Oh! NAC

Nepal Airlines Corporation (NAC) is a tragic example of how everything can go wrong with a public enterprise in Nepal. It´s a victim of political interference, mismanagement and corruption-- you name a malady that can strangle a public enterprise and you will find it at NAC. The national flag carrier and the oldest airline of Nepal is perhaps also the country’s sickest public enterprise. It´s a shame that five decades after its establishment, NAC has just five big and small aircraft and it is only rarely that all these aircraft are operational simultaneously. But this sorry state of affairs at NAC is not due to any adverse business climate. Actually, during the last one-and-half decades since Nepal liberalized the aviation sector, several foreign and domestic airline companies have been doing excellent business here. Air passengers have also grown exponentially over the period, thanks to about two million Nepalis working/studying abroad and the growing capacity of Nepalis to afford air travel within the country. Unfortunately, it´s in this robust business environment that the state-owned airline has taken such a serious beating.



The reason behind the awful situation that NAC finds itself in is chronic mismanagement. It´s a fact proven worldwide that bureaucrats are the worst businessmen possible but when bureaucrats running public enterprises collude with corrupt politicians they become terrible managers. And this is precisely what happened at NAC. With every political change at Singha Durbar there comes a change in top-level NAC management. Such management, which comes in through political connections and is as uncertain as it can be about its own life span, is hardly in a position to think of the future of the still-fledging airline. Instead, it´s more concerned about making a quick buck before someone pulls the plug on it. It´s no wonder that Nepal´s most infamous scams are invariably linked to NAC.



And now it seems that another scam is in the making. The NAC management has paid advance money of Rs 56 million to Airbus Company to buy two aircraft though it doesn´t have the required money for the purchase, nor does it have a creditor lined up to lend it that money. There are also serious lapses over standard financial procedures for making such an advance. Moreover, the government hasn´t agreed to stand guarantor and the Employee´s Provident Fund, from which NAC was hoping to borrow, has said it will not extent any loan unless the government underwrites it. NAC also doesn´t have any business and a reform plan without which the corporation is not going to survive much longer, irrespective of whether it adds to its current fleet or not. Management reform must precede any aircraft purchase because the same bunch that is responsible for the mess at NAC cannot be trusted to rescue the airline.

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