NAC In Financial Turbulence

When Nepal Airlines Corporation (NAC) bought two wide-bodied aircraft to give its long disrupted long-haul services a boost, many had thought that the national flag carrier would soon be in its pink of financial health. The jubilation of NAC of adding two brand new aircraft has however turned out to be short-lived. After the purchasing the two new long-range aircraft the corporation has hit financial turbulence, experiencing depleting cash-flow that may well result in the national flag carrier defaulting on payment of its loans, interests and even salaries to its staff unless the government bails it out from the financial turmoil. NAC’s deteriorating financial health has been spelt out through a White Paper made public the other day. Through the White Paper, the NAC management has sought enough injection of capital to keep the national flag carrier afloat and to save it from the imminent bankruptcy because the long term debt of the corporation has now reached a whopping Rs.32.89 billion after the purchase of two new aircraft. The corporation has to pay Rs.1.14 billion as installment in every three months for the credit it has taken to buy the two new planes. But it has been facing a loss of Rs. 317.79 millions every month. The debt-equity ratio of NAC has gone up to 39.28. Currently, the total asset of the corporation is about Rs. 49 billion and its total liability is around Rs. 41.37 billion. Before the purchase of the new aircraft, the debt-equity ratio had stood at 14.40.

The rising amount of debt and crunch in liquidity, an immediate outcome purchasing as well as mishandling of the long-haul aircraft, have forced the national flag carrier to make a SOS call to the government for safe landing. The problem of cash-crunch is an outcome of the inefficient handling of the two aircraft which has remained grounded for a considerable time after their purchase. Currently, the NAC management is criticised for failing to operate the two long-haul airplanes to the destinations in Japan, South Korea and many European nations. Inefficiency in operating the aircraft has resulted in the huge losses to NAC. Now, it seems that the two aircraft were bought in haste, without giving proper attention on their effective operation to various destinations as well as on managing trained pilots to fly them. As these airplanes often remain grounded for long for various reasons, NAC’s losses due to their operating cost has skyrocketed compelling it to urge the government to inject enough cash flow to keep its fleet of 39 aircraft above the rough financial condition. Besides, the corporation has faced the charges of corruption taking place among its high officials. Some media reports suggest that the whopping amount of funds have been misappropriated while buying the same two aircraft which has now been giving a major headache to the corporation in maintaining its financial health.

If the government ponders over making any attempt to bail the national flag carrier out of the present dire situation, it would be prudent for the government to compel the NAC management to deploy quite efficiently the loss incurring two-wide body aircraft into long-haul destinations so that they make good returns to the beleaguered corporation. This is because, without effective and efficient operation of the two aircraft, the losses will keep on rising and if these planes are not utilised properly, they would turned out to be just white elephants. On the other hand, the government must also ensure that the corporation is free from corruption and abuses to bring it out of the present crisis. Only then can the national flag carrier fly high smoothly without hitting any financial snag.

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