NAC told to show viable biz plan

- Post Report, Kathmandu

Dec 19, 2015-

The Finance Ministry has told Nepal Airlines Corporation (NAC) to show a viable and trustable business plan first when it said it wanted Rs26 billion to buy two wide-body jets.

The national flag carrier has proposed procuring long-range jets to serve destinations in North America, Japan, Australia and the UK as they have been identified as prospective markets for Nepal over the next 20 years.

During a meeting held this week to discuss fast-tracking new projects and addressing the problems faced by national pride projects, the ministry told NAC that it could create an environment or act as a guarantor to finance its aircraft purchase plan.

“The Finance Ministry has assured NAC that resources could be arranged through internal sources or through international financing agencies if it is convinced by the business plan,” said Suresh Acharya, joint secretary of the Tourism Ministry.   

However, the Finance Ministry has also raised questions about NAC’s current management setting and its operations as it has not been able to fully utilize its newly acquired two Airbus A320 jets, he said.

Finance Secretary Lok Darsan Regmi said that the ministry was yet to receive a formal financing request from NAC. “NAC should first try to put together the money itself if it plans to buy new planes and add new destinations based on projected business opportunities,” he said. “If it cannot do so, we can consider helping it based on the resources at our disposal.”

Regmi said that the ministry had to be careful about allocating resources for every project that comes along with revenue collection expected to dip by Rs50 billion by mid-December.  NAC has had to ask the Finance Ministry for money as it owes Rs14 billion and all its assets have been put up as collateral.

Last month, the Tourism Ministry had directed NAC to submit a concrete report on purchasing at least eight fixed-wing and four rotor-wing aircraft and hiring the required workforce. It also includes procurement of two wide-body jets. “We have almost completed the business plan, and we will be submitting a report to the Tourism Ministry next week,” said NAC Managing Director Sugat Ratna Kansakar.

The business plan also includes an aircraft investment strategy that involves aircraft purchase, procurement cost, type of aircraft, and the management of resources and manpower to make NAC an efficient organization. The national flag carrier purchased two Airbus A320-200 aircraft this year by borrowing Rs10 billion from the Employees Provident Fund, its first fleet expansion in 27 years.

Presently, NAC holds a meagre 5.87 percent share of the market in the international segment. It flew 206,430 passengers last year. The carrier serves seven international destinations, including three Indian cities, and plans to expand operations to three more destinations, namely Guangzhou, Dubai and Saudi Arabia in the near future.

A decade ago, NAC was flying to 21 international destinations. Its international network has shrunk rapidly since then reflecting the rot within caused by mismanagement and political interference.

Published: 19-12-2015 08:49

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