NAC incurs monthly loss of Rs 10 million from grounded Chinese aircrafts

Published On: December 23, 2020 12:17 PM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Dec 23: The Nepal Airlines Corporation (NAC) has been incurring a monthly loss of more than Rs 10 million due to the Chinese aircrafts that remain grounded since July 30.

Although the state-owned corporation has decided to sell the aircrafts owing to the Rs 5 billion loss including loans incurred due to these grounded aircrafts, there has been little to no progress in this regard. 

The corporation had earlier sent a letter to the Ministry of Culture, Tourism and Civil Aviation (MoCTCA) for the management of the aircraft, seeking its opinion. The corporation is in a state of dilemma after the responsibility of the management was later handed over to the board of directors (BoD) through the Tourism Ministry. 

A meeting of the corporation’s BoD held last July came to a conclusion that the Chinese aircrafts cannot be flown and since then they remain grounded adding Rs 50 million more loss to the corporation.

A source at the NAC informed that more than Rs 12 million is spent monthly on the parking and insurance fee of the grounded aircrafts that have not been used much. The daily parking fee of the MA60 aircraft is Rs 2,514 and the company needs to pay 61 US dollar for insurance.

Similarly, the parking fee for the Y12E is Rs 685 per day and the insurance is Rs 315. Sources say that the insurance amount of Chinese aircrafts is about 35 percent more than others. The decision to remove the aircraft from the fleet surfaced seven years after the purchase. The loan taken while making the purchase is yet to be repaid.

The corporation is yet to pay the quarterly interest installment of the loan taken from the Citizen Investment Trust and Employees Provident Fund. Meanwhile, more than Rs 10 million a month has to be spent on grounded aircrafts. Sources claim that more than Rs 60 million is being spent monthly after adding the salaries of pilots and technicians.

The corporation, which could not make good use of the existing aircrafts, had purchased one MA60 and three Y12E aircrafts on concessional loan at that time. For the purchase of four aircrafts, China had given one MA60 and Y12E on grant. The record shows that the corporation has incurred an annual loss of up to Rs 380 million from these aircraft since they were brought to Nepal.

According to a source at the corporation, it has incurred a total loss of Rs 1.90 billion from fiscal year 2014/15 to 2018/19 from the Chinese aircraft. Even after financial hits from the Chinese aircraft, the number of domestic flights has dropped to 25 percent. The corporation, at one point used to earn from 19 aircraft, is now operating in loss but the management is preparing to buy a new aircraft. It has been more than a month since the report submitted by the sub-committee formed to buy the aircraft reached the BoD.

The board of directors has kept the report confidential. According to sources, the corporation is currently studying the issue of returning the aircraft to AVIC International Holding Corporation based on fair market value, using it as a down payment when buying a new aircraft and selling it through a tender process.

The corporation, which is hoping to increase its domestic market share by buying new aircraft, has not been able to sell the old Boeing 757-200 aircraft through the auction process. Sources claim that procurement of new aircraft seems impossible until the existing aircrafts are sold.

According to NAC sources, out of the Chinese aircraft, 9N AKS flew 1,346 hours till January 2020, while 9N-AKAT flew 604 hours, 9N-AKU 573 hours and 9N-AKV flew 1,001 hours. Similarly, MA60 with the call sign 9N-AKQ flew 2,996.32 hours and 9N-AKR flew 2,819 hours so far.


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