NAC urged to keep ground handling service separateNepal Airlines Corporation (NAC) has been urged to separate its flight operations and ground handling services before taking on a foreign strategic management partner to be able to determine improvements after the move.
Nepal Airlines Corporation (NAC) has been urged to separate its flight operations and ground handling services before taking on a foreign strategic management partner to be able to determine improvements after the move.
A committee led by Tourism Joint Secretary Buddhi Sagar Lamichhane set up to recommend partnership modalities said that this was necessary to accurately gauge the national flag carrier’s performance after the entry of the foreign partner.
NAC’s ground handling service at Tribhuvan International Airport is a major moneymaker, generating more than Rs3 billion in revenues annually, which is nearly one-third of its total receipts.
This income has masked the losses during the past decades of mismanagement and political interference at the airline and kept it afloat.
“The ground handling service should be operated by NAC, but it should be managed separately,” said Pramod Nepal, under-secretary at the ministry and the member-secretary of the committee.
Likewise, the committee has recommended that NAC take on a reputed international carrier which is listed on a major stock exchange as a partner. With regard to revenue, the committee has suggested a net profit sharing modality.
“NAC will share the profits earned from flight operations,” said Nepal. “The revenues generated from its ground handling service will not be included.”
The partnership can be continued for a maximum period of 10 years, and the partner can be given charge of key areas like operations, management, engineering or technical and financial.
Receiving the committee’s report, the Tourism Ministry has asked it to prepare
request for proposal documents so that the process can be expedited.
NAC is set to induct two long-range Airbus A330 aircraft into its fleet after acquiring two Airbus A320s in 2015. Following the acquisition of the wide-body jets, NAC’s loan amount is expected to reach Rs40 billion.
NAC has long been facing criticism for its failure to assure quality and efficiency. The government’s budget statement for the current fiscal year has also envisaged getting a strategic partner for the national flag carrier to improve its overall performance and management.
The government has been considering privatizing NAC or bringing in a strategic partner for the last decade. In 2007, it initiated a plan to hand over NAC’s management to a foreign strategic partner so that it could reform and rescue the troubled carrier. However, the plan fell apart.
In 1970, the then Royal Nepal Airlines Corporation (RNAC) had invited experts from Air France under a programme to improve management, and they handled most of the managerial positions until 1973. In 1972, RNAC acquired its first jet, a Boeing 727, in cooperation with the French carrier.
The Finance Ministry has, on different occasions, informed the Tourism Ministry to get a strategic partner to improve the state-owned company’s overall system performance.