Kathmandu, February 16

Nepal Airlines Corporation (NAC) has sent $1 million as commitment fee to AAR Corporation — supplier of the two wide-body Airbus aircraft. This has paved the way to start contract negotiations with the American leasing company, which was selected from among the bidders to supply two A330-200 series aircraft to the national flag carrier.

According to Sugat Ratna Kansakar, managing director of NAC, the contract negotiations with the supplier will start from next week. “NAC aims to conclude the contract agreement within March,” he said. During the negotiation, price of the aircraft, delivery date and seat configuration (business and economy class), among other issues will be discussed.

AAR Corporation, which had the lowest offer among the six qualified bidders, has proposed to supply the wide-body A330-200 series aircraft at $104.8 million each. Following the selection of AAR Corporation through the NAC board of directors meeting led by the secretary of the Ministry of Culture, Tourism and Civil Aviation (MoCTCA) in mid-January, NAC had sent a letter of intent to AAR Corporation and signed memorandum of understanding (MoU) with the supplier on January 27 to purchase two aircraft.

However, the contract agreement is the only legally binding agreement.

“As we have sent the lock-up money to AAR Corporation the process of aircraft purchase has gathered momentum,” said Kansakar, adding, “With the process to purchase aircraft gathering pace, we believe we will have five aircraft in our international fleet by September 2018.”

In the request for proposal, AAR Corporation 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 stick to the schedule proposed by the supplier,” mentioned Kansakar.

NAC has also started negotiations with the government owned Employees Provident Fund (EPF) to obtain a loan to purchase the aircraft. EPF has agreed to extend the entire Rs 25 billion that is required to purchase the two aircraft on government’s guarantee. However, negotiations are ongoing regarding the interest rate and payback period of the loan.

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

NAC has opted for the smallest wide-body plane with highest flying time range (9 to 10 hours) as per its plan to expand its network to 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 and has approached the civil aviation authority of Japan for landing permit at Narita International Airport or Osaka International Airport.