NEPAL AIRLINES

Big Deal

The country’s flag carrier decides to buy two aircraft in more than two decades

By A CORRESSPONDENT

Purchasing aircraft may be a routine business for many airlines in the world. For Nepal Airlines (NA), it is a big deal. NA’s aircraft purchase or lease decisions in the past have rocked governments.

One of the oldest airlines of Asia, NA is having to do with two ageing narrow-body Boeing 757 airplanes in its international sector. It will add two new airbuses by March/April 2010.

The NA board took a decision this week to purchase two airbuses. This decision assumes more significance especially in view of Nepal Tourism Year 2011 when Nepalese airlines will need to be able to cater to a million tourists visiting the country.

The credit goes to courageous NA executive chairman Sugat Kansakar, who pushed the idea of buying the aircraft. Kansakar is known for transforming Nepal Telecom and its network by introducing CDMA despite severe opposition from within the organization and outside it. Unlike what critics said CDMA helped bring about a kind of internet revolution in Nepal.

Similar criticism is heard regarding Kansakar’s push for purchasing new airbuses to add to the NA fleet. Kansakar is undeterred.

“As a commercial and business entity, Nepal Airlines needs aircrafts to continue its business in competitive markets. With an organization having a long pool of efficient and capable manpower, Nepal Airlines can easily capture the markets which shrink in the absences of aircrafts,” said Kansakar. “If Nepal Airlines is not permitted to purchase new aircraft, there is no reason why we need to retain this organization.”

Nepal Airlines used to occupy over 20 percent of market, which is less than 10 percent now because of lack of aircraft.

Before taking the decision, Nepal Airlines Board looked at the proposal of Boeing and Airbus. It decided to purchase the airbus A 320-200 with a seating capacity of 150 passengers and A 330-200 series with a capacity of 279 seats.

Nepal Airlines is considering using the loan from Provident Fund and other commercial banks to purchase the new aircraft. The deal will be worth over Rs. 12 billion. The airline is also trying to get loans from local banks with a guarantee from the government.

However, Nepal Bankers Association president Sashin Joshi said Nepali bankers do not have the capability to invest such a big amount of money and stressed the need for foreign investors. “Provident Fund has yet to sign a deal with Nepal Airlines. The fund has demanded the government guarantee for its loan,” said Tourism secretary Nagendra Prasad Ghimire. “The fund wants government guarantee that it will gets return on its investment.”

Kansakar said: “We will pay back the money even if there is just 60 percent of occupancy. The investors do not need to worry about their investment.”

All the foreign airlines have been increasing their Kathmandu flights. Even Qatar Air is said to be doubling its flights in the near future by making Kathmandu as one of its hubs. As more than 2 million Nepalese are working abroad, Nepal Airlines stands better chances of increasing its share of passengers.

In 1998, Nepal Airlines finally abrogated a proposal to purchase two airbuses at the last minute following denial by the Ministry of Finance to stand guarantee. This time also, the ball is in the court of the Ministry of Finance.

Established in 1959 with DC-3 aircraft, Nepal Airlines purchased Boeing 727 Aircraft in 1976 when it was under the management of supervision of Air France. If the government wants to keep its own flag carrier, it must give guarantee to purchase two aircrafts.

“Nepal Airlines needs new aircraft to compete with other airlines,” said Keshab Raj Khanal, director General of Civil Aviation Authority.