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Nepal Airlines has decided to sell five of its troublesome Chinese planes after no one came forward to lease them from the loss-making national carrier despite a deadline extension, according to a media report on Saturday.
While the Finance Ministry of Nepal is the owner of the Chinese planes, the state-owned Nepal Airlines is the operator.
Plagued by breakdowns and lack of pilots, the three 17-seater Y12e aircraft and two 56-seater MA60 aircraft have turned into “the most expensive white elephants in the carrier’s history” right after they arrived, officials were quoted as saying by the Kathmandu Post newspaper.
Nepal Airlines has been eager to get rid of the non-flying planes, but bureaucratic hassles forced it to hold on to them even as losses mounted. Officials doubt there will be anybody wanting to buy them too, the report said.
The five condemned planes are currently parked at the remote parking bay on the eastern side of Tribhuvan International Airport in Kathmandu. A sixth aircraft crashed in Nepalgunj and is unflyable, the report said.
The Y12e is a twin-engine turboprop utility aircraft built by Harbin Aircraft Industry Group, previously Harbin Aircraft Manufacturing Corporation.
On September 14, the national flag carrier put the Chinese planes up for lease. Prospective bidders were given an October 31 deadline. As there were no bids, the deadline was extended until November 16.
We didn’t get a single bid during the extended time either, said Archana Khadka, spokesperson for Nepal Airlines. Now the management has decided to sell them off. Khadka said that after Sunday’s general elections, they would issue a notice to appoint an international assessor to determine a fair market value of the planes.
It may take two to three weeks to appoint the assessor. Based on the assessor’s report, we will float a global tender to sell the planes, said Khadka, adding that it would take at least two months to complete the process.
Eight years after acquiring the Chinese planes that Nepal Airlines had hoped to fly on underserved mountain routes, the carrier has decided it doesn’t want the albatross around its neck anymore.
Except for operating services to a few airports in the Terai plains, these aircraft spent more time on the ground than in the air even in operating hours, and they were becoming a financial stress to the debt-ridden Nepal Airlines.
The Chinese planes have been grounded for more than two years.
Nepal Airlines said that they followed the Finance Ministry’s instructions to get rid of the Chinese planes.
In November 2012, Nepal Airlines signed a commercial agreement with the Aviation Industry Corporation of China (AVIC), a Chinese government undertaking, to procure six aircraft two MA60s and four Y12es.
As part of the deal, China provided grant and concessional loan assistance worth 408 million Chinese yuan (Rs 6.67 billion) to purchase the six aircraft.
Out of the total aid money, a grant worth 180 million yuan (Rs 2.94 billion) went to pay for one MA60 and one Y12e aircraft; and a loan worth 228 million yuan (Rs 3.72 billion) was used to purchase one MA60 and three Y12e aircraft.
The Nepal government has to pay annual interest at the rate of 1.5 per cent and a service charge and management expenses amounting to 0.4 per cent of the overall loan taken by the Ministry of Finance as per the agreement.
As the Finance Ministry has instructed us to lease out or sell the planes, it’s now irrelevant that two of the six planes were gifted by China, said Khadka.
Nepal received the first batch of planes in 2014. The delivery of the rest of the Chinese aircraft was stalled for years after issues appeared in the first batch.
The second batch of MA60 and Y12e aircraft arrived in January 2017 as part of the six-aircraft deal between Nepal and China.
The corporation received the final two Y12e aircraft in February 2018.
