Nepal Airlines, Perfect Example How not to run an Airline!

Nepal Airlines Corporation (NAC) continues to be a model of incompetence in the aviation industry. The corporation is becoming a perfect example for studying how not to work in the air sector. Those in leadership are spending time covering up mistakes rather than not making mistakes.

The chaos in the National Flag Carrier is such that neither the flight arrangement nor the maintenance work is being done on time for any aircraft. Even the installment of the loan taken for the purchase of the aircraft could not be paid on time due to continuous losses. There is a situation where the corporation is going bankrupt due to the increasing debt due to the leadership’s work style. The leadership is fast asleep with the cycle of commissions matching aircraft repairs.

The Corporation had brought two widebody aircraft into Nepal on 14th June 2018 and 11th July 2018. The aircraft was purchased by taking a loan of 12 billion rupees from the Employee Provident Fund and 12 billion rupees from the Citizen Investment Fund under the guarantee of the Government of Nepal.

The two widebody aircraft entered commercial flight in July and August of 2018. It has been five years and eight months since the aircraft entered commercial flight, but the corporation has not been able to pay the full amount of any installment of the loan taken while purchasing the aircraft. The principal and interest of the 24 billion loan taken for the purchase of the widebody aircraft has reached 39 billion rupees.

The corporation has not even paid the installments of the 12 billion rupees loan taken from the Citizen Investment Fund for the purchase of aircraft. The 12 billion rupees debt has increased to 19 billion and 23 billion rupees by the end of December.

The corporation has paid only 20 million rupees in two installments from July to December of the current financial year. While the corporation has to pay Rs 63 crore in one installment.

So far, the corporation has neither paid the amount for any installments on time nor paid the full amount. Due to this, the loan is increasing as the interest amount is also added.

Similarly, although the Employees’ Provident Fund Corporation has been paid the loan installment and interest for the purchase of the narrowbody aircraft, it has not been paid the loan installment for the purchase of the widebody aircraft. 

The corporation took a loan of 10 billion rupees in 2071 for the purchase of narrow body and 12 billion rupees in 2075 for the purchase of wide body.

Damodar Subedi, information officer of the fund, said that although some amount has been paid recently, the amount due for installments has not been paid. Now the amount owed by the corporation to the fund alone has exceeded 24.5 billion rupees. In which Widebody’s 12 billion debt has increased to more than 19 billion rupees as in the Citizen Investment Fund.

The management of the company is unnecessary expenses and commissions in the purchase of aircraft. The amount of the loan for the purchase of aircraft has increased significantly when the amount of the loan of 34 billion rupees taken twice to purchase aircraft is reduced. There is a misconception that the loan of the company has been repaid on time, while the entire loan of the company has not been repaid even at this time. 

Executive Chairman Yuvaraj Adhikari is only interested in engine maintenance and renting. He is not paying attention to flying the aircraft on time. The grounded aircraft from November 30, 2023, was still grounded until March 29, 2024. The aircraft was parked in Israel for engine maintenance. Even though the aircraft did not fly, the company has been charged two thousand dollars per day since September 30th for engine rental. 

Executive officers are enjoying their time in the hustle and bustle of repairs.As soon as the aircraft is grounded, the company’s monthly revenue has decreased by 30 crores. But the executive officers are spreading the rumor that business has increased. Most of the senior employees of the company are also involved in the selfish plan. Although when the company is in a financial crisis, they are being assisted by directors such as Financial Director Tankanidhi Dahal, Ashok Sigdel, Umesh Paudel. 

So far, the company’s finance department has not made any details public about the expenses claiming that there is more revenue, while the company has been in deficit of more than 33 billion rupees in the last fiscal year. To make the company financially strong in times of crisis, it is necessary to repair more and more aircraft and fly them. However, even after the arrival of the executive officers, no aircraft has flown for even a few days. Most of the time, one or the other aircraft is grounded. 

The aircraft, grounded in narrow body in December 2021, was grounded until March 2022. The aircraft, grounded in July 2022, was fully grounded until September 2022. Most of the time between two narrow body aircraft, one aircraft is grounded. One of the wide-body aircraft is also grounded. The recent narrow body Nine Aces aircraft grounded on July 17, 2023, until September 30, 2023. Although it flies for some time, this aircraft has been grounded again since November 30. There is no information with the company when the aircraft will fly again.

The wide-body aircraft has incurred a loss of 19 billion, with an additional 10 billion loss expected in the next five years. On Asar 14, 2075, the first wide-body aircraft was brought to Nepal, followed by the second wide-body on Shrawan 11. The aircraft went into commercial operation 33 and 99 days later, respectively. The company has not been able to operate the aircraft at full capacity yet, as seen in reports publicly released by the company. The company has incurred a loss of more than 20 billion from the wide-body aircraft alone so far. According to a study conducted by a committee led by former governor of the central bank Dipendra Bahadur Kshettri, a loss of 19 billion 14 crore rupees is expected by Baisakh 2080. The report mentions losses of 1 billion 53 crore 51 lakh in the fiscal year 2074/2075 and 3 billion 59 crore in the fiscal year 2075/2076 from wide-body operations. 

Additionally, the company incurred losses of 4 billion in 2076/2077, 3 billion in 2077/2078, 3 billion in 2078/2079, and 3 billion in 2079/2080 from wide-body operations, as mentioned in the report. The report also indicates that the company will not be able to profit from wide-body operations in the next five years. 

Declining Business : The company’s revenue has declined due to the inability to operate flights after repairing the aircraft on time. In comparison to Kartik of the fiscal year 2080/81, the company’s revenue has decreased by 45 crores in Poush. According to the published details, the revenue has consistently declined in Kartik, Mangsir, and Poush. This trend is expected to continue in Magh as well. One of the company’s narrow body aircraft has been grounded since November 30. The aircraft is leased to Israel. It is uncertain when the aircraft will be brought back to Nepal after repairs. 

The aircraft grounded since Mangsir 15 is also affecting revenue when it is not flying. In Kartik, the company had two narrow body and two wide-body aircraft in operation. As a result, the company earned 1 billion 67 crores in revenue within a month. However, with the grounding of the aircraft, the company’s revenue has been affected. As the company’s revenue decreases, expenses increase. The company earned 1.76 billion  in Kartik. However, revenue in Mangsir decreased to 1.5 billion. There has been a significant decrease in revenue in Poush compared to Mangsir. The company’s revenue has dropped to 1.2 billion in Poush. Compared to the revenue in Kartik, there is a decrease of 17 crores in Mangsir and 45 crores in Poush. Similarly, revenue has decreased by 30 crores in Poush compared to Mangsir. 

The company’s market share increased to 16.56 percent in 2022 and declined to 10.79 percent in 2023. Nepal Airlines’ market share in total international air passengers in 2023 is 14.20 percent. According to statistics provided by Tribhuvan International Airport, the company’s market share was 14.43 percent in 11 months of 2023. This share decreased to 14.20 percent in December. Throughout December, one of the company’s narrow body aircraft was grounded. This has reduced the company’s market share. According to airport office statistics, Tribhuvan International Airport received 4,541,137 international passengers in 2023. Of these, 645,166 were passengers of Nepal Airlines. This is 14.20 percent of total passengers. The company’s market share increased by more than 25 percent in 2020. The company’s market share has been steadily increasing since 2017. In 2017, the company’s market share was 10 percent. The market share increased by 1 percent in 2018 to reach 11 percent. In 2019, it increased by 7 percent to reach 18 percent, and in 2020, it increased by 7 percent again to reach 25 percent.

In 2021, due to the effects of COVID-19, the company’s market share decreased by 5 percent. However, in 2022, due to mismanagement and executive incompetence, the market share decreased further to 16.56 percent. Similarly, in 2023, the market share decreased again. In 2022, two of the company’s narrow body aircraft were grounded for more than 500 days. One narrow body aircraft, grounded in December 2021, resumed operations only in March 2022, while another aircraft, grounded in July 2020, resumed operations only in September. Due to mismanagement in engine maintenance, no narrow body aircraft operated fully in 2022. One flight operated while another remained grounded continuously. Additionally, two wide-body aircraft used in international flights were unable to operate fully due to mismanagement by the company management, resulting in a loss of market share. The delay in aircraft maintenance and grounding has increased the time when the company’s aircraft are not flying, thereby increasing the market share of foreign airlines operating in Nepal. Instead of focusing on aircraft management and operations, the company leadership is spending time in purchasing settings and manipulating data. 

The company’s own report indicates that none of the company’s aircraft flew during the scheduled time in any month of the fiscal year 2079/80. According to the report, in one month, the company’s aircraft flew only 68 percent of the scheduled time. In the previous fiscal year, the company’s aircraft flew only during 40 percent of the scheduled time. As per the publicly available report, in Bhadra, the company’s aircraft flew only 40 percent of the scheduled time. Similarly, in Aswin, only 61 percent of the scheduled time was utilized for flights. Furthermore, in Kartik, Mangsir, Poush, Magh, Falgun, Chaitra, Baisakh, Jestha, and Asar, the aircraft flew only during 60, 54, 53, 68, 59, 53, 44, 44, and 54 percent of the scheduled time, respectively. Despite not flying on time, the company claims 100 percent reliability, which is ludicrous.

Two crores are still missing. Due to the negligence of the company’s employee, it has been about seven months since two crore rupees were looted, but the company has not been able to recover the amount yet. The employee at the company’s Dubai station unknowingly allowed two crore rupees to be hacked. The hacker hacked the company’s Dubai station email ID and changed the account number to that of a catering company and transferred the money to the new account. The Dubai Station Chief Asmita Subedi herself transferred the amount three times, totaling 5,35,912 Dirhams, to the hacker’s account. Subedi has now been taken to Kathmandu. Although the erring employee is to be suspended and investigated, no action has been taken against any executive officer. Subedi transferred a total of 5,35,912 Dirhams in three installments, namely 1,15,153 Dirhams on August 1, 2,06,202 Dirhams on August 9, and 2,01,557 Dirhams on August 25, to the hacker’s account. At the prevailing exchange rate of 1 Dirham equal to 36 Nepalese Rupees, the total amount of 5,35,912 Dirhams is equivalent to 1,92,90,780 Nepalese Rupees. However, the amount has not yet been recovered. The issue of the hacked amount has also been raised in the parliamentary committee. Although the executive officers have assured everyone that the amount will be recovered, the amount has not yet been credited to the company’s account. The company directors have repeatedly questioned the officers about this matter, as one director revealed. However, the executive officers have only claimed that the money will come, but they have not provided any details on the board. The incident of two crore rupees missing from the company is not just a matter of employee negligence, but also indicates how the company is being run. This is an example of the failure of leadership amidst the mountain of loans, which has left the company unable to recover even through regular treatment.

These are few reasons that indicated NAC should be privatized to control the corruption.