Nepal Airlines recommended selling Chinese planes for scrap

Nepal Airlines Corporation (NAC), trading as Nepal Airlines (RA, Kathmandu), is asking NPR 220 million Nepalese rupees (USD1.65 million) for five Chinese-made aircraft that have sat idle at Kathmandu’s Tribhuvan International Airport since mid- ​2020.

According to The Kathmandu Post, an independent appraiser, US-based Aviation Asset Management Inc., arrived at the scrap price after being commissioned to value the planes earlier this year. The recommendation to sell the two 56-passenger MA-60s and three Y12s for scrap follows several failed campaigns by the NAC to offload them.

The recommendation, which cost the state-owned NAC USD 20,000 to operate, has reportedly put the airline and the government in a quandary. The airline is keen to divest the aircraft but is hesitant to do so at such a low price as the Chinese government, via the EXIM Bank of China, provided a soft loan of NPR 3.72 billion ($27.9 million) (plus an NPR2 ). 0.94 billion (USD22.1 million) grant) to buy the planes.

The pair of MA-60s are 9N-AKQ (msn 1007) and 9N-AKR (msn 1008), while the three Y12s are 9N-AKS (msn 26), 9N-AKT (msn 27) and 9N-AKV (msn) 29). A fourth Y12, 9N-AKU (msn 28), was written off after a runway excursion at Nepalgunj Airport in March, just before the decision was made to ground the Chinese-made aircraft in July of that year.

Nepal’s Ministry of Finance took out the loan in November 2012. It came with a seven-year holiday on interest and principal payments. But the holiday is now over. In addition to installments on the principal, the ministry now pays interest of 1.5% pa of the outstanding amount plus an annual service and administration fee of 0.4% of the outstanding amount. In return, the ministry charges NAC interest at 1.75% of the outstanding amount. But neither the airline nor the ministry is believed to have made any interest or repayments on the principal and EXIM Bank has started compounding interest. In addition, NAC is raising parking fees at the airport.

The newspaper quotes a Nepal Airlines spokesperson as saying that the Aviation Asset Management report was sent to the ministry last month for approval. But in response to queries, the ministry says the NAC board must sign off on the report and send it to them for action. The ministry says that neither has happened. ch-aviation has contacted NAC and the Ministry of Finance for a comment.

ch-aviation has tracked the fate of these aircraft since their acquisition. After retiring them, NAC attempted to dispose of the aircraft at least three times, most recently in mid-2023. At the time, ch-aviation also reported pushback from the Chinese embassy in Kathmandu, which said selling the plane too cheaply would send the wrong message. Recently, before the Nepalese Prime Minister’s visit to China at the end of September, ch-aviation reported that he would ask the Chinese government to forgive the loan.

“There is no way to pay the loan,” a Nepali official said at the time. “We have seen that the debt can be forgiven because there is a (Nepalese) government led by the leader of the party that is close to China.” ch-aviation has contacted the Prime Minister’s Office for comment on the outcome of these negotiations.