KATHMANDU, Sept 7: Ubaraj Adhikari, executive chairman of Nepal Airlines Corporation (NAC), has blamed the government and the Civil Aviation Authority of Nepal (CAAN) for NAC’s inability to generate profits.
In response to an 11-point clarification demanded by Minister for Tourism and Civil Aviation, Badri Pandey, on August 28, Adhikari claimed that the government hindered efforts to expand NAC's fleet and forced the airline to operate at Gautam Buddha International Airport. These actions, he argued, contributed to NAC's financial struggles. Adhikari also cited high interest rates on loans taken for aircraft purchases as a major factor in NAC’s losses.
NAC purchased two narrow-body aircraft with a Rs 10 billion loan from the Employees Provident Fund (EPF) and two wide-body aircraft with Rs 12 billion loans from both the EPF and the Citizen Investment Trust (CIT). Due to its inability to meet loan repayments, the airline's total debt surged to Rs 51.26 billion by the end of the last fiscal year (mid-July 2024).
The airline took loans in June 2013 at an interest rate of 12 percent and in May 2017 at 9 percent. These loans were provided with government guarantees. Now, after failing to generate profits, Adhikari argues that the interest rates are too high.
CAAN seeks 27-point clarification from NAC, highlights operatio...
"The high interest rates on the loans have weakened the corporation's financial condition," Adhikari said, urging the government to take steps to improve the situation. He also noted that operating flights at Gautam Buddha International Airport, as directed by the Ministry of Tourism and Civil Aviation and CAAN, had resulted in a loss of expected revenue.
NAC currently operates flights to Gautam Buddha International Airport just once a week, mainly to transport Nepali workers from Kuala Lumpur. After dropping passengers in Bhairahawa, the aircraft flies back to Kathmandu with returning passengers. Adhikari’s remarks is a setback for the government’s plan to operate regular flights from Pokhara and Gautam Buddha International Airport.
On August 12, the Cabinet approved a plan offering airlines various incentives for flights and landings at these two airports. Despite these initiatives, Adhikari has not acknowledged his role in NAC's financial decline. Instead, he criticized Minister Pandey for questioning his effectiveness, calling it an attempt to shift blame. In his 29-page response, Adhikari expressed surprise that conclusions were drawn before he had the opportunity to explain himself.
Despite having four aircraft for international flights, NAC has struggled with operational inefficiencies. For example, it took five months to repair a single aircraft, resulting in a significant revenue shortfall for the last fiscal year. NAC's revenue reached Rs 21.5 billion, far below its Rs 32.14 billion target. This represents a Rs 2.27 billion drop compared to the previous fiscal year, with NAC losing one-third of its projected revenue (Rs 10.64 billion) and incurring over Rs 1 billion in losses last year alone.
Adhikari pointed to flight cancellations due to aircraft maintenance issues, engine repairs, and a lack of C-check crews as key contributors to the airline’s declining performance. He added that CAAN’s decision to cut ground handling fees by 10 percent at Tribhuvan International Airport and provide a 50 percent discount at Gautam Buddha International Airport has cost NAC Rs 500 million annually.
Looking ahead, Adhikari stressed that NAC needs more aircraft to make a profit. "With only four international aircraft and some grounded due to technical issues, we are falling short of revenue targets. Operating 10 sectors with just two wide-body and two narrow-body aircraft makes it difficult to cover costs. The government must support NAC by adding more aircraft to increase revenue," he said.
Though NAC’s board decided to lease two narrow-body aircraft, the Ministry of Finance opposed the plan, citing NAC’s poor management of its existing fleet.
Minister Pandey is currently reviewing Adhikari’s explanation. "The response attempts to shift the blame and evade responsibility. The minister is not satisfied with this explanation. A decision will be made soon," said a source close to Pandey.
