Nepal Airlines to auction second Boeing

Nepal Airlines is publishing an auction notice for its last Boeing 757 – marking the the end of the five-decade long Boeing era in Nepal – on Friday after its board has approved ‘in principle’ the proposal to retire the age-old American aircraft.
The NAC has formed an expert committee to auction the Boeing. “The auction notice will be issued on Friday,” a source at the Nepal Airlines informed. “It’s a long process,” he said, adding that the NAC will have to give 45 days for potential buyers to submit their bids.
The NAC was planning to auction its last Boeing after the arrival of the Airbus A330s last year but was delayed after the allegations of financial irregularities in the purchase of the wide-body jets.
Nepal Airlines was initially planning to retire its last Boeing 757 after C-check – which will cost Rs 250 million – as it can significantly affect the aircraft’s resale value but changed the idea though the Gandaki was due for a C-check in February-end.
The national flag carrier also plans to auction off the Boeing’s spare parts as it will now have an all-Airbus fleet. The state carrier has set the minimum sale price at $7.8 million for the 31-year-old vintage Boeing ‘Gandaki’ with registration number 9N-ACB and its spare parts.
The narrow body twin-engine jet is valued at $5.4 million out of the total sale price by the NAC, which is technically bankrupt even after buying widebody Airbus. The NAC has not been able to pay its installment of loan to the Employment Provident (Fund) and asking the Finance Ministry to rescue it by paying the installment.
Nepal Airlines Corporation – the then Royal Nepal Airlines Corporation (RNAC) – entered the jet age in 1972 by acquiring a Boeing 727. The first Boeing 757 named Karnali and bearing registration number 9N-ACA, arrived in 1987. Gandaki – the narrow body twin-engine jet – was delivered the following year in 1988. The NAC has already sold its first 757 ‘Karnali’ to BB Airways of Bhaban Bhatta, for $1.46 million in December 2017.
Nepal Airlines has decided to sell off both the 757s as they were no longer profitable to fly due to their high maintenance costs compared to the revenue they bring in.
According to Nepal Airlines, the Boeing 757 burns 4 tonnes of fuel per hour, compared to 2.5 tonnes for the Airbus A320 aircraft. The NAC – in the move to phase out Boeing and adding Airbus fleet – currently possesses two 158-seater A320 jets delivered in 2015, and two 274-seater A330 jets delivered in 2018, in its international fleet.

Investment Board begins parley with developers on PDA template

Nepal Investment Board has launched formal round of discussions with developers on the legal framework of the Project Development Agreement (PDA) Template for large hydropower projects above 500MW.

The agreement – drafted by leading global firm Herbert Smith in consultation with Nepali legal counsel– ensures balanced and bankable deals that fully benefit and protect the country’s interests while ensuring a fair return to investors, according to chief executive of the board Radhesh Pant.

Herbert Smith has recently been appointed legal advisers to the Investment Board to assist the Board in its negotiations of detailed, tailored PDAs with each of the developers.

Pant also shared that initial discussions with three developers of the four export oriented projects – 650MW Tamakoshi 3, 600MW Upper Marsyangdi 2, 900MW Upper Karnali and 900MW Arun 3 – was held to ensure a common understanding of the legal terms in the PDA template and to listen to and respond to any remaining concerns as a crucial first step towards kick starting bilateral negotiations tailored to individual projects.

“Our preliminary discussions with SN Power, Sutlaj JVN and GMR to clarify legal issues on the PDA template went very well,” he said, adding that the board has clarified that Nepalis and Nepal’s interests are first protected while ensuring a fair return to investors on any project.

The developers also understood and respected Nepal’s priorities and we re moving towards intensive bilateral negotiations in the next few months,”he added. “However, the meetings did not touch upon any commercial aspects of the PDA or any project specific concerns.”

The board was leading an exercise to assess the technical readiness of the four export projects in terms of legal, economic, financial and technical issues, which would inform the negotiations with each of the three developers.

He also shared that two initiatives were currently underway –Benefit Sharing Exercise that aims to ensure that spin offs from mega projects reach true beneficiaries – for the local communities affected directly by hydro projects and Industrial and Employment Benefits Plan that seeks to develop a services and supplier base so that domestic industries can meet developer demands while ensuring on time budget delivery.

“It will leave local communities with improved livelihoods, labour force with job opportunities and industries with the opportunity to supply quality goods and services at competitive prices,” Pant said, adding that these exercises will help us develop frameworks to be included in the PDA and negotiated with developers.
The four projects aimed at the Indian market will have an installed capacity of 3,050MW, and will first aim to satisfy Nepal’s domestic power needs. Of the four, Arun III has committed to provide Nepal with 21.9 per cent free electricity while Upper Karnali has committed 12 per cent free electricity and 27 per cent free equity, in addition to paying royalties and taxes.

The new PDA template comes as a response to the previous model PDA that was rejected by developers and financiers in 2010 for not being bankable.

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.

NAC wants to lease one aircraft for international flight

The national flag carrier is seeking to lease one aircraft from January for six weeks as one of its Boeing is going for a regular C check to Israel.
"Nepal Airlines Corporation (NAC) is sending its Boeing for a regular C check," executive chairman Sugat Ratna Kansakar said adding that an aircraft will be leased to maintain the scheduled flights and reliability of the carrier.
The aircraft is required to operate flights from its Kathmandu base for the Kathmandu-New Delhi-Kathmandu sector everyday and Kathmandu-Dubai-Doha-Kathmandu four times a week. "Since it will still be the tourist season, we do not want to disturb the schedule," he added.
However, NAC managing director Captain K B Limbu thinks that it is not economically viable to lease an aircraft for a short term. "It's not necessary to lease aircraft for a short term," he said adding that NAC can fly its passengers on another low-cost airlines for six weeks.
Kansakar explained that if it will not be economically viable, NAC may rethink the leasing idea.
NAC has asked for an aircraft that should not be older than 15 years from the date of manufacture on Aircraft, Crew, Maintenance and Insurance (wet lease) -- ACMI -- basis for six weeks begining January 3 with a total number of 375 guaranteed blocks hours during six weeks.
The interested parties should send their offers with detailed specification, manufacturing date, configuration, present registration number, valid insurance, present owner, present operator of the aircraft and ACMI rate per block hour within November 12, said NAC.
The aircraft should have 150 to 200 seat capacity and delivery and re-delivery of aircraft will be in Doha. "The national flag-carrier will decide whether to lease or not on the basis of ACMI rate per block hour," Kansakar said.
NAC is connected to 10 major cities around the globe and flies to 30 destinations domestically. It has two Boeing 757-200 aircraft -- Karnali and Gandaki -- since the 1980s. It has always been in controversy while leasing aircraft.
However, it has recently 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 the European manufacturer Airbus soon.
Currently, around two dozen international airlines are flying to Kathmandu and the ailing national carrier has been limited to its few destination due to lack of aircraft and over-politicisation of the management. It is facing troubles on the international and domestic fronts too as its domestic fleet has six Twin Otter Aircraft with 19-seat capacity but only four of these are operational.

NAC forcing pilots to fly ‘unsafe’ plane?

The troubled national flag carrier, Nepal Airlines Corporation (NAC), has hit yet another snag. After a technical glitch on Saturday, it cancelled all its flights till Tuesday. The reason: Short-circuit due to water leakage in the cargo compartment.But the aircraft is scheduled to fly to Hong Kong tomorrow at 8.30 pm. However, captain SR Shrestha, who was to fly the Boeing 757 aircraft, Karnali, to Hong Kong on Saturday, claims that the aircraft is still technically unsafe to fly.
“The reason given is not satisfactory. All the wiring should be checked thoroughly,” he argues adding that it’s wise to inform the Boeing company, get clearance from it and be sure of the real reason. “The aircraft should be safe for us and for the passengers. Patch up work will not help,” he adds.
Captain RB Shrestha, operation director at the NAC, however, confirms that the aircraft will not fly until it’s safe. “We are conscious of safety as it’s the only asset we have,” he adds. Most of the pilots are against flying ‘the unsafe’ aircraft.
However, Gautam Das Shrestha, managing director of NAC, says NAC never compromises on safety. “The aircraft will fly only after a complete safety check,” he confirms adding that pilots would not be forced to fly an aircraft unless it’s properly fixed.
But the pilots do not buy that argument as they had faced such situation earlier and had flown under pressure. “Without proper rectification, we had to fly under pressure in May to Dubai, where the aircraft was grounded for five days,” captain YK Bhattarai of that flight remembers.
“We have only one aircraft in operation at the moment. We are faced with increased passenger pressure. So everybody is under pressure but the safety should not be compromised,” he adds.NAC has only two ageing Boeing 757 aircraft and one aircraft has gone for checks in Brunei currently.
“The aircraft is checked every year and the grounded aircraft was checked only eight or nine months ago. If there was problem it should have been fixed then,” captain Shrestha says.
NAC had bought Karnali on lease in 1987 and Gandaki in 1988.