First Business News Portal in English from Nepal
KATHMANDU: Nepal Airlines Corporation (NAC) has stepped up efforts to sell five out of six Chinese aircraft that have been grounded for over two years.
The state-owned enterprise in this regard called for tender bids on Tuesday to assess the prices the functionless airplanes can fetch. The NAC moved ahead with its plan to sell these aircraft after it failed to rent out these airplanes despite repeated attempts.
The NAC had purchased the first lot of the Chinese aircraft in 2014 with high hopes of generating a notable amount of revenue by operating the airplanes. The five planes—three 17-seater Y12e aircraft and two 56-seater MA60 aircraft—however made the NAC incur more costs than the revenue it earned.
The purchase of Chinese aircraft courted controversy from the very beginning. Right from the initial stage after these aircraft were brought to Nepal, the NAC faced shortage of pilots to operate the Chinese airplanes, while the public enterprise later on faced the problem of getting the spare parts for the maintenance of the aircraft.
The 56th annual audit report of the Office of the Auditor General released in April 2019 said that the NAC had been operating the Chinese-made Y12e aircraft ineffectively and incurring heavy losses.
The audit report said the Y12e earned Rs 25 million in 2018/19. However, their operating cost and indirect expenditures stood at Rs 188.5 million and Rs 96.3 million, respectively. In total, losses from the operation of Y12e stood at Rs 289.7 million in a single fiscal year.
In November 2012, the NAC signed a commercial agreement with the Aviation Industry Corporation of China (AVIC), a Chinese government undertaking, to procure six aircraft—two MA60 and four Y12e. For this purpose, the Chinese government provided grant and concessional loan assistance worth 408 million Chinese Yuan, equivalent to Rs 6.67 billion.
Out of the total aid money, a grant worth 180 million yuan (Rs 2.94 billion) was used to pay for one MA60 and one Y12e aircraft. The other aircraft were bought for 228 million yuan (Rs 3.72 billion) with a soft loan provided by China’s EXIM Bank.
The country incurred heavy losses for the purchase and operation of the Chinese aircraft.
The state-owned enterprise got nothing but heavy financial burdens, said NAC officials. Before the planes were grounded, the total accumulated losses of five planes were around Rs 2 billion, nearly half of the cost of the planes, an NAC report shows.
According to the NAC sources, the enterprise has decided to sell the airplanes due to the reasons like higher insurance premium of the aircraft, expensive spare parts, delay in delivery of the spare parts by the parent company, higher cost to provide training to the pilots concerned and excessive fuel consumption compared to other planes of similar nature, among others.
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