The board of directors of Nepal Airlines Corporation (NAC) has started formal discussions to bring in a foreign strategic partner.

Buddhi Sagar Lamichhane, joint secretary of the Tourism Ministry and a NAC board member, said that they had talked about, in particular, the modality and practices of getting a strategic partner. 

The government’s budget statement for the current fiscal year has also envisaged getting a strategic partner for the national flag carrier. 

“As NAC will be inducting two widebody Airbus A330-200 aircraft into its fleet in the near future and plans to expand its network, it needs a professional team,” he said. “Inducting a strategic partner will take some time. The board, however, will come up with a concrete plan soon,” said Lamichhane.   

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.

Last August, NAC Managing Director Sugat Ratna Kansakar said that they were holding informal stake sale talks with a Middle Eastern airline in Dubai. He said that executives from a Middle Eastern airline had visited him in Kathmandu for ‘informal talks’ about purchasing shares in NAC. 

The Finance Ministry has on different occasions informed the Tourism Ministry to induct strategic partners to improve the state-owned company’s overall system performance.

Last September, 21 foreign firms including Lufthansa Consulting and Airbus had submitted letters of intent (LoI) to provide world class management consultancy services to NAC. The national flag carrier had asked for LoIs to improve its overall system performance by inducting a management consultancy service provider in the first phase, and handing over management in the second phase.

Under the proposal, NAC had planned to conduct a gap analysis to identify its shortcomings. The gap analysis period will last a month and NAC will have to pay a fee of 295,000 euros for the service. 

In the second phase, the company will take over NAC’s management. It will appoint its own people to top management posts like chief executive officer, chief financial officer and chief marketing officer. However, the plan fell apart after the Finance Ministry showed reluctance to fund the project. 

In 2015, NAC’s market share on international routes stood at 7.88 percent, up from 5.87 percent in 2014. The carrier saw the strongest passenger growth after it added two A320 aircraft to its fleet.