After no company showed interest in the purchase of Chinese aircraft belonging to flag carrier Nepal Airlines, a tender notice has been issued again for re-bidding.
The Nepal Airlines Corporation (NAC) had issued a notice on December 21, 2023, for the sale of two MA-60 and three Y-12 aircraft. Despite the notice being issued, no company showed interest in purchasing the aircraft, prompting the issuance of another tender notice for the sale.
The NAC had previously used five Chinese aircraft for domestic flights, one of which, a Y-12 aircraft, was involved in an accident during landing at Nepalgunj Airport in Chaitra 2076 (March-April 2020) and has since been out of service. These aircraft had stopped operating from Shrawan 15, 2077 (July-August 2020).
Since 2077, there had been discussions about operating, selling, or leasing these aircraft. The operation was announced by the minister, and after the evaluation of the American company’s report, the NAC initiated the bidding process for the sale.
The Chinese aircraft have been grounded at Tribhuvan International Airport since Shrawan 2077 (July-August 2020). The NAC had put these aircraft up for sale through a confidential bidding process. The deadline for submission was until February 4, 2024, and if no bids were received, an additional 15 days would be added to the deadline for tender submission. The valuation for the sale of the aircraft was determined by the American company, Aviation Asset Management International.
The company had estimated that it could sell five aircraft at a total of USD 12,367,525. However, it was reported that one Y-12 aircraft might not be sold due to its condition.
Currently, the NAC has put all five aircraft up for bidding again. The company had proposed to sell three Y-12 and two MA-60 aircraft as a single lot, with a potential sale price of USD 2,875,000. Additionally, the parts of the Chinese aircraft, if sold as they are, could fetch up to USD 1,385,051, while if they were dismantled, they could fetch up to USD 585,051.
In total, if both the aircraft and their parts were sold as proposed, they could fetch up to NPR 212 million. A committee had been formed to study the feasibility of operating the aircraft, which reported that it would cost around NPR 50 million to make the aircraft airworthy.
However, after the aircraft were grounded due to the committee’s findings, the management of the NAC attempted to lease them out. Afterward, former Chairman Dim Prakash Poudel had studied the matter of leasing Chinese aircraft. Along with the study, preparations were made to tender for leasing them. However, with the change in government leadership, from KP Oli’s government to Sher Bahadur Deuba’s government, the matter of leasing the aircraft was put on hold.
With the change in government, the issue of aircraft leasing became inactive. After the plan for flight operations, the NAC requested permission from the Ministry of Finance to lease out the aircraft. The NAC had issued a notice on September 14 for leasing Chinese aircraft. A committee formed to lease Chinese aircraft had proposed monthly earnings of at least USD 149,696 for two Y-12 aircraft, and a minimum of USD 140,632 for one MA-60 aircraft.
The sub-committee had also proposed leasing three Y-12 aircraft for a minimum of USD 94,671, 89,240, and 91,888 respectively. However, the proposal submitted by the sub-committee could not be passed by the NAC Executive Committee. Subsequently, the issue of aircraft leasing was put on hold.
The matter of aircraft leasing was subsequently limited to paperwork. With the change in government, the matter of aircraft leasing remained stagnant. After the plan for flights was made, the NAC had requested permission from the Ministry of Finance to lease out the MA-60 and Y-12 aircraft.
The company had prepared a proposal for leasing the aircraft on November 2, with a second notice issued. If no one showed interest in leasing the aircraft, the NAC would start the tender process again. There was a delay in the second round of the bidding process, and now, after a year, a notice has been issued again for bidding on the lease of the aircraft.
Loss caused by the grounded Chinese Aircraft
When the airline operated 2 MA-60 and 4 Y-12 aircraft, it incurred a loss of Rs 1.90 billion from the fiscal year 2071/72 to 2075/76 due to problems in flight operations, prompting the announcement not to operate.
From these aircraft, a further loss of over half a billion rupees was added in the last fiscal year 2076/77. After the suspension of flights, the company suffered an additional loss of Rs 2 billion due to insurance and maintaining aircraft airworthy and parked.
The purchase of 6 Chinese aircraft has also caused the company a loss of more than Rs 10 billion in operations. The company has not been able to operate Chinese aircraft in full operation even during the six fiscal years of operation.
Cost of Purchase
Nepal spent a total of Rs 6.67 billion on the purchase of aircraft through grants and soft loans.
Out of the total amount, Rs 2.943 billion was in the form of grants, while Rs 3.72 billion was in the form of annual 10.5% interest loans. However, despite spending such a significant amount, the new branded aircraft purchased had to be grounded within six years due to technical issues.
