Print Edition - 2019-06-26 | MONEY
Khatiwada reveals turnaround plan for debt-ridden Nepal Airlines
- Capital restructuring and inducting a strategic partner are the major moves to revamp the state-owned carrier
Jun 26, 2019-
Finance Minister Yuba Raj Khatiwada informed Parliament on Tuesday that the government had a turnaround plan for debt-ridden Nepal Airlines Corporation that includes capital restructuring and inducting a strategic partner.Responding to questions from parliamentarians in the House of Representatives on behalf of Prime Minister KP Sharma Oli, who also holds the tourism portfolio, Khatiwada said, “We are worried about the future of Nepal Airlines. The corporation’s worrisome legacy is long, and it did not start with the present government. But we cannot evade our responsibility.”
Khatiwada said that the government had rescheduled the interest payment deadline for its loans taken from state-owned financial institutions. Currently, the corporation owes Rs40 billion to various institutions, which means interest payments totalling Rs3.66 billion annually.
The cash-strapped airline has started defaulting on loans. This is the first time it has defaulted on a debt payment even though it has a long history of poor financial performance in the past several years.
The airline has defaulted on the payment of principal and interest to two state-owned financial institutions. According to the airline, it has defaulted on two quarterly installments of Rs1.18 billion to the Employees Provident Fund and one quarterly installment of Rs730 million to the Citizens Investment Trust. The corporation said that it would not be able to pay the third installment either.
As the corporation’s poor financial health has been a cause for concern for many lawmakers, Khatiwada said that it needed capital restructuring too. Capital restructuring involves changing the mixture of debt and equity in a company’s capital structure.
It is performed in order to optimise profitability or in response to a crisis like bankruptcy.
“We are also considering bringing a strategic partner for the corporation.”
He added that the corporation would be taken ahead with a viable business plan. “It has started the process to fly long-haul routes that will generate more income,” he said.
Sanjay Kumar Gautam, a Nepali Congress member in the House of Representatives, asked whether the government was turning Nepal Airlines into ‘a white elephant’. Nepal Communist Party lawmaker Ram Kumari Jhakri said that Nepal Airlines didn’t have any business plan or destinations to fly to and that it had not been able to repay its loans. “Is the government trying to close down the corporation?” she asked.
The cash flow problem at the state-owned airline started months ago when it inducted two brand new Airbus A330 jets into its fleet last year, as they largely remained under-utilised for months after failing to get enough routes to fly.
The corporation on Monday issued a press statement stating that it had been approved an additional slot in Delhi and would be operating three daily flights on the Kathmandu-Delhi sector soon. Currently, it has been operating double daily flights on the sector. The corporation said that the Kathmandu-Dubai service would be increased to four daily flights soon from the existing three daily flights.
Nepal Airlines has postponed the re-launch of its Osaka service till August-end due to ‘very poor’ bookings during the low season, the state-owned carrier said. Flights to Kansai International Airport were slated to start on July 4.
Published: 26-06-2019 09:41