THE HIMALAYAN TIMES

NAC purchased new aircraft in haste without detailed business plan, market
analysis and financial backup to run international flights

State-owned Nepal Airlines Corporation (NAC) has now become a white elephant
and a liability to the state due to its shoddy management and poor financial
backup even though it has five aircraft for international flights and eight others for
domestic services at its disposal. NAC recently purchased two narrow-body A320-
200 planes and as many wide-body A330-220 aircraft. One Boeing 757-200M
which is also in operation is going to retire in mid-2019 due to high maintenance
cost. The aircraft are sufficient to operate short and long haul international flights
if they are operated efficiently. Before the two wide-body aircraft were pressed
into services on August 1, NAC management had promised to become one of the
vibrant air service companies competing with other airlines. However, NAC’s
stake in the international flights declined by 1.8 per cent in the first few months
after it purchased two wide-body aircraft. The national flag carrier has not been
able to fly its two newly purchased aircraft in long distance flights because of no
business plan.

After being appointed as NAC’s executive chairman on September 18, Madan

Kharel on Thursday issued a “white paper” depicting NAC’s poor financial health.
He sought a bailout of around Rs 30 billion from the state to make it financially
sustainable, a proposal the Finance Ministry has turned down. According to the
white paper, NAC’s overall debt stands at Rs 32.87 billion and it has to pay
interest of the debt at 10.5 per cent per annum. It means NAC has to pay Rs 3.45
billion as interest to the lending agencies every year. However, the shocking fact is
it earned only Rs 264 million through its wide-body aircraft between August 1 and
September 15 from international flights while it spent Rs 756 million for their
operation during the same period. Usually a wide-body aircraft needs to fly up to
18 hours a day to make profit. However, NAC has been operating them only for
four to five hours a day because of its failure to operate in long destinations. It
shows how inefficient the NAC management is. Overstaffing is another problem in
NAC.

Before the purchase of the aircraft, Sugat Ratna Kansakar, NAC managing
director, who made a deal to purchase the aircraft, had made tall claims of making
it a profitable venture. After their purchase, NAC is seeking a bailout and is also
looking for increasing its authorised capital. It all leads us to believe that NAC
purchased the aircraft in haste without detailed business plan, market analysis
and financial backup to operate long distance international flights, which are a
must for its sustainability. In this case, Finance Ministry has taken a right decision
by not supporting the ailing company to meet its daily operation cost, which
excludes the capital investment. The government has bailed out NAC time and
again. Now, it has to stand on its own income by improving its institutional
capacity. NAC has been embroiled in financial irregularities since it decided to
purchase the wide-body aircraft. The concerned parliamentary panel must look
into the mismanagement within it and its failure to operate the service as per the
expectations. The concerned officials must be held accountable for bleeding NAC
dry even though the state stood as a guarantor to bring NAC back to life.