NAC set to renew insurance of MA60 aircraft today

Kathmandu, July 26

Nepal Airlines Corporation (NAC) is renewing insurance of its MA60 aircraft on Monday even though the aircraft has turned out to be a loss making venture. The insurance for the aircraft, gifted by China, which was renewed for three months earlier is expiring on Monday.

The national flag carrier plans to renew the insurance coverage at a cheaper rate and continue operating service through the China-made aircraft by reducing expenses. “Hopefully, we will be able to renew the insurance at a cheaper rate and we plan to operate it by slashing expenses,” said Ram Hari Sharma, spokesperson of NAC.

Following the decision of the NAC Board to renew the insurance, NAC had sought a list of companies providing insurance service at comparatively low rates, according to Sharma. Earlier too, NAC had requested AVIC International Holding Corporation, supplier of the aircraft to cut the rate by looking for options available in other international companies.

At present, NAC is paying 4.7 per cent of the $15 million value of the aircraft as insurance premium annually. This means the national flag carrier has been paying around Rs 250,000 insurance premium per day, which is less than daily income. The aircraft is operating a daily flight in Kathmandu-Biratnagar sector.

READ ALSO: Flights to Mumbai, Bangalore to resume

The Chinese aircraft has been a headache for NAC for a long time due to multiple problems including hefty insurance charge, expensive spare parts and load restriction while taking off from small regional airports, among others. In January, NAC Board had also approved the decision to return the aircraft if the supplier fails to address the problems.

The government had received the MA60 plane with capacity of 56 seats in April last year and was put into service from July. The poor performance of the plane has put the government in a dilemma on whether or not to take delivery of another MA60 for which an order has already been placed. In November 2012, NAC had signed a commercial agreement with AVIC to procure six aircraft.

As part of the deal, China had provided an MA60 and Y12e aircraft each worth around Rs three billion as gift and a soft loan of Rs 3.72 billion to buy another MA60 and three Y12e planes.