A New Government. New management. New Opportunities for Nepal Airliines?
With every change in government, often several times, during the tenure of a relatively longer lived government, any number of revival, rescue, and resurgence plans for the National Carrier have been put forward. Now, with a new government that could potentially complete its mandated five-year term; the first in generational memory, talk is rife about what direction any plan for Nepal's venerable and mismanaged National Carrier should take. In fact, the newly appointed Executive Chairman is on record saying he would work to make the carrier debt-free in three years. Whether this is a necessary or even desirable outcome is debatable, but for now it is the only plan on the table.
As with many Government of Nepal owned entities, the National Carrier is severely under capitalized, poorly managed with a disproportionate debt-equity ratio stemming from GON guaranteed debts and loud scandals, and the GON as owner has exercised little or zero oversight via Parliament which formed the entity by law in 1965 or 2019 BS.
Problems Galore
Aviation is a Capital intensive business and the Government of Nepal's investment of a tad over NPR 162 million looks less than meager against the stated ambition of owning and running a modern 'airline'. Mismanagement over the years now shows up as negative net worth of Shareholder's Equity of NPR 7.93 Billion led by sustained debts, guaranteed by the Government of Nepal, no less, and accumulated over half a century. By comparison, Buddha Air, a primarily domestic operator reported a positive Shareholder's Equity of over NPR 3.3 Billion led by sustained and continuous retained earnings in two and half decades. That Buddha Air is blessed with a stable, honest, and capable management, genuinely invested in the operation of the airline seem to be the differentiating factors.
The GON, instead of investing in the entity chose the easy way out and found the novel way of guaranteeing debts, whether to Barclays Bank to pay for two Boeing 757's in the mid and late eighties or to Employees Provident Fund and Citizen's Investment Trust in the mid two thousand tens and early two thousand twenties to pay for four Airbus aircraft. It added insult to injury when it decided to accept, in the mid two thousand tens, via China's EXIM Bank, an unrealistic loan from China, of Chinese made aircraft and then foisted the payment and operational responsibilities onto the national carrier. Instead of biting the bullet the GON has, historically, chosen to kick the can down the road.
Then, there are the scandals. Primary among them, the Dhamija affair of 1993 and the Chase Air affair of 1998. The first led to a financial hit of about USD 20 million (NPR 864 million to 982 million in 1993 rupees or NPR 7.1 Billion adjusted for 2026!) and the second to another hit of about USD 0.8 million (NPR 5.30 million in 1998 rupees or NPR 253 million adjusted for 2026!). The first incident severely impacted the then Royal Nepal Airlines' financial and growth plans and thereby its credibility and the second added a less than needed nail to the coffin. These two incidents have a large part to play in the Accumulated Losses of over NPR 17.5 billion carried on the carriers books today. The perpetrators are now footnotes in history. Yet, the mess persists.
The future is here
Prior government's timelines considered, the Balen Shah led RSP government moved with great speed and intent in sacking the previous management of Nepal Airlines and continues to move to make appointments to various positions even while occasionally the courts yank the legal chains. An Executive Chairman is in place and he needs to be given a clear mandate, which he must communicate down to the rank and file to implement.
The Government of Nepal must first decide, with clarity of thought, whether Nepal needs it own airline. A National Flag Carrier. One that the nation can be proud of. One where young boys and girls can dream of one day working. One which is capable of providing Strategic Airlift Capabilities in times of need (natural disaster, Geo-political fall outs, etc) If no, then the correct way to go would be to bring a bill to parliament and scrap the Royal Nepal Airlines Corporation Act of 2019 BS (1963) and let the chips fall where they may. Life will go on. If yes, then the corresponding decision must be accompanied by a clearly thought out vision and missions.
One such road on which the GON may embark with a 'yes' decision and any accompanying vision and missions is this.
The Government of Nepal sets up an investment company to which it transfers all of of its holdings in Nepal Airlines. This would require amending or scrapping the Royal Nepal Airlines Corporation Act 2019. That company would then undertake the necessary feasibility studies, market analyses, etc., take a call on what its holdings, as a percent of shares in the airline will be - for instance, Temasek Holdings (https://www.temasek.com.sg/en/index) owns 50% of Singapore Airlines - and then raise further capital from the market via IPO, FPOs, Employees, Institutional investors, Stakeholder, Creditors, Strategic partners as investors, etc. (while initially being underwritten by the GON for a fixed duration) to the tune where it is sufficiently capitalized to operate as a viable airline. Once the desired capitalization is achieved, the GON entity holding excess shares via the underwriting process can sell such shares in the secondary market. The role of the Holding Company would be only to act as investor and not manager, to seek a decent ROI for its owner and not to seek 'rent', to ensure that the company complies with the broad goals of supporting Nepal's transportation sector, and the vision and missions that the GON has mapped out for it.
One could argue, and not without possibility, that things could go horribly wrong. But then again a counter argument could be made about how much more wrong could things go than they have already gone?
Where do we go from here
The same model could then be employed to de-couple the Government of Nepal from 'managing' the various business entities in its portfolio. Banks, Energy, Infrastructure, everything. The GON would be an investor via the same holding company, which itself can, at some point, be publicly listed and traded and make further strategic investments in domestic industry, services and infrastructure. The Sovereign Wealth Fund, which was proposed by the present government in the recent Finance Act can manage the country's Foreign Exchange Holdings and invest in industry, services and infrastructure regionally and internationally.
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