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Nepal Airlines working on strategy to regain control

Publication Date : 29-05-2014

 

Nepal Airlines Corporation (NAC) is expected to submit a firm business plan to the Nepali government in two to three weeks to restructure the troubled company.

The national flag carrier has prepared a 10-year business plan which was submitted to its board on Sunday. According to NAC spokesperson Ram Hari Sharma, the board plans to approve the roadmap at its next meeting.

The business plan will then go to the line ministry, the Ministry of Culture, Tourism and Civil Aviation, for necessary policy intervention to turn the carrier into a professional and commercial entity.

Under NAC’s turnaround business plan, it proposes to acquire 15 new aircraft by 2024 for its domestic and international fleets. The airline will then revive all its suspended routes and operate on new  lucrative sectors.

Presently, the airline possesses a skeleton fleet of two ageing Boeing 757s and a vintage Twin Otter, a far cry from its glory days when it had two dozen aircraft criss-crossing the skies over Nepal and showing the flag at international destinations like London, Paris and Osaka.

NAC’s domestic fleet will consist of 16 aircraft including the six on order from China under its resurrection strategy. The carrier is now flying one Twin Otter, another has been leased to a private carrier and two are grounded. 

On the international front, NAC plans to have five narrow-body and four wide-body aircraft including the two Airbus A320-200s on order. As per the plan, the carrier will phase out one of its two 757s by 2015 and the second one by 2019.

“Some of the aircraft for the international sectors will be leased,” said a NAC board member. Asked why the airline had chosen to lease planes instead of buying new ones, the member said that the lease option gives lot of flexibility in terms of capacity. “Leasing will also help the airline to expand its fleet faster as buying new planes takes a long time,” he said. Leasing aircraft has become a viable option in the global aviation industry nowadays due to its cost-saving options, he added. The business plan says that the potential infusion of cash in the form of equity by the government would be a positive move to speed up its aircraft acquisition plans.

The government holds stock worth 370 million Nepali rupees (US$4 million) at NAC. As the objective is also to find a potential strategic partner for the ailing carrier, the business plan has proposed that the government put up 60 percent of the cost of new aircraft. “NAC needs to have a favourable debt-to-equity ratio to make it financially sound to bring a strategic partner.”

According to the annual performance review of public enterprises, in 2012-13 NAC earned 5.94 billion rupees, 2 billion rupees of it from ground handling charges from international airlines. Likewise, its business plan includes taking over ground handling services at the proposed regional international airports in Pokhara and Bhairahawa and the planned full-fledged second international airport in Bara, Nijgadh.

The plan has asked the government to be flexible on a number of policies to make leasing or buying aircraft more simple. It has asked the government to make amendments to the Public Procurement Act among other laws. Other plans include resuming operations on all its old domestic sectors and expanding its international network to Europe and beyond.

During its heyday, NAC used to operate 18 aircraft-12 Twin Otters, three Avros and three Pilatus Porters-to 42 stations across the country. NAC plans to resume services to a number of international destinations which were taken offline for lack of aircraft. Over the last decade, the number of international destinations has been slashed from 21 to four reflecting the spreading malaise within the carrier.

*US$1 = 94.29 Nepali rupees

 

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