SriLankan Airlines Sues Airbus For $1 Billion In Court

The Airbus bribery scandal continues to rumble on, with one of the affected airlines taking legal action against the planemaker this week. SriLankan Airlines is suing the company for $1 billion in compensation relating to bribery claims surrounding an order of six A330s, four A350s, and a further four A350s to be leased.

SriLankan Airlines Airbus 330-300 landing at Tokyo Narita
SriLankan Airlines is suing Airbus for a billion dollars. Photo: Getty Images

SriLankan files for a billion from Airbus

Sri Lanka’s flag-carrying airline, SriLankan Airlines, is suing European planemaker Airbus for the sum of $1 billion. The amount is being sought in respect of damages, loss of reputation and the reimbursement of costs and interests. The issue stems back to the Crown Court judgment in the UK, which found Airbus guilty of bribery in relation to aircraft deals.

As well as the billion-dollar compensation sought, SriLankan Airlines is seeking to cancel the outstanding delivery of four A350-900s and to claw back some $19 million in pre-delivery payments for these planes.

The outcome of the UK investigation led to the approval of a Deferred Prosecution Agreement (DPA) between the Serious Fraud Office of the UK and Airbus. Announced in January 2020, this included a settlement of some $4.3 billion, with proceeds to be split between France, the UK and the US.

Sri Lanka was just one of several countries alleged to have been impacted by the bribery scandal. The offenses spanned countries including Taiwan, Indonesia, Malaysia, Nepal, Russia, China and Colombia. Impacted airlines included the AirAsia Group, TransAsia Airways, Garuda Indonesia and the aviation arm of the Ghanaian government.

Delivery ceremony for SriLankan Airlines’ first A330-300
The airline took delivery of the A330s in the end. Photo: Airbus

Specifically, Airbus was alleged to have offered a Brunei-based straw company some $16.84 million in bribes relating to contracts for widebodies for SriLankan Airlines. This included six A330-300s, four A350-900s and a further four A350-900s to be leased. Reports suggest that only $2 million of the proposed bribe was ever paid.

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$98 million to cancel lease contracts

Transparency International Sri Lanka (TISL) has been advocating for SriLankan Airlines to take action against Airbus for the bribery. At the time of the UK Crown Court decision, TISL Executive Director Asoka Obeyesekere said,

“It is important to recall that the fallout from this deal is widely reported to have cost in excess of 17 billion rupees (USD 116mn [2015]) in cancellation penalties. Given that the evidence now shows that corruption was involved in the procurement process, it is imperative that action is taken both internationally and locally to ensure that Airbus and its agents are held accountable for losses inflicted on Sri Lanka.

Following the news that the airline was taking Airbus to court, as revealed by FT last week, TISL said that it welcomed the decision. In a statement, the company said that it was important to hold to account those responsible for the significant losses inflicted on the Sri Lankan public through this incident.

The airline has not taken delivery of any A350s, and has paid almost $100 million to cancel leasing contracts. Photo: Airbus

Canceling the lease contracts for the four A350-900s cost the company $98 million in cancellation payments. TISL has noted that this is money that could have been used to pay for COVID vaccines for the Sri Lankan people. It estimated that some 24.5 million doses could have been imported for this value.

In the end, SriLankan Airlines took delivery of the A330s from the Airbus deal. However, it has long been attempting to wriggle out of the A350 purchase agreements, beginning the extrication process just two years after the deal was signed. It has even attempted to switch these to purchase orders for A330neo aircraft, which are better suited for its operations, but the contract remains legally binding.

It remains to be seen how far the company will get in pursuing Airbus for such a large amount of compensation.