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NAC Reform Committee: Nepal Airlines must seek foreign partner

Published Date : September 19, 2019

Kathmandu, Sept 19: A committee formed to recommend reforms for the beleaguered Nepal Airlines Corporation has suggested that the government restructure its loans, bring in a foreign partner to manage key departments, and purchase two new Airbus A320 jets.

These are some of the immediate reform measures the committee has suggested to revive the ailing national flag carrier, which has been teetering on the brink of bankruptcy due to debts and a poor operation plan.

The committee, led by former tourism secretary Sushil Ghimire, submitted its report to Tourism Minister Yogesh Bhattarai on Wednesday, proposing immediate reform measures for 13 areas. Most measures are a continuation of recommendations made by several committees in the past.

The Ghimire-led committee is the seventh in two decades. Almost none of the recommendations made by the earlier committees has been implemented.

At a press conference after receiving the report on Wednesday, Bhattarai, however, promised not to dump the report and said that he would implement the recommendations by setting a timetable.

One crucial recommendation considers restructuring the carrier’s loans, which amount to around Rs37 billion. If the reform process is to be expedited, as per the recommendations, its loan repayment time can be rescheduled for six months. The corporation has been paying an interest of Rs3 billion annually to its lenders.

Recently, Nepal Airlines Executive Chairman Madan Kharel had said that the loan restructuring plan would not help, as the carrier wants the government to increase its investment by providing a bailout of Rs20 billion.

“We have not asked for money for our daily operations,” Kharel said. “We want the money to pay the loan so that the annual interest rate will be halved.”

Lenders’ investments are at risk since the corporation has already defaulted on three instalments, according to the report. Nepal Airlines’ lenders—the Employees’ Provident Fund and Citizen Investment Trust—are state-owned but they have levied a high interest rate of 10.50 percent, making the corporation sick, said the report. The committee has suggested bringing down the interest rate on par with the market rate of 6-7 percent.

“We all know that the national flag carrier is going through a rough patch. Nepal Airlines is in the headlines for all the wrong reasons, largely due to mismanagement,” said Ghimire, who served as the airline’s chair for 18 months.

The report has also recommended that Nepal Airlines purchase new planes. And as the airline gets mired in controversy each time it buys a new plane, the report has recommended that Nepal Airlines obtain its planes directly from the manufacturer.

“Since Nepal Airlines has adopted an all-Airbus fleet policy, it can buy planes directly from the manufacturer. To make the process transparent, negotiations should involve representatives from the Finance and Tourism ministries,” said Ghimire.

The first report suggesting reforms for Nepal Airlines had also recommended the same thing—that planes be purchased directly from the manufacturer to prevent financial irregularities. That report was prepared by a high-level committee led by former chief secretary Damodar Prasad Gautam in February 2002.

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