A special correspondent
Airport & Aviation Services (Sri Lanka) (Private) Limited (AASL) is operating amid a growing governance crisis, marked by a leadership vacuum, unresolved audit concerns, and mounting financial risks tied to one of Sri Lanka’s most expensive stalled infrastructure projects.
As of 22 January 2026, the state-owned aviation monopoly has no permanent chairman. Air Vice Marshal (Retd.) Harsha Abeywickrama, appointed in October 2024, was removed, and the post is now held on an acting basis by W. W. S. Mangala, Secretary to the Ministry of Ports and Civil Aviation. This move places AASL effectively under direct ministerial control, weakening independent oversight at a moment when scrutiny should be at its strongest.
Headline Profits, Hidden Risks
While AASL has publicly reported profits exceeding Rs. 19 billion for 2025, auditors reviewing the 2024 financial statements have raised serious red flags. These include unaddressed asset gaps, unrecognized liabilities, and deep uncertainty surrounding the stalled Bandaranaike International Airport (BIA) Terminal 2 project.
The contrast between strong headline numbers and unresolved audit issues has raised questions about the quality, completeness, and transparency of AASL’s financial disclosures.
Terminal 2: A Project Frozen in Time
At the center of the controversy is Package A of the BIA Terminal 2 development, which covers construction of the passenger terminal building and related works. The contract was awarded on 4 March 2020 for Rs. 105.6 billion (JPY 41.55 billion and Rs. 35.1 billion), with completion scheduled for 13 December 2023.
That deadline passed with no meaningful delivery.
Construction was suspended on 9 December 2022 after the Japan International Cooperation Agency (JICA) halted loan disbursements, following a Ministry of Finance circular introducing an interim foreign debt policy. By then, nearly two years of the contract period had elapsed.
Physical progress stood at just 5.44%, against an expected 30%, an underperformance that remains unexplained in public disclosures.
Billions Paid, Little to Show
Despite minimal progress, Rs. 37.3 billion had been paid to the contractor by 31 December 2024 for certified works and items taken over by AASL. Contract terms continue to expose the company to monthly expenses, financial charges, and delay penalties until final settlement.
More critically, the contractor retains the right to seek arbitration, a step that could significantly increase AASL’s financial exposure. Yet this risk was not recognized as a contingent liability in the 2024 accounts an omission auditors have explicitly questioned.
Idle Assets, Recurring Losses
Assets procured under the halted project, with an invoice value of Rs. 1.995 billion, have been transferred to two private warehouses. Some items are reported to have expired.
By end-2024, Rs. 60.3 million had already been paid in warehouse rentals, with no disclosed strategy to reduce further losses. With no confirmed restart date, these costs are expected to continue, turning idle assets into a permanent financial drain.
Costs Rise Even After Construction Stops
Following the suspension, AASL entered into two additional agreements with a private company for “protective works” and related scopes, valued at Rs. 3.73 billion. By end-2024, Rs. 1.33 billion had already been paid despite the terminal itself remaining largely unbuilt.
Accounting under Question
Total expenditures of Rs. 43.74 billion, including construction costs, consultancy fees, and project management unit salaries, have been recorded as work in progress. Auditors have questioned whether this treatment adequately reflects the project’s stalled status, uncertain future, and escalating cost risks.
Restart Still Uncertain
Bids to recommence Terminal 2 were called between September and December 2024, with deadlines extended to 25 March 2025. As of early 2026, evaluations remain incomplete, prolonging uncertainty over whether the project will proceed, be restructured, or face further delay.
Governance on Trial
The appointment of the ministry secretary as Acting Chairman has intensified concerns over blurred lines between policy control and corporate governance. At a time when AASL must confront audit findings and account for billions locked into an inactive project, the absence of an independent, permanent board leader raises a stark question:
Is accountability being strengthened or postponed?
As public funds remain tied up in a terminal that barely exists, BIA Terminal 2 has become a test case for how Sri Lanka’s state-owned enterprises balance profit claims against transparency, risk disclosure, and responsibility for long-term national assets.