR D NASSIRY AND E 
BURKE; USDOC FOR EROL YESIN 
 
SENSITIVE, SIPDIS 
 
E.O 12958: N/A 
TAGS: EAIR EFIN ECON CE
SUBJECT:  SRI LANKAN AIRLINES INTERESTED IN BOEING AIRCRAFT 
 
 
¶1.  (SBU) Summary:  Sri Lankan Airlines (SLA), Sri Lankas 
national carrier, is in contact with Boeing and Airbus 
regarding gradual replacement of its current all Airbus 
fleet.  Boeing will have tough competition from Airbus, due 
to its existing hold on Sri Lankan Airlines and its partner 
Emirates Airlines of UAE (Emirates).  The airlines future 
plans will also rest on the decision by the Sri Lankan 
Government (GSL), SLAs majority shareholder, to renew the 
he 
Emirates current management contract.  End Summary. 
 
¶2.  (SBU) EconOff met with Peter Hill, Chief Executive 
Officer of SLA, Sri Lankas national carrier, on March 29 to 
learn about its plans to purchase new aircraft.  Previously, 
the Ambassador had heard of SLAs interest to purchase 
Boeing Aircraft from local business tycoon Harry Jayawardena, 
who is also the Chairman of SLA.  Hill confirmed that SLA is 
exploring the possibility of acquiring new aircraft to 
replace its ageing fleet as part of its medium-term business 
plan, currently under development.  According to Hill, due 
to SLAs ageing fleet with most aircraft hitting 10 years by 
2008-09, equipment needs will be a key component of the SLA 
business plans for 2008-2013 (medium term) and beyond. 
 
¶3.  (SBU) SLA is owned jointly by the GSL (51%) and Emirates 
(43%) with employees owning the remaining shares.  Emirates 
also manages the airline under a 10 year management 
agreement.  Hill, one of the only two expatiate staff 
aff 
seconded by Emirates to SLA, said that Emirates wants to 
secure the renewal of its management contract (which ends in 
2008) and work diligently on medium-term and long-term plans 
for SLA.  According to Hill, SLA has performed well during 
the past eight years under Emirates management and has been 
able to pay dividends to the GSL, in contrast to the pre- 
Emirates situation where the GSL needed to keep rescuing the 
airline financially. 
 
¶4.  (SBU) Hill expressed hope that SLA will benefit from 
peace, increased foreign direct investment and tourism into 
Sri Lanka.  However, the new SLA board has been slow in 
determining when to begin contract renewal discussions and 
whether to establish medium- and long-range business plans. 
(Comment:  This board is the eighth appointed by the GSL 
since Emirates took over management of SLA.  It is currently 
chaired by Harry Jayawardena, who served as Chairman/CEO of 
SLA immediately prior to Hills appointment to the position 
eight years ago.  Jayawardenas historical role in SLA 
raises the possibility that SLA Board leadership may seek to 
remove Emirates and their named CEO, returning management 
control to Sri Lankans.  End Comment.) 
 
¶5.  (SBU) The airline is already in contact with both Boeing 
and Airbus.  Hill noted that Boeing has already made 
presentations in Colombo and will return soon for further 
discussions.  According to Hill, SLAs shopping list (during 
the next few years) will include replacements for A340, A330 
and A320 aircraft.  SLAs primary replacement need is for 
long-range wide-bodied aircraft to replace the five current 
A340 aircraft (potentially with Boeing 777s).  In addition, 
SLA will eventually shop for the replacement of four A330 
aircraft purchased in 1999/2000 (potentially with Boeing 
787s).  SLA will also need to replace five A320 aircraft, as 
their leases will expire from 2007 onwards.  The A320s fly 
to short-haul destinations in India, with a passenger load 
ad 
of 130-150.  Hill said SLA is likely to stick to Airbus for 
this final component of its fleet.  He said a different 
vendor (i.e., Boeing) will have to come up with a 
sweetheart deal for SLA to consider a change from the A320 
model. 
 
¶6.  (SBU) Hill also revealed that SLA benefits from Emirate 
contracts with aircraft manufacturers, which extends 
Emirates regular terms and conditions to SLA.  While SLA 
talks with its current aircraft supplier Airbus, prospects 
are not all dim for Boeing, as Emirates has also entered 
into agreements recently with Boeing.  On financing, Hill 
said that they would rely on the credibility of Emirates to 
raise finances for the aircraft and not seek government 
financing. 
 
COLOMBO 00000559  002.2 OF 002 
 
 
 
¶7.  (SBU) Comment:  The prospect of moving the national 
airline into a more pro-Boeing position could tremendously 
reduce the current US trade deficit with Sri Lanka.  The 
Embassy considers this a high priority over the coming 
months, and will seek ways maximize the potential for this 
his 
high-value US sale. 
 
LUNSTEAD