Nepal Airlines Regrets Chinese Plane Procurement, Financial Debt Looms

Nepal Airlines Corporation (NAC) finds itself grappling with the consequences of its decision to procure Chinese aircraft, which has cost the corporation billions of Nepali Rupees. NAC, the government flag carrier with a history spanning over 60 years, has remained in a prolonged state of debt.

The ordeal began around nine years ago when NAC purchased four Y12 and two MA-60 planes through a bilateral agreement between the Nepal government and the Chinese government. The acquisition was made with a combination of soft loans and subsidies. Unfortunately, these aircraft have become a significant contributing factor to the corporation’s continuous financial losses.

The agreement for the purchase of these Chinese planes dates back to 2070 BS (Nepali calendar), with the MA-60 and three Y-12 planes falling under the loan category and the remaining MA-60 and Y-12 planes receiving subsidies. This procurement, amounting to approximately 7 billion Nepali Rupees, placed a substantial financial burden on the corporation, aiming to serve remote hilly and Himalayan regions.

Tragically, these aircraft turned out to be ill-suited for their intended purpose and became non-operational within just three years. According to NAC’s statistics, an annual average loss of 38 million Nepali Rupees has been incurred since 2071 BS while operating these aircraft.

Currently, all six of these aircraft remain grounded, with one of the four Y-12 planes rendered unflyable due to a crash. Despite repeated calls for tenders to operate these aircraft, no applicants have come forward.

In today’s meeting of the International Relations and Tourism Committee (IRTC) of the House of Representatives, Sudan Kirati, the Minister of Culture, Tourism, and Civil Aviation, highlighted the ongoing losses incurred by NAC due to these aircraft. He cited difficulties in obtaining spare parts for the Chinese planes, which are both expensive and scarce. Additionally, the insurance costs for these aircraft are prohibitively high.

The minister also said that even though the aircraft have been out of operation, the corporation continues to pay an annual cost of 50 to 60 crore rupees for parking fees, insurance, and maintenance. Furthermore, a shortage of trainers for these aircraft compounds the issue, he said.

In financial terms, NAC’s expenses for acquiring these six Chinese aircraft amounted to nearly 7 billion rupees. When the aircraft were initially purchased, Nepal had spent 6 billion 67 crore 10 lakh Rupees through grants and soft loans. This included a grant assistance of 2 billion 94 crore 30 lakh Rupees, with the remaining 3 billion 72 crore in the form of a loan with a 1 decimal 5 percent interest rate.