Why a company?

Airports are commercial entities where customers are being provided with a service for a fee. When a customer pays a fee he expects prompt service with value for money. When a departing passenger pays airport tax, he expects the airport to provide him a hassle free passenger experience allowing him to move through the embarkation process without undue inconvenience or hindrance. If he encounters any situation that causes dissatisfaction in him such as having to use a washroom that is not cleaned properly, having to wait long to check-in due to inadequate number of counters, and things like that, he would feel that he is not getting a service of value for the money he paid. If a plane that has just landed had to wait a long time before getting a gate to dock and let the passengers disembark then the airline would feel that it is not getting the service for the value of the landing charges they pay to the airport. Like in any other business, keeping the customers who pay for service well satisfied is very important for airports and for ANSP.

For an organization dealings with customers, it is very important to be able to act promptly. Whenever a problem arises in the service, it should be possible to provide a solution as soon as possible. To provide prompt solutions, prompt decision making and having all the resources at hand is essential. 

Organizations run by the government are generally characterized by elaborate procedures and strict control on administration and finance. They have to be. Government organizations utilize public money, are bound to be uniform and equitable when dealing with matters and have a high level of accountability so they need to be rigid. However, when it comes to prompt decision making and utilization of funds they may find it difficult to be flexible. Also, revenue of public institutions are usually credited to a common fund and all contributors are treated equal irrespective of the magnitude of individual contributions. When running commercial entities like airports in a competitive market a government department or corporation may not be the best operational model. This is a reality that has been felt all over the world. Various alternative models have been tried out in many countries but there are only few examples of airports or ANSP being fully entrusted to the private sector because they perform a public duty and a government cannot afford to transfer total control of them to a private entity.

Sri Lanka too has undergone this experience. Until 1980 the airport and ANSP were operated by the Department of Civil Aviation and they were operated well. After the liberalization of the economy and the increase in tourist and business travel the need to develop the airport infrastructure was strongly felt. At the same time the development of many airports in the Asia-Pacific region began to offer stiff competition and Sri Lanka was faced with the risk of losing its identity as a destination unless the airport infrastructure were developed and upgraded.

To face this challenge, the ‘Airport Authority of Sri Lanka’ was founded and the responsibility of operating the airports and providing air navigation services was transferred from the Department of Civil Aviation to the newly formed authority. The department retained its regulatory role in the civil aviation industry with the Director General of Civil Aviation acting as the national focal point for dealing with the ICAO.

On 23^rd February 1982, our company was formed as the successor to the Airports Authority. The government of Sri Lanka was made the sole shareholder and through this the government retained control of the affairs of the company. The aim was to provide the company some autonomy in making business decisions to face the challenges in running commercial airports and developing them, to recruit, train and retain personnel while continuing to be an entity fully owned by the government. From its inception up to date this aim has been achieved in varying degrees and it has been possible to run the company as a profitable state venture to become a dependable revenue earner for the state. The company has also been able to develop airports; build new airports; make technological advancements to air navigation services to be on par with the rest of the world; and to retain qualified, experienced, and trained staff by paying competitive salaries and offering various perquisites.

Although our company is registered under the company’s act, it remains to be a state entity. Apart from the autonomy described earlier, as an organization performing a public duty, it shares many features of state run organizations. For example, with the board of directors being appointed by the Minister in charge of Civil Aviation our company comes within the state’s executive purview. The affairs of our company are reviewed by the Committee on Public Enterprises (COPE) of the parliament and therefore our company comes within the purview of the national legislature. The court has special jurisdiction over state institutions. Many of those are applicable to our company. Accordingly our company comes within the purview of all 3 state organs namely the executive, legislature and the judiciary which signifies its status as a state organization.

In addition our company is bound to follow the national guidelines on procurement and the company’s accounts are audited by the Auditor General.

Apart from these state controls the company has the freedom to draw up its own administrative and financial regulations, schemes for the recruitment and promotion of employees, strategic plans, business plans and marketing plans. The company can also maintain a pay structure different to the state sector which has enabled it to become one of the most attractive employers in the country. The revenue of the company as well as the salaries of employees are subject to taxation similar to other private companies. These signify our company’s status as a commercial establishment running a business on behalf of the government. The government being the sole shareholder, our company’s revenue is given back to the government while the company is permitted to retain a share of the revenue to run its affairs and for development.

This model where the company can remain as a state owned enterprise and yet function as a commercial entity engaged in a competitive business has been found to work for all practical purposes. It may not be the best model and it may be improved in future. However, it would be reasonable to assume that it would not have been easy for a conventional government department to keep abreast with the rapid advancements that took place in the industry and realize the developments that our company was able to achieve.

It is also pertinent to note that in year 2002, the Department of Civil Aviation itself was transformed into an authority as a consequence of the passing of the Civil Aviation Act in the same year. This indicates that even the regulatory function is better handled by an authority which is more autonomous than a department.

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