NAC aircraft deal raises eyebrows

Kathmandu, April 8

Nepal Airlines Corporation (NAC)’s recent agreement with the United States-based leasing company AAR Corp for the supply of two wide-body Airbus A330-200 aircraft has raised a few eyebrows as the corporation is going to transfer around Rs eight billion to AAR Corp next month without any bank guarantee of the supplier.

Though NAC has selected AAR Corp through a global bidding process to supply two wide-body Airbus aircraft, the national flag carrier has overlooked some of the specific provisions, including bank guarantee, in the agreement signed with AAR Corp to make the supplier liable and also to make the contract more reliable. Bank guarantee from the supplier is a must as per the public procurement rules, but NAC has ignored this provision despite being a public corporation.

NAC is going to purchase the two aircraft from the concerned agent at a total cost of around Rs 22 billion. NAC selected AAR Corp through a global bidding process as Airbus — the manufacturing company — did not take part in the bidding.

The NAC board, chaired by the secretary of the Ministry of Culture, Tourism and Civil Aviation, had selected the agent company AAR Corp as it had quoted the lowest price to supply the aircraft. NAC, in its tender document, had sought second-hand aircraft that has been flown for only up to 1,000 hours, but AAR Corp had proposed to supply new aircraft at $104.8 million each.

NAC has already sent $1 million to AAR Corp as lock-up money for the aircraft. As per the agreement signed on Friday, NAC will pay for the aircraft in two instalments. The first tranche or 35 per cent of the total cost will be transferred by next month.

“The manufacturing company is not involved in supplying the aircraft and NAC is relying on the agent company, but the national flag carrier has not yet ascertained the reliability of AAR Corp on whether it would be able to supply two wide-body aircraft within a year,” a high-level source privy to the development told The Himalayan Times.

The supplier, however, has assured NAC to supply both aircraft within a year as it has already ordered two wide-body A330-200 aircraft from a Portugal-based airline company named ‘Hi Fly’. As per NAC officials, the supplier has claimed that the Hi Fly company has cancelled one of its orders and AAR Corp will supply those aircraft to NAC. This claim of the supplier landed in controversy as the Portuguese company ‘Hi Fly’ in an e-mail correspondence with officials of the Tourism Ministry has said that it has never cancelled any orders till date.

However, Sugat Ratna Kansakar, managing director of NAC, has claimed that manufacturing company Airbus has confirmed that AAR Corp has ordered two A330-200 series aircraft in an e-mail correspondence with NAC. He further said that NAC does not have any doubts on whether or not AAR Corp will be able to supply the aircraft within the scheduled delivery dates next year — first one in April and the second one in May.