The government is not doling out the funds to the bankrupt national flag carrier rather seek a strategic partner to run the Nepal Airlines Corporation (NAC).
Coming down heavily on 'non-performing' entity, Prime Minister KP Sharma Oli – addressing the 61st anniversary of Nepal Airlines Corporation (NAC) here today – said that the government will not inkect any fund under the existing circumstance as it has no trust on the incumbent management. But the management team led by executive chairman Madan Kharel has been appointed by himself and his cabinet last September. “The company buys the planes first and finds the pilots to fly them later,” he said, adding that it procured wide-body jets but it doesn’t have destinations to fly to. “There is high demand for services to Japan’s Narita International Airport, but it decides to fly to Kansai International Airport in Osaka instead.”
Planes of other companies are in the sky, but Nepal Airlines planes are seen on the tarmac at Tribhuvan International Airport (TIA) all the time, Oli added.
The private sector airlines have been making profits, but the NAC has incurred Rs 37 billion loss and also failed to pay last two installments of its loan. The NAC has not been able to repay the principal and interest to two state-owned financial institutions. According to the NAC, it has defaulted on two quarterly installments of Rs 1.18 billion to the Employees Provident Fund (EPF) and one quarterly installment of Rs 730 million to the Citizens Investment Trust (CIT). The corporation will not be able to pay the third installment either, it added.
The government had rescheduled the interest payment deadline for its loans taken from EPF and CIT. But still the NAC owes more than Rs 36 billion to various institutions, which means interest payments totalling Rs 3.66 billion annually.
“The government will not give even a single penny since the NAC has already incurred a huge loss due to its mismanagement," Premier Oli said, adding that the government will be compelled to search for a strategic partner, if the NAC did not undergo positive changes in its overall performance.
The NAC has been asking for a bailout. In 2017, it has asked for Rs 20 billion from the government to raise its paid-up capital to support its financial restructuring plan. It has been struggling to manage its cash flow since it inducted two brand new Airbus A330 jets into its fleet last year, as they remained largely under-utilised for months for lack of routes.
Though, the government claims to have a turnaround plan – including capital restructuring and inducting a strategic partner – for the bankrupt corporation, the NAC seems not improve its financial health also due to political red tape.
The NAC currently has two wide-body and two narrow-body aircraft in operation. They fly to seven countries including India, Malaysia and Qatar. But the small aircrafts – donated and sold by China – for the domestic flight are a financial liability as the NAC has not been able to fly them due to lack of pilots.
NAC executive chairman Madan Kharel, on the occasion, briefed the gathering that the achievement of expected profit became impossible as NAC resources, primarily aircrafts in its possession, could not be operated to the full strength and the size of destination could not be expanded. According to him, procedures are on the progress to enlist Guangzhou of China and Riyadh of Saudi Arabia in the NAC destination soon.
According to the NAC report, till the first nine months of the current fiscal year, the NAC earned a profit of Rs 7.54 billion compared to Rs 3.85 billion in the same period of the last fiscal year. The number of passengers flying by NAC on flights routes during the first 11 months of the last fiscal year stood at 348,528 while some 569,034 passengers flew on international flights during the same period of current fiscal year, which is 63.5 per cent more.
Coming down heavily on 'non-performing' entity, Prime Minister KP Sharma Oli – addressing the 61st anniversary of Nepal Airlines Corporation (NAC) here today – said that the government will not inkect any fund under the existing circumstance as it has no trust on the incumbent management. But the management team led by executive chairman Madan Kharel has been appointed by himself and his cabinet last September. “The company buys the planes first and finds the pilots to fly them later,” he said, adding that it procured wide-body jets but it doesn’t have destinations to fly to. “There is high demand for services to Japan’s Narita International Airport, but it decides to fly to Kansai International Airport in Osaka instead.”
Planes of other companies are in the sky, but Nepal Airlines planes are seen on the tarmac at Tribhuvan International Airport (TIA) all the time, Oli added.
The private sector airlines have been making profits, but the NAC has incurred Rs 37 billion loss and also failed to pay last two installments of its loan. The NAC has not been able to repay the principal and interest to two state-owned financial institutions. According to the NAC, it has defaulted on two quarterly installments of Rs 1.18 billion to the Employees Provident Fund (EPF) and one quarterly installment of Rs 730 million to the Citizens Investment Trust (CIT). The corporation will not be able to pay the third installment either, it added.
The government had rescheduled the interest payment deadline for its loans taken from EPF and CIT. But still the NAC owes more than Rs 36 billion to various institutions, which means interest payments totalling Rs 3.66 billion annually.
“The government will not give even a single penny since the NAC has already incurred a huge loss due to its mismanagement," Premier Oli said, adding that the government will be compelled to search for a strategic partner, if the NAC did not undergo positive changes in its overall performance.
The NAC has been asking for a bailout. In 2017, it has asked for Rs 20 billion from the government to raise its paid-up capital to support its financial restructuring plan. It has been struggling to manage its cash flow since it inducted two brand new Airbus A330 jets into its fleet last year, as they remained largely under-utilised for months for lack of routes.
Though, the government claims to have a turnaround plan – including capital restructuring and inducting a strategic partner – for the bankrupt corporation, the NAC seems not improve its financial health also due to political red tape.
The NAC currently has two wide-body and two narrow-body aircraft in operation. They fly to seven countries including India, Malaysia and Qatar. But the small aircrafts – donated and sold by China – for the domestic flight are a financial liability as the NAC has not been able to fly them due to lack of pilots.
NAC executive chairman Madan Kharel, on the occasion, briefed the gathering that the achievement of expected profit became impossible as NAC resources, primarily aircrafts in its possession, could not be operated to the full strength and the size of destination could not be expanded. According to him, procedures are on the progress to enlist Guangzhou of China and Riyadh of Saudi Arabia in the NAC destination soon.
According to the NAC report, till the first nine months of the current fiscal year, the NAC earned a profit of Rs 7.54 billion compared to Rs 3.85 billion in the same period of the last fiscal year. The number of passengers flying by NAC on flights routes during the first 11 months of the last fiscal year stood at 348,528 while some 569,034 passengers flew on international flights during the same period of current fiscal year, which is 63.5 per cent more.
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