Govt plans to bring in strategic financial partner for NAC

Kathmandu, June 27

The government is preparing to rope in a strategic financial partner for Nepal Airlines Corporation (NAC) — the national flag carrier.

In a bid to restructure the financially ailing NAC, the Ministry of Culture, Tourism and Civil Aviation (MoCTCA) has recently sought suggestions from the Ministry of Finance (MoF) to bring in strategic financial partner for Nepal Airlines similar to a strategic management partner, which is on the cards.

If MoF gives a nod to the said proposal, MoCTCA will start the process of hiring financial strategic partner for NAC, informed Suresh Acharya, acting secretary at MoCTCA.

“As the financial performance of NAC has been unsatisfactory since many years, the enterprise needs a financial strategic partner that will inject equity investment as well as strategically improve NAC’s financial status,” said Acharya.

Stating that NAC requires huge capital and investment due to its nature compared to other government enterprises, Acharya opined that bringing in equity investor will increase NAC’s capital and help it become financially viable.

NAC’s paid-up capital stands at only Rs 160 million at present.

Due to lack of adequate aircraft and strong financial mechanism, NAC is lagging behind in terms of revenue generation since many years.

Though NAC was able to book Rs 43.3 million profit in 2016-17 fiscal year, the enterprise’s cumulative loss until the period was Rs 1.82 billion.

“Besides injecting certain per cent equity investment in Nepal Airlines, the financial strategic partner will identify financial leakages at NAC and restructure the entire commercial aspect of the national flag carrier to make it economically strong,” added Acharya.

In the context of central bank allowing banks and financial institutions (BFIs) to borrow funds from foreign BFIs, Acharya said that bringing in equity investment in Nepal Airlines is justifiable.

Meanwhile, the government has not been able to hire strategic management partner for NAC though it was planned since 2013. In January, MoF had sent back the proposal of MoCTCA to hire German-based Lufthansa Consulting Group as strategic management partner for NAC asking MoCTCA to complete hiring process complying with existing laws.

Since then, the issue has not been discussed in MoCTCA.

Earlier, the government had repeatedly drawn criticism for attempting to award the contract to Lufthansa. NAC had sought closed request for proposals (RfPs) from airlines of only five countries (United States, the United Kingdom, France, Germany and Australia) for strategic management partnership in NAC, raising eyebrows as to why the RfPs were not more encompassing.