NAC’s wide-body aircraft incur loss of Rs 1.6bn

Kathmandu, March 24

In the first six months of operation, the newly purchased widebody aircraft of Nepal Airlines Corporation (NAC) have incurred loss of Rs 1.6 billion. It has been almost nine months since NAC received delivery of its two new wide-body aircraft named Annapurna and Makalu.

The two wide-body aircraft of Airbus A330-200 series had landed in Nepal on June 28 and July 26, last year, respectively.

Since the start of flight operations from August, 2018 till mid-January this year, the aircraft have earned total operating revenue worth Rs 2.4 billion.

Meanwhile, the total amount of operating expenditure for the same period stood at Rs 2.1 billion.

Hence, the net profit of NAC is Rs 26.60 million in the first six months of operation. However, what has to be taken into account is that NAC in the review period paid a total interest of Rs 1.92 billion on the loans it had taken to purchase the planes.

The national flag carrier had purchased the wide-body aircraft by borrowing Rs 24 billion at 10 per cent interest from the Employees Provident Fund (EPF) and Citizen Investment Trust (CIT). “We do have assets but we are having trouble in managing cash flow. That is why we are getting into trouble to pay back our debts,” said Navaraj Koirala, joint spokesperson for NAC, adding that NAC is currently unable to pay back the loan on its own.

As per the loan agreement, NAC has to pay back the loan in 60 instalments to clear the debt of EPF and CIT. As per Koirala, NAC has to pay around Rs 804 million per instalment. Till date the national flag carrier has cleared the first instalment and only Rs 100 million of the second instalment. Moreover, it is under pressure to pay the third instalment by mid-April. “As we cannot pay back the loan on our own we have asked the Ministry of Culture, Tourism and Civil Aviation for financial support,” he said, “A high-level discussion is going on over this issue but no decision has been taken yet.”

Prior to this, NAC had also issued a white paper asking the government for financial support until they begin to earn profit from the wide-body aircraft.

Meanwhile, NAC is optimistic about adding new international destinations. “We are putting an effort to resume our flights to Japan along with starting flights to new destinations like China, Korea and Saudi Arabia,” Koirala said adding, “There will be some respite for NAC if we could start flight operations to Japan in the initial phase.”

Currently both wide-body aircraft are flying nine hours per day while the full-fledged capacity of the aircraft is 16 hours per day. If NAC begins flights to Japan, the flying hour is likely to reach 14 hours per day, Koirala added.

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