The Employment Provident Fund (EPF) has finally agreed to lend Rs 10 billion to Nepal Airlines Corporation (NAC) for the ailing national flag carrier to purchase aircraft.
Managing director of NAC Madan Kharel and chief administrator of EPF Krishna Prasad Acharya signed the loan agreement here today.
The corporation is planning to purchase two narrow-body aircraft — A320-200 series — through the loan. Though NAC has already signed a Memorandum of Understanding (MoU) with the European aircraft manufacturer, Airbus, it has only sent a signing amount of $500,000, and is yet to sign the purchase agreement due to lack of financial closure.
Earlier, in April, NAC and Airbus had signed a revised MoU after over three years of lingering due to various hurdles.
"Today's agreement will help us sign a purchase agreement with Airbus," said Kharel. "The corporation had last week written a letter to Airbus asking for 15 days time to enter into a purchase agreement."
Though NAC had bargained for 11 per cent interest, the agreement has been signed at 12 per cent interest on the loan — apart from 0.5 per cent service charge — with a payback period of 15 years after the corporation starts flying the new Airbus, informed Acharya, on the occasion. "The loan will be however, released according to schedule of the purchase agreement between NAC and Airbus."
Airbus is expected to deliver the first A320-200 aircraft by February 2015 and the second by March 2015.
NAC will separate 30 per cent amount from ticket sales — that is projected to be around Rs 150 million — every month to pay for the loan, according to NAC. "However, NAC has to pay Rs 350 million, including principal and interest, every quarter."
Though the government has given a guarantee against the loan, the new aircraft that NAC is going to buy, the corporation's head office in New Road, and its land in Sinamangal have also been kept as collateral against the loan, it added.
Without the aircraft, the national flag carrier has not only been unable to expand its international route but also reduced lucrative routes like New Delhi.
The corporation has two age-old Boeings that are usually grounded due
to regular technical glitches. Due to lack of aircraft with the
national flag carrier, the number of inbound tourists has also started dwindling. In the last five months in 2013, arrivals via air for three months were lower compared to 2012.
NAC is also planning to get two aircraft on dry lease for international flights till the new aircraft arrives in 2015.