Nepal Airlines pleads for bailout as virus losses eat into cash reservesThe debt-ridden carrier has to fork out around Rs 1.13 billion in interest and instalment payments every quarter.
Debt-ridden Nepal Airlines is pleading with the Civil Aviation Ministry to help save it from going under amid Covid-19 losses.
The state-owned carrier has formally written to its line ministry asking for a complete waiver of interest on its loans for at least two instalment periods, that is six months.
"The Nepal Airlines board decided to seek a waiver of interest as we are in no position to generate any revenue currently," said Ganesh Bahadur Chand, acting managing director of the national flag carrier.
Interest and instalment payments amount to around Rs1.13 billion per trimester.
"Tourism Secretary Kedar Bahadur Adhikari has informed us that the interest waiver proposal has been sent to the finance minister," Chand told the Post.
Nepal Airlines currently has around Rs300 million in cash reserves which is enough to pay the staff salaries for at least three months, he said. "Revenue has not dried up entirely as we have been operating some charter flights," he said.
The carrier employs around 1,400 people. "In order to cut expenses, we have given unpaid leave to a number of highly paid pilots, those who earn more than Rs1 million monthly," said Chand.
Since the beginning of the autumn travel rush in October, full-fare passengers had been filling its flights which pulled the company back from the brink of bankruptcy. The autumn earnings allowed the teetering national flag carrier to repay creditors breathing down its neck.
It paid Rs572 million to the Citizens Investment Trust and Rs440 million to the Employees Provident Fund in January, after having missed three quarterly instalments.
In November 2018, Nepal Airlines had announced that it was running out of cash and close to bankruptcy, less than four months after making the largest jet purchase in the history of Nepali aviation in a bid to reclaim its long-lost glory with a determined fleet expansion plan.
During that time, its two A330 jets were in the air for less than seven hours daily, less than half the required flight time needed to generate a decent profit.
Subsequently, the cash-strapped corporation started defaulting on loans. It was the first time the airline had defaulted on a debt payment even though it has a long history of poor financial performance in the past several years.
The airline has been seeking a bailout fund of Rs20 billion from the Finance Ministry. Currently, the corporation’s loans from various institutions stand at Rs37 billion, and this translates into Rs3.66 billion in interest payments annually.
Aviation is one of the worst hit sectors.
According to an estimate by the International Air Transport Association, around Rs50 billion in revenue will be wiped out and 175,000 people rendered jobless in Nepal's aviation industry due to the Covid-19 outbreak.
The estimate is based on a scenario where severe restrictions on travel are lifted after three months.
Nepal is expected to see passenger demand fall by 39 percent year-on-year, translating into losses of 2.6 million passengers in both domestic and international sectors this year alone.
Last year, Nepal's international and domestic air passenger traffic crossed 7.32 million, with more than 20,000 travellers taking to the skies daily.
The International Air Transport Association is urging countries in Asia and the Pacific to take urgent action to provide financial support to their airline industry.