Nepal Airlines Contemplates Scrap Sale for Unused Chinese Aircraft Amid Loan Woes

Nepal Airlines Corporation (NAC), operating as Nepal Airlines, faces a challenging decision as it considers selling five Chinese-manufactured aircraft for scrap, following a recommendation from independent assessor Aviation Asset Management Inc. The aircraft, consisting of two MA-60s and three Y12s, have remained unused at Kathmandu’s Tribhuvan International Airport since mid-2020.

The assessed scrap value of NPR220 million Nepalese rupees (USD1.65 million) has raised concerns for NAC, which is reluctant to dispose of the planes at such a low price. The Chinese government, through the EXIM Bank of China, provided a substantial soft loan of NPR3.72 billion (USD27.9 million), along with a grant of NPR2.94 billion (USD22.1 million) for the aircraft’s purchase.

The recommendation comes after unsuccessful attempts by NAC to offload the aircraft through various campaigns. The situation poses a dilemma for the airline and the government, considering the significant financial support from China for the aircraft acquisition.

The Aviation Asset Management report, commissioned at a cost of USD20,000, has added complexity to the decision-making process. Nepal Airlines is keen to dispose of the grounded aircraft but faces challenges in reconciling the recommended scrap value with the substantial Chinese loan that funded the purchase.

The loan, initiated in November 2012, included a seven-year holiday on interest and principal repayments. With the holiday period concluded, the Ministry of Finance is now responsible for interest payments and principal repayments. However, neither the airline nor the ministry has made any payments, leading to compounded interest and additional financial burdens.

The NAC board needs to sign off on the Aviation Asset Management report before it can be actioned by the Ministry of Finance. As discussions unfold, the airline grapples with accumulating parking fees at the airport and seeks a resolution to the challenges surrounding the unused Chinese aircraft.

Stay tuned for updates on the evolving situation as Nepal Airlines navigates the complexities of its financial obligations and explores options for the grounded fleet.