Nepal Airlines has finally decided to lease out or sell its six Chinese-made aircraft, nearly a year after grounding them because they were more trouble than they were worth.

"Out of the two options recommended by the Finance Ministry—dry lease or outright sale—Nepal Airlines will try the first one," said Dim Prasad Poudel, managing director of Nepal Airlines.

“We have constituted a committee to determine the lease rate. The panel will submit a report within a week, and we will show it to the board for its go-ahead,” he told the Post.

After the board's approval, Nepal Airlines will invite offers from prospective national and international bidders to lease the Chinese planes, said Poudel. “If there are no takers, we will go for the second option—sale. Both options seem difficult, but we don’t have any alternative,” said Poudel.

According to Nepal Airlines officials, the planes will be given on dry lease, which means the owner will provide the aircraft only, without crew or ground staff.

Nepal Airlines has repeatedly said that the Chinese-made planes were causing heavy losses ever since they were acquired between 2014 and 2018, and that it wants to remove them to stop further losses.

The Finance Ministry is the owner of the planes and Nepal Airlines is the operator.

The ministry gave the green signal to Nepal Airlines last month to lease out or sell the planes.

In July last year, the board of directors of Nepal Airlines unanimously decided to stop flying the Chinese planes as they cost more money to operate than they brought in.

Five months after the decision, in December 2020, the national flag carrier had submitted four options to its line ministry—Civil Aviation Ministry—to get rid of the six inefficient Chinese aircraft in its fleet.

The first option was to ask the aircraft manufacturers to buy back the planes by evaluating their existing worthiness.

The second option presented by the flag carrier was to lease out the planes to interested Nepali operators on either a long-term or a short-term basis.

The third alternative was to auction off the planes through a global competitive bidding process.

The fourth option was to look for Chinese or international companies or banks interested in buying or leasing them.

As the planes have been grounded for a long time, Nepal Airlines officials said that they need to expedite the process to lease out or sell the planes because aircraft depreciate quickly if they are kept on the ground for a long period.

In November 2012, Nepal Airlines signed a commercial agreement with Aviation Industry Corporation of China (AVIC), a Chinese government undertaking, to procure six aircraft—two 56-seater MA60s and four 17-seater Y12es.

As part of the deal, China provided grant and concessional loan assistance worth 408 million Chinese yuan (Rs6.67 billion) to acquire and purchase the six aircraft.

Out of the total aid money, a grant worth 180 million yuan (Rs2.94 billion) went to pay for one 56-seater MA60 and one 17-seater Y12e aircraft; and a loan worth 228 million yuan (Rs3.72 billion) was used to purchase one MA60 and three Y12e aircraft.

The 17-seater Y12e is a twin-engine turboprop utility aircraft built by Harbin Aircraft Industry Group, previously Harbin Aircraft Manufacturing Corporation.

The 56-seater MA60 is a turboprop-powered airliner produced by China's Xi'an Aircraft Industrial Corporation. Both manufacturers are subsidiaries of AVIC.

In 2014, marking the beginning of what was supposed to be a new era for Nepal Airlines after acquiring the planes, it had even changed its classic red and blue stripes livery, opting for a more modern design.

But these planes never took to the air.

The delivery of the rest of the Chinese aircraft was stalled for years after issues appeared in the first batch of planes that arrived in 2014.

These issues included lack of pilots, lack of instructor pilots, lack of spare parts and lack of engineers trained to maintain them.

The second batch of MA60 and Y12e aircraft, as part of the six-aircraft deal between Nepal and China, arrived in January 2017.

The corporation received the final two Y12e aircraft in February 2018.