Nepal | January 18, 2021

NAC seeks Rs 20bn equity investment

Himalayan News Service
Share Now:
Aircrafts, Nepal Airlines Corporation, Tribhuvan International Airport, Aeroplanes

Grounded Nepal Airlines Corporation’s aircraft are parked in the hangar of Tribhuvan International Airport for maintenance, in a picture taken on Monday, July 11, 2016. Photo: THT/ File

Kathmandu, September 24

Nepal Airlines Corporation (NAC) has requested the government to inject fresh capital worth Rs 20 billion as equity investment in the state-owned enterprise, which is distressed with high debt compared to equity.

Currently, NAC’s debt to equity ratio is 76 per cent, which will increase to 92 per cent after it obtains loan for the purchase of two wide-body aircraft. NAC at present already has taken loans worth Rs 17 billion from the Employees Provident Fund (EPF) and Citizen Investment Trust (CIT). This figure will rise to Rs 33 billion after the second instalment of loan committed by the EPF and CIT to purchase wide-body aircraft is disbursed.

As NAC is planning to bring two aircraft in March and June of next year, it has urged the government to raise the equity investment to improve the financial health of the national flag carrier.

Due to high debt to equity ratio NAC has not been able to obtain loans from other financial institutions to expand its business. It has obtained loan from government-owned financial institutions on the government’s guarantee to purchase two wide-body aircraft. NAC is planning to add more aircraft in its international fleet.

“We are planning to purchase two more narrow-body aircraft to add more flights to the Gulf countries as a large number of migrant workers are employed in the Middle East,” said Sugat Ratna Kansakar, managing director of NAC. “NAC needs to expand its flight network and add more flights in the potential destinations, which will have a multiplier benefit in the country’s economy,” he added.

Currently, NAC has two narrow-body Airbus aircraft and one narrow-body Boeing aircraft in its international fleet, which have been flying to eight destinations.

Kansakar further said that the government needs to inject more capital in the corporation to make it a commercially viable entity. “As NAC is also planning to bring in a strategic partner, the debt-equity ratio of the government-owned entity needs to be justified,” he said. The national flag carrier will also be able to obtain loans from private financial institutions if its debt to equity ratio is maintained at an acceptable level for financial institutions to issue loans.

The Ministry of Culture, Tourism and Civil Aviation — parent ministry of NAC — has forwarded NAC’s proposal to the Ministry of Finance. However, according to authorities at the Finance Ministry, the ministry is not convinced with NAC’s proposal.

However, Kansakar has said that the MoF needs to support the national flag carrier because the country will have multiplier benefit from the growth of tourism sector in the country along with expansion of flight network of the national flag carrier. “No country without a strong network of its national flag carrier has achieved high growth in tourism sector.”

According to Kansakar, Kathmandu remains one of the expensive destinations with regards to airfare due to lack of aircraft in NAC’s international fleet. “International airlines will bring down the airfare only if the national flag carrier can intervene by offering lower fares,” he asserted.


A version of this article appears in print on September 25, 2017 of The Himalayan Times.


Follow The Himalayan Times on Twitter and Facebook

Recommended Stories:

More from The Himalayan Times:

Nepali Congress senior leader Ram Chandra Paudel

HoR dissolution anti-national, says NC leader Paudel

CHITWAN, JANUARY 16 Senior Nepali Congress leader Ramchandra Paudel today said that dissolution of the House of Representatives was a step against the nation and nationality. Addressing a mass meeting organised by Nepali Congress Bharatpur Metropolitan Committee in Bharatpur, Paudel said that Read More...

CM Raut casts doubt over apex court’s role

RAJBIRAJ, JANUARY 16 Province 2 Chief Minister Lalbabu Raut today said though the Supreme Court verdict should be acceptable, circumstances in which the Parliament was dissolved were suspicious. Addressing the 10th General Assembly of Saptari chapter of Federation of Nepali Journalists at Bana Read More...

Home Minister Thapa defends dissolution of Parliament

DHANKUTA, JANUARY 16 Home Minister Ram Bahadur Thapa said that dissolution of the Parliament was an imperative for the sake of political stability. Addressing a district-level meeting of party cadres in Dhankuta today, the Nepal Communist Party (NCP) leader claimed that the prime minster h Read More...

Security tightened at border points in Banke

NEPALGUNJ, JANUARY 16 District Administration Office, Banke, has tightened security to prevent the possible spread of bird flu in Banke. The DAO took the decision after bird flu was found in different states of India. The DAO has banned import of birds and poultry-related items from India. Read More...

Mexico records deadliest coronavirus week yet with 7,000 deaths

MEXICO CITY:  Mexico has registered its worst week yet of the pandemic, with a record number of infections from the new coronavirus and more than 7,000 COVID-19 deaths, government data showed on Saturday. There were 20,523 new coronavirus cases and 1,219 more fatalities on Saturday, push Read More...

Price of precious metals fall

KATHMANDU, JANUARY 16 The price action of precious metals in the trading week of January 10 to 15 suggests investor indecision and impending volatility in the international markets. According to the rate list of the Federation of Nepal Gold and Silver Dealers’ Association (FeNeGoSiDA), gold Read More...

Sherpa, Acharya take lead

KATHMANDU, JANUARY 16 Pemba Sherpa and Sadbhav Acharya took lead after the first day of the Indian Ambassador’s Invitational Golf Tournament here at the Gokarna Golf Club today. Played under stabelford 3/4 handicap format, the seven-handicap amateur golfer Sherpa earned 39 points to stay Read More...

APF register huge victory

KATHMANDU, JANUARY 16 Abinash Bohara took five wickets and Asif Sheikh scored half century as Nepal APF Club thrashed Province-1 by 135 runs in the Group A match of the PM Cup National Men’s Cricket Tournament here at the TU Stadium today. Batting first, APF were all out for 243 runs in Read More...