Govt not to give guarantee for NAC to purchase aircraft

A U-turn of the Finance Ministry has landed Nepal Airlines Corporation (NAC) in a soup.
Finance Minister Surendra Pandey has in his budget for the 2009-10 had promised to give a guarantee for the purchase of new aircraft. "But after a five-month long study, the ministry decided not to go ahead with the deal," a high level source at the finance ministry said.
Earlier, Public Accounts Committee (PAC) had also directed NAC not to go ahead with the purchase of the aircraft. The finance ministry wrote to the Ministry of Tourism & Civil Aviation not to go ahead with the planned deal as according to it, "the evaluation and selection process of the aircraft was against the public procurement law."
However, the NAC officials smell a rat in the latest decision of the finance ministry. "The ministry could have decided within five days," said a high-level source at the NAC.
"After five months, it ordered the ministry not to go ahead with the purchase," the source said adding that the national carrier could have arranged a loan from other sources.
"Other financial institutions are ready to finance the airline," the source said adding that financing is not the problem. "But in that case, the ownership of the aircraft will be of the financial institutions, and not of the NAC."
Nepal is going to celebrate Nepal Tourism Year 2011, and the national carrier has the two age-old aircraft -- Boeing 757s Karnali and Gandaki -- that also have to be grounded due to technical problems.
Earlier, the Maoists-led government had promised of a government guarantee to purchase the aircraft as the NAC needed them badly.
NAC had in September decided to buy two aircraft -- a wide body A330-200 with a seat capacity of 279 and a narrow body A320-200 with 150 seat capacity -- from European manufacturer Airbus at an estimated cost of around $41.289 million and $92.845 million respectively. The American aircraft company Boeing had also submitted the proposal but the proposal of the Airbus was selected by the technical committee.
NAC -- that has been operating the two Boeing 757s bought in 1987-88 -- has an ambitious plan of purchasing a fleet of six aircraft in five years to help boost the image of the ailing carrier. However, the process has been marred in controversy every time it tried to buy or lease aircraft.
Lately, NAC is losing its customers and some two dozen international airlines flying to Nepal are profiting at the cost of the national carrier.