Nepal Airlines says it may incur a loss of Rs1.5 billion this fiscal year

  • National flag carrier points to higher fuel prices and competition from budget airlines for the debacle.

Jul 13, 2019-

Nepal Airlines Corporation on Friday told the parliamentary Finance Committee that it could incur a loss of Rs1.5 billion this fiscal year ending July 16.

The state-owned carrier’s losses on domestic operations amount to Rs500 million, and losses on the international sector total Rs3.99 billion. These losses overshadowed the net profit of Rs3 billion the airline made from its ground handling operations at Tribhuvan International Airport. In the last fiscal year, the corporation had posted a profit of Rs200 million.

Nepal Airlines Executive Chairman Madan Kharel told the House committee that factors like higher fuel prices and competition from budget airlines prompted the carrier to offer low fares, and they were the primary reasons behind the poor performance this fiscal year.

Kharel also reported to the Finance Committee that the corporation failed to make another quarterly instalment payment due in July citing a ‘temporary liquidity crisis’. This is the third time that Nepal Airlines has defaulted on repayments to two state-owned financial institutions, and its debts have piled up to Rs1.13 billion.

According to the national flag carrier, it has not paid two quarterly instalments amounting to Rs1.18 billion to the Employees Provident Fund, and one quarterly instalment of Rs730 million to the Citizens Investment Trust.

Currently, the corporation is teetering on the brink of collapse with Rs36 billion owed to assorted institutions and annual interest payments totalling Rs3.66 billion.

Nepal Airlines has been struggling to manage its cash flow since it inducted two brand new Airbus A330 jets into its fleet last year, as they remained largely under-utilised for months for lack of routes. According to Kharel, operating the Airbus A330 jet is three times costlier than the Airbus A320. The corporation has two A320s.

Lawmaker and former prime minister Baburam Bhattarai said that Nepal Airlines had been beset with varied troubles for a long time, and these perennial problems should be addressed through policy intervention. “The corporation is ill, and it needs a proper cure for the disease.”

Bhattarai said that the government should launch a package to take ownership of the corporation’s loans, and privatise it to turn it into a successful company. “The corporation should also focus on the two neighbours, India and China, as they are the potential tourism markets for Nepal for the next five decades,” he said.

Lawmaker Ghanshyam Bhusal said Nepal Airlines was keeping its head above water with its income from ground handling. “But now it seems revenues from ground handling will not be enough to keep the airline afloat.”

Tourism Secretary Mohan Krishna Sapkota told lawmakers that until the corporation submits a doable business plan, the government will not inject additional funds into the carrier. “The corporation needs restructuring.”

Once the pride of Nepal and the ruler of the Nepali skies, the venerable carrier has lost some of its shine in recent years. It has started knocking on the government’s door asking for a bailout. In 2017, Nepal Airlines asked for Rs20 billion from the government to raise its paid-up capital to support its financial restructuring plan.

Recently, Prime Minister KP Sharma Oli said mockingly that the only achievement Nepal Airlines can show after 61 years of operation is the accumulation of loans worth Rs36 billion.

“How to make Nepal Airlines a success is a big question,” he had said. Oli gave a few examples of how the airline had been stumbling from one fiasco to another.

“The company buys the planes first and finds the pilots to fly them later. Again, it procures wide-body jets but it doesn’t have destinations to fly to. There is high demand for services to Japan’s Narita International Airport, but it decides to fly to the Kansai International Airport in Osaka instead.

Planes of other companies are in the air, but Nepal Airlines planes are seen on the tarmac at Tribhuvan International Airport all the time. All this shows that there is no preparation at all. It’s not the planes that have caused losses, it’s the management,” the prime minister had said.

Published: 13-07-2019 10:23

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