EDITORIAL: Planes sans plans
NAC purchased new aircraft in haste without detailed business plan, market analysis and financial backup to run international flights
State-owned Nepal Airlines Corporation (NAC) has now become a white elephant and a liability to the state due to its shoddy management and poor financial backup even though it has five aircraft for international flights and eight others for domestic services at its disposal. NAC recently purchased two narrow-body A320-200 planes and as many wide-body A330-220 aircraft. One Boeing 757-200M which is also in operation is going to retire in mid-2019 due to high maintenance cost. The aircraft are sufficient to operate short and long haul international flights if they are operated efficiently. Before the two wide-body aircraft were pressed into services on August 1, NAC management had promised to become one of the vibrant air service companies competing with other airlines. However, NAC’s stake in the international flights declined by 1.8 per cent in the first few months after it purchased two wide-body aircraft. The national flag carrier has not been able to fly its two newly purchased aircraft in long distance flights because of no business plan.
After being appointed as NAC’s executive chairman on September 18, Madan Kharel on Thursday issued a “white paper” depicting NAC’s poor financial health. He sought a bailout of around Rs 30 billion from the state to make it financially sustainable, a proposal the Finance Ministry has turned down. According to the white paper, NAC’s overall debt stands at Rs 32.87 billion and it has to pay interest of the debt at 10.5 per cent per annum. It means NAC has to pay Rs 3.45 billion as interest to the lending agencies every year. However, the shocking fact is it earned only Rs 264 million through its wide-body aircraft between August 1 and September 15 from international flights while it spent Rs 756 million for their operation during the same period. Usually a wide-body aircraft needs to fly up to 18 hours a day to make profit. However, NAC has been operating them only for four to five hours a day because of its failure to operate in long destinations. It shows how inefficient the NAC management is. Overstaffing is another problem in NAC.
Before the purchase of the aircraft, Sugat Ratna Kansakar, NAC managing director, who made a deal to purchase the aircraft, had made tall claims of making it a profitable venture. After their purchase, NAC is seeking a bailout and is also looking for increasing its authorised capital. It all leads us to believe that NAC purchased the aircraft in haste without detailed business plan, market analysis and financial backup to operate long distance international flights, which are a must for its sustainability. In this case, Finance Ministry has taken a right decision by not supporting the ailing company to meet its daily operation cost, which excludes the capital investment. The government has bailed out NAC time and again. Now, it has to stand on its own income by improving its institutional capacity. NAC has been embroiled in financial irregularities since it decided to purchase the wide-body aircraft. The concerned parliamentary panel must look into the mismanagement within it and its failure to operate the service as per the expectations. The concerned officials must be held accountable for bleeding NAC dry even though the state stood as a guarantor to bring NAC back to life.
Every country needs an effective and healthy workforce to keep its economy moving. The health of citizens can hugely contribute to national economy, as physically and mentally able people can contribute more in economic activities. As Nepal tries to achieve a rapid economic growth, public health is one major area where a constant focus is required. In this context, the call from stakeholders and lawmakers’ for improving public health is timely.
1Nepal’s spending on health — around 6 per cent of the gross domestic product — is comparatively better when compared to other South Asian countries. But still we are struggling to put in place effective public health systems to provide care for the sick and institute measures to promote wellness and prevent diseases. Tobacco prevalence is still high in Nepal, while infectious and noncommunicable diseases are major challenges. Effective public health systems are not limited to building new hospitals, they require wide-ranging approaches which prevent diseases and improve wellness. Healthy citizens mean effective workforce.