Kathmandu, February 6

Nepal Airlines Corporation (NAC) has started negotiations with the government-owned Employees Provident Fund (EPF) for loan agreement to purchase two Airbus ‘wide-body’ aircraft as the NAC board has already selected American leasing company — AAR Corporation — as the supplier.

In a press briefing organised by NAC today, NAC Managing Director Sugat Ratna Kansakar informed that the financial closure will be achieved within February and the corporation is preparing to sign aircraft purchase contract with the supplier in March.

NAC and EPF officials have already started negotiations and EPF has proposed to lend the entire amount of Rs 25 billion required for purchasing the two aircraft at nine per cent interest rate. However, NAC officials are trying to obtain loan at eight per cent interest.

“The payback period, interest rate and the loan amount will be finalised during the negotiation,” said Rajendra Kafle, chief officer of the EPF, adding, “We will provide loan to NAC based on the government guarantee.”

In 2013, EPF had lent NAC Rs 10 billion to purchase Airbus’ narrow-body aircraft, which is currently being used for international flights.

The memorandum of understanding (MoU) with the supplier was signed on January 27 after the AAR Corp was selected among the bidders to supply aircraft on January 14 by the tourism secretary-led board of directors meeting of NAC. To sign the aircraft purchase agreement with the supplier, NAC has to deposit $1 million as commitment fee to the bank account of the AAR Corp and achieve the financial closure, according to Kansakar. “NAC has already started the process to send commitment fee to AAR Corp.”

“With the process to purchase aircraft gathering pace, we believe we will have five aircraft in the international fleet by September 2018,” Kansakar stated. Currently, NAC has two narrow-body Airbus aircraft and one narrow-body Boeing aircraft in its international fleet, which has been covering eight destinations.

Kansakar further informed that the AAR Corp has already placed the order for two A330-200 series aircraft with the manufacturing company.

The supplier has quoted $104.8 million for each aircraft. The rate quoted by the supplier is way below NAC’s estimation of $118 million to $119 million, according to NAC managing director. “These two aircraft are cost-effective and will be delivered within one-and-a-half years.”

“In the request for proposal, AAR Corp has offered to deliver the first aircraft by September 2017 and the second by March 2018 but due to some procedural delay in signing the contract agreement, the schedule may differ but we will try to be stick to the schedule proposed by supplier,” Kansakar stated.

NAC is preparing to fly to Saudi Arabia, Japan and South Korea after adding two wide-body aircraft. So far, the national flag carrier has received landing permit for Seoul of South Korea and Dammam of Saudi Arabia.

According to Kansakar, NAC has approached the civil aviation authority of Japan to receive landing permit, and in the long run NAC plans to expand its network to Australia and Europe.