In a bid to alleviate financial burdens, Nepal Airlines Corporation, the national flag carrier, is auctioning five Chinese aircraft that have been grounded for three years. The aircraft, consisting of two MA-60 and three Y-12 E models, were originally intended for remote sectors but have remained unused since July 2020.
The national carrier has issued an auction notice, inviting interested companies and individuals to submit sealed tender documents for the auction sale of the two MA-60 and three Y-12 E aircraft. The bidding is conducted on an “As is Where is Basis,” emphasizing the current condition of the grounded planes.
Deadline Set for Sealed Bids by February 4, 2024
Prospective bidders must submit their sealed bids by February 4, 2024, signaling the urgency of the auction. The move comes as the parked aircraft accumulate rust and debts, adding to the financial challenges faced by Nepal Airlines.
Failed Ventures and Government Neglect Lead to Auction Decision
Despite attempts to hand over the aircraft to the government and unsuccessful rental endeavors, the national flag carrier has decided to sell the grounded planes. The decision stems from the realization that the operational costs exceeded the benefits, contributing to the financial strain on Nepal Airlines.
Chinese Loan Assistance and Unfulfilled Expectations
The aircraft were procured in 2012 through a commercial agreement with China’s Aviation Industry Corporation, supported by a grant and concessional loan assistance. However, the national carrier soon discovered that the planes required more operational funds than initially anticipated, leading to their cessation in July 2020.
Financial Strain Continues with Loan Repayments
While the planes remain unfit to fly, the Ministry of Finance has initiated loan repayments, covering annual interest, service charges, and management expenses. Despite being out of service, the national carrier faces the financial obligation to pay back the loans provided by China’s EXIM Bank.
Seven-Year Grace Period Ends, Accumulated Losses Surpass Rs 2 Billion
China had granted Nepal Airlines a seven-year grace period for loan payments, which concluded in 2021. The accumulated losses on the five Chinese planes have surpassed Rs 2 billion, with the first quarterly installment sent in September 2021. The national carrier now grapples with the financial aftermath of the grounded aircraft, including insurance premiums for the idle planes and their parts.
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