Sri Lanka is to investigate the controversial privatisation of its loss-making national airline.

The running of SriLankan Airlines was taken over by Dubai-based Emirates airline, who bought 40% of the company for $70m, formerly known as AirLanka.

The takeover upset many of the airline's employees, who reportedly resented the privatisation of the formerly state-run company.

The three-person team which will investigate the deal will also look into the purchase of six Airbus A-330 aircraft, the Sri Lanka transport ministry said.

Fuel concessions

The ministry said it would be looking into the possibility of further investigations into the deal put together by the previous government in March 1998.

The new government of prime minister Ranil Wickramasinghe, which came to power in December, has warned it will not honour commitments made at the time.

Under the deal, Emirates was given management control of the company for 10 years, together with fuel concessions and the right to retain national carrier status.

The new aviation minister, Tilak Maparone, said the government wanted to adopt an "open skies" policy and remove some of the concessions given to SriLankan.

SriLankan cut more than 1,500 jobs following the loss of half its fleet in a Tamil Tiger attack on Colombo airport in August last year.

The job losses followed a sharp increase in air fares, which rose after the attack to meet high-risk insurance cover for all aircraft flying to Sri Lanka.