NAC advised to restructure asset and loan portfolio for financial recovery

Published On: October 6, 2023 09:30 AM NPT By: Republica | @RepublicaNepal

KATHMANDU, Oct 6: The authority concerned has been advised to introduce strategic partners along with issuing the initial public offerings (IPOs) to improve the financial health of Nepal Airlines Corporation (NAC).

A study carried out by the NAC Reform Committee formed to study the structural and managerial aspects of the national flag-carrier has come up with the recommendation. The panel led by former Nepal Rastra Bank Governor Dipendra Bahadur Chhetri has also suggested the conversion of NAC into a public limited company, while maintaining 51 percent share of the government.

Out of the remaining stakes, NAC has been recommended to sell 15 percent shares each to financial institutions and organizations of tourism businesses. Similarly, four percent is recommended for the NAC staff, while the remaining 15 percent is advised for IPOs.

As an alternative measure, it has been advised to continue with keeping the NAC a public enterprise while recruiting international experts in management contracts for an overall reform of the NAC. The experts should possess long experience of working in international airline companies.

The panel, in its report, has also stated that NAC faced huge losses in operation of the wide-body airplanes. The NAC’s loss from the business was estimated at Rs 328 million per month. “Considering the operation for the first 10 months of the fiscal year 2022/23, the incurred losses for the period reached Rs 3.28 billion,” reads the report.

During the review period last year, NAC earned a revenue of Rs 7.70 billion from operation of the wide-body airplanes. In the previous year, the corporation earned Rs 6.99 billion while facing a loss of Rs 3.40 billion.

The NAC has also been incurring losses in its domestic flights. In the first 10 months of 2022/23, the deficit amount was Rs 500 million, while in the entire period of the fiscal year 2021/22, the losses stood at Rs 559.40 million.

Increasing NAC’s paid-up capital to Rs 20 billion and increasing the number of flights in both domestic and international sectors are among the recommendations forwarded by the panel. Likewise, a restructuring of the current loan portfolio and to look for new concessional loans are among the panel’s suggestions for NAC.