Nepal | July 06, 2020

Nepal Airlines on a wing and a prayer

Himalayan News Service
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  • Turns to govt to tide over financial woes
  • Debt crosses Rs 32 billion

Nepal Airlines Corporation officials attend a press conference organised while issuing white paper seeking financial assistance from the government, in Kathmandu, on Thursday, November 15, 2018. NAC’s overall debt has reached Rs 32.87 billion with debt to equity ratio of 14.40:39.82. Photo: NepalAirlinesRA Facebook

Kathmandu, November 15

Nepal Airlines Corporation has sought financial assistance from the government for its sustainability.

Issuing a white paper today, NAC mentioned that financial indicators of the corporation were negative and that the government should extend financial support to the national flag carrier to help it mitigate financial risks.

“Along with the procurement and operation of wide-body aircraft, NAC’s overall debt has reached Rs 32.87 billion and its debt to equity ratio is 14.40:39.82. As NAC has to pay interest of the debt at 10.5 per cent per annum, the corporation has been facing cash flow problem,” reads the white paper.

Madan Kharel, executive chairman of NAC, said in such a context the government should increase the authorised capital of the corporation, which is at Rs 300 million and extend other financial support immediately.

The white paper states that NAC’s cash flow condition further deteriorated after its two wide-body aircraft started operation on August 1. Following NAC’s inability to fly its Airbus A330 wide-body aircraft in a full-fledged manner, the corporation has been facing huge loss in the operation of these aircraft. As per the report, NAC has made Rs 264 million earnings through its two A330 wide-body aircraft — between August 1 and September 15 — while it has spent Rs 756 million for their operation.

Acknowledging that NAC has not been able to make use of its wide-body aircraft properly, Kharel said the government’s support to NAC was essential until the corporation was able to stand on the firm financial ground by operating the wide-body aircraft in a full-fledged manner.

While one of the A330 wide-body aircraft has not been able to fly to long destinations, the other has been grounded. However, Kharel vowed that the aircraft would fly to China, Saudi Arabia and South Korea in four months.

The white paper also shows that the stake of NAC in the international flight sector declined by 1.8 per cent in the first few months of this fiscal compared to the previous fiscal. The seat occupancy of NAC’s flights in the international sector has also come down in the first two months of this fiscal compared to the average seat occupancy of NAC’s international flights in the last fiscal.

Meanwhile, aviation experts have said that NAC should give priority to identifying potential markets and start flying to new international routes as soon as possible. “As NAC’s wide-body aircraft have not been able to fly to long-haul destinations which they were meant for, it seems that enough market analysis was
not done before purchasing the wide-body aircraft,” said Yagya Prasad Gautam, director general at the Civil Aviation Authority of Nepal and also former tourism secretary.

Along with proper market evaluation, Gautam also stressed the need to strengthen the reliability of Nepal Airlines to make it competitive in the international flight sector. “If these things are not addressed, NAC’s financial state is bound to deteriorate further,” he added.

 


A version of this article appears in print on November 16, 2018 of The Himalayan Times.


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