Govt mulls strategic partner for NAC

KATHMANDU, APR 27 - The government has taken a fresh initiative to restructure ailing Nepal Airlines Corporation (NAC), with a plan to convert it into a public limited company or bring in a suitable foreign strategic partner.

For this, the national flag carrier is working on amending the NAC Act 1963 (2019) that will be government by the Company Act.

A restructuring proposal report prepared by a panel led by Ranjan Krishna Aryal, joint-secretary at the Tourism Ministry, has been tabled at the NAC board. “Discussions on the report have started at the NAC board as the ministry has asked suggestions on the panel’s report,” said Ram Hari Sharma, spokesperson for NAC.

The government entirely owns the national flag carrier.

According to an NAC board member, a committee will be formed to prepare a separate report based on the panel’s report and submit it to its line ministry with necessary recommendations. “It will take at least a month to prepare the report after the committee is formed,” the member said.

There are three options for NAC share divestment, according to the board member. The first option is a three-party divestment, which involves the government, a strategic partner and an initial public offering. The second is two-party share

divestment that involves the government and a strategic partner. And third one is an outright sale.

As per the report, NAC’s assets have been valued Rs 32 billion. This suggests a potential strategic partner will have to invest at least half of the amount. The valuation, which was Rs 16 billion earlier, was revised as NAC is purchasing eight aircraft by the next one and a half years.

The government has been considering privatising NAC or bringing in a strategic partner for the last decade. In 2007, the government had initiated a plan to hand over NAC’s management to a foreign strategic partner to reform and rescue the troubled

carrier. However, the plan fell apart.

NAC is currently in a pathetic condition with only a twin otter and two ageing Boeing 757s in its fleet. On international routes, NAC holds a meagre 6.80 percent market share. The national flag carrier flew 213,837 travellers in 2013, up 6.39 percent. It serves four international destinations.

NAC’s share in the domestic market stands at just 1.33 percent. It flew 20,591 passengers last year, down 44.15 percent year-on-year.