KATHMANDU, AUGUST 15
The Nepal Airlines Corporation (NAC), once a national pride, has been mired in scandals, with its reputation and operational efficiency taking a severe nosedive.
In the latest development, the corporation is facing actions for dispatching a wide-body aircraft for C-check to Italy without approval from the Nepali authorities.
Moreover, the Commission for the Investigation of Abuse of Authority (CIAA) has filed a case against 32 individuals, including former minister for tourism, culture and civil aviation Jeevan Bahadur Shahi and Sugat Ratna Kansakar, then managing director of NAC, for their alleged corruption in the procurement of two Airbus A30-200 for the national flag carrier back in July 2018 worth $13 million or Rs 1.47 billion in collusion with representatives of the foreign companies and NAC office bearers.
Given the status quo, dark clouds are looming in the horizon for the NAC, as per experts.
Billions in loss
"Nepal Airlines, once a symbol of national pride and a significant contributor to the country's foreign currency reserves, has seen its reputation and efficiency severely compromised due to a series of scandals over the years, government apathy, weak management and ineffective policies," Ashok Chandra Pokhrel, former NAC board member, told The Himalayan Times. "Ultimately, it's the government that needs to take responsibility for NAC's failure to operate effectively and provide up to the par standard services," he said.
According to him, NAC has always remained undercapitalised, with a significant gap between the capital invested by the government of Nepal and the assets of NAC.
"In addition, there have been recurring reports of political interference over NAC's operations, ineffective actions against weak management and infirm business plans plundering its operations, market share and revenue collection," he added.
Experts further opined that the country is losing around $3 billion in air tickets and cargo freights per annum due to NAC's limited fleet, public distrust and deteriorating market share.
"Every year over a million tourists come to Nepal, in addition to more than a million Nepalis who travel abroad. In addition, the NAC is not even the top cargo carrier when around 35 tonnes of cargo flies out of the country every day by air. Typically, a country having a competent national carrier has a market share of 60 per cent and above. As a result, around $3 billion in revenue is flying out of the country every year taking into account the revenue loss from incoming tourists, outgoing Nepalis and cargo flights,"
Pokhrel explained, suggesting that a landlocked country requires numerous air connections given the sensitive border issues with China and India.
Poor governance
At present, NAC is not operating any domestic flights. The six procured Chinese planes, which arrived in April and November of 2014, have been put up for sale without any success.
The four aircraft owned by the NAC are tentatively 7.5 years old on an average. Every airline should have at least 20 per cent of its fleet in the ground. In the case of NAC, it loses 45 per cent of its fleet size if one of its wide-body aircraft is grounded, which is another factor affecting its operation.
"Even if the corporation expresses interest to buy aircraft, procurement laws affect and delay them. This is another area the government needs to look into," Pokhrel said.
"One of the Airbus A330 sent to Italy for repairs has been grounded there for over 50 days, far exceeding the planned 30-day maintenance period," informed Captain KB Limbu.
Also several aircraft have been parked at Tribhuvan International Airport, incurring significant insurance and parking fees each year. The NAC has been unable to sell its Boeing 757 aircraft and had to sell its Boeing 727 at scrap value. Not to mention the five Chinese aircraft that are simply taking up space. In addition, the corporation has extremely high debt obligations.
All this is a result of poor governance, experts claimed.
"Everything is as clear as day. The apathy by the government towards the NAC is a matter of grave concern. It clearly indicates that the NAC does not have a bright future," Limbu opined.
NAC officials did not respond to repeated requests for comment.
Changes necessary
The downfall of Nepal Airlines has been marked by mismanagement and corruption, with political interference exacerbating the situation. In the 1990s, the airline became a hub for corruption and cronyism, with various scandals tarnishing its reputation. One notable incident was the Lauda Air scandal in 2001, which led to significant financial losses and political fallout, among various others.
"If the government really wants to retain some of the lost revenue and operate the NAC efficiently, it should be ready to take responsibility and run it effectively either by handing over its management to foreign entity or an eligible domestic company. Another option is to run the corporation as a public limited company. It should run on a viable business proposition instead of maintaining it at status quo," Pokhrel told THT.
Pokhrel informed that it was concluded during previous discussions that the private sector here cannot run the corporation due to conflict of interest.
"If the government does have plans to run the national carrier effectively, the existing policies and management should be changed, especially given the country's huge tourism prospect," he added. "If things were to change, NAC could soar to new heights under effective management in a matter of a few months."
