Nepal | May 29, 2020

NAC-Lufthansa strategic partnership gets ‘conditional’ nod

Sujan Dhungana
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  • National flag carrier will have to foot an eye-watering bill of $5.57 million to hire the German consulting firm

Kathmandu, January 24

The Ministry of Finance (MoF) has ‘conditionally’ agreed to make German-based Lufthansa Consulting Group as the strategic management partner of Nepal Airlines Corporation (NAC).

Agreeing principally on the proposal of the Ministry of Culture, Tourism and Civil Aviation (MoCTCA) to make Lufthansa NAC’s strategic partner, MoF has said that the strategic hiring process should comply with the existing laws.

MoF’s condition, however, has put the likelihood of Lufthansa being appointed as NAC’s strategic partner in limbo as the process of hiring a strategic partner for NAC has repeatedly drawn criticism in the past.

Earlier, MoCTCA had sought closed request for proposals (RfPs) from airlines of only five countries (United States, the United Kingdom, France, Germany and Australia) through their embassies in Nepal, raising eyebrows as to why the RfPs were not more encompassing.

Moreover, MoCTCA has also been charged of not following the competitive bidding process in hiring the strategic partner for NAC as mandated by the Public Procurement Act.

“If MoCTCA is to hire Lufthansa as the strategic partner for the national flag carrier, it should assure that the hiring process has not been breached,” said Ganesh Prasad Panday, joint secretary at the Corporation Coordination Division of MoF.

MoCTCA officials had said earlier that the government could seal the deal directly with Lufthansa as the government had sought RfPs directly via embassies, and hence, the Public Procurement Act would not apply to this deal.

The sole company to submit the RfP to partner with NAC back in 2015, Lufthansa had proposed to cater its services to NAC in three different phases.

The German firm had proposed to conduct financial due diligence, functional assessment and market potential analysis of NAC within the first four weeks of partnering with NAC at $2,350,000.

In the second phase, Lufthansa had proposed to assess general management, commercial operation, including technical and financial assessment of NAC, within the first five months of becoming NAC’s strategic partner.

In the third phase, Lufthansa had stated it would appoint its officials to top management post of NAC for three years and hand over NAC’s management to NAC within five years.

Lufthansa had sought $3,225,000 for the second and third phase services as NAC’s strategic partner.

However, this financial proposal of Lufthansa is sure to add financial burden on NAC as the corporation would have to pay a staggering $5,575,000 (over Rs 570 million as per today’s exchange rate of Rs 102.34) to the German firm for its strategic consultancy service.

Meanwhile, Maheshwor Neupane, secretary at MoCTCA, expressed his commitment that the process of hiring a strategic partner for NOC would comply with the existing laws.

Informing that MoCTCA will soon seek legal advice from the Ministry of Law, Justice, Constituent Assembly and Parliamentary Affairs and the Nepal Law Commission on the adopted process of hiring strategic partner for NAC, Neupane said, “Lufthansa will be hired as NAC’s strategic partner only if the adopted recruitment process is as per the law.”

He also stated that a strategic partnership at NAC is a must to enhance the performance of the national flag carrier.

A version of this article appears in print on January 25, 2018 of The Himalayan Times.

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