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Potential partners for NAC invited to submit proposals

- SANGAM PRASAIN, Kathmandu

Mar 13, 2017-

The Tourism Ministry has invited proposals from reputed airlines of five countries interested in becoming a long-term strategic management partner of Nepal Airlines Corporation (NAC).

The request for proposal (RFP) was issued last week through the embassies of the US, the UK, France, Germany and Australia in Kathmandu. “The deadline for submitting proposals is April 17,” said Pramod Nepal, tourism under-secretary. 

When asked why the RFP has not been issued through open bidding, he said, “We don’t have the modality and legal clarity to induct a foreign strategic management partner.”

Besides, the parliamentary Public Accounts Committee (PAC) has also directed the government to induct a foreign strategic partner in NAC within three months, he said. “It’s a long process to prepare the modality. Also, we have to honour the House committee’s directives,” he added. “So, we chose the best way.”  

Nepal said that after private or state-owned airlines of the respective countries submit their proposals, they would conduct negotiations to get the best deal. He added that the five countries had been chosen as potential sources of partners because their airlines do not operate in Nepal. “This will also avoid conflict of interest.”

A committee led by Tourism Joint Secretary Buddhi Sagar Lamichhane set up to recommend partnership modalities has suggested that NAC take on a reputed international carrier which is listed on a major stock exchange as a partner. 

With regard to revenue, the committee has suggested a gross profit sharing modality. The partnership can be continued for a maximum period of 10 years, and the partner can be given charge of key areas like operations, management, engineering or technical and financial. 

NAC has been urged to separate its flight operations and ground handling services before taking on a foreign strategic management partner to be able to determine improvements after the move.

NAC’s ground handling service at TIA is a major moneymaker, generating more than Rs3 billion in revenues annually, which is nearly one-third of its total receipts.

This income has masked the losses during the past decades of mismanagement and political interference at the airline and kept it afloat.

Speaking at a recent PAC meeting, lawmakers said that the national flag carrier’s performance would not improve unless it takes on a foreign strategic partner. The carrier is procuring two Airbus A330 jets, and if its existing style of work is not improved, the jets may become a burden to them, they said.

NAC is set to induct two long-range Airbus A330 aircraft into its fleet by 2018 after acquiring two Airbus A320s in 2015. Following the acquisition of the wide-body jets, NAC’s loan amount is expected to reach Rs40 billion. 

NAC has long been facing criticism for its failure to assure quality and efficiency. The government’s budget statement for the current fiscal year has also envisaged getting a strategic partner for the national flag carrier to improve its overall performance and management.

The government has been considering privatizing NAC or bringing in a strategic partner for the last decade. In 2007, it initiated a plan to hand over NAC’s management to a foreign strategic partner so that it could reform and rescue the troubled carrier. However, the plan fell apart.

In 1970, the then Royal Nepal Airlines Corporation (RNAC) had invited experts from Air France under a programme to improve management, and they handled most of the managerial positions until 1973. In 1972, RNAC acquired its first jet, a Boeing 727, in cooperation with the French carrier.

The Finance Ministry has, on different occasions, informed the Tourism Ministry to get a strategic partner to improve the state-owned company’s overall system performance.

Published: 13-03-2017 09:20

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