Nepal Airlines struggles with mounting Rs 51.26 billion debt

KATHMANDU: The government-owned airline Nepal Airlines Corporation (NAC) is having a difficult time paying off its enormous debt of Rs 51.26 billion as a result of its incapacity to grow and run its operations efficiently. In contrast to private airlines that enjoy profitability, NAC's debt has skyrocketed as a result of multiple problems, such as the non-operation of aircraft that were purchased from China, frequent jet groundings, and inadequate administrative leadership. Due to the corporation's nonpayment of loans from the Employee Provident Fund (EPF) and Citizens Investment Trust (CIT), principle and interest debt have increased.

Due to the Covid-19 outbreak, flights were suspended and planes were frequently stranded, which made NAC's financial problems worse. NAC has been unable to meet its financial obligations, even after paying the EPF and CIT a total of Rs 439.55 million as the latest repayment of debt. The company has attempted to control its internal debt and buy new aircraft by requesting a soft loan of Rs 135 billion from foreign organizations, but it has not been able to obtain this money.

The NAC's financial difficulties are compounded by the fact that only two of its four international aircraft are currently operational, with two others sent to Israel and Italy for maintenance. This has led to significant losses, as the grounded aircraft are not generating revenue. Domestically, only one Twin Otter aircraft is in service, reducing NAC's market share to a mere 0.3 percent and damaging its reputation.

The Ministry of Culture, Tourism, and Civil Aviation (MoCTCA) has criticized the NAC's leadership, particularly Executive Chairman Ubaraj Adhikari, for failing to manage the corporation effectively. The ministry has raised concerns about the financial liabilities created under Adhikari's leadership and has discussed the possibility of appointing a new Managing Director to improve NAC's management and operations.

The decline of NAC is also linked to the grounding of six Chinese aircraft purchased during former Prime Minister Pushpa Kamal Dahal's tenure, none of which are currently in operation. These aircraft have not flown since 2018 and are parked at Tribhuvan International Airport, contributing to the corporation's financial losses. The MoCTCA has questioned Adhikari's decision-making, including the simultaneous maintenance of both wide-body aircraft, which led to service disruptions.

Members of parliament's International Relations and Tourism Committee have suggested exploring alternatives to the current leadership, as Adhikari's management is seen as ineffective. The MoCTCA has raised numerous concerns about his performance, including the lack of alternative arrangements during aircraft maintenance, resulting in flight disruptions and fines in various countries.

Adhikari, who was appointed by former tourism minister Prem Ale in 2021, was previously removed from his position following a probe that concluded he was unable to manage the NAC effectively. However, Adhikari returned to the NAC in 2022 after obtaining a short-term interim order from the Supreme Court. Despite this, the MoCTCA is considering reducing his authority and appointing a new Managing Director to address the ongoing issues at NAC.