28 June-4 July 2013 #662

Sliver lining in the Nepal sky

Nepal Airlines is finally breaking from its past with its Airbus order, but must reform management by the time the jets arrive in 2015
Hardik Gurung

IT’S A DEAL: After then Executive Chairman of Nepal Airlines, Sugat Ratna Kansakar (left) signed a deal at the Dubai Air Show in 2009, he was jailed for alleged irregularities. But a reduced version of the deal for two Airbus 320s like the one pictured here is going ahead.
At the Dubai Air Show in November 2009 then Executive Chairman of Nepal Airlines, Sugat Ratna Kansakar, signed a MoU with Airbus to purchase an A330-200 and an A320. This deal received a lot of international media attention and proved that the airline was finally breaking from its past.

After 25 years, Nepal’s national airline was finally buying new jets to service not just the tourism industry but also the three million or so Nepalis who work abroad. As per the agreement, the wide-body 330 and the narrow body 320 were to have been delivered in two years. But after the $750,000 advance was sent to Airbus, Kansakar was jailed for financial irregularities and not following procedures.

Last month, the deal was revived, but the order was changed to two A320s with the Employees’ Provident Fund chipping in $106 million for the purchase. If the original deal had gone through, Nepal Airlines would today already be ferrying Nepali workers back and forth from Malaysia and Qatar and ensuring that their hard-earned money stayed at home. The A320 would have revived Kathmandu’s short haul links to major Indian hubs.

Although the Boeing 737-800 would perhaps be a more suitable aircraft than the A320 and maintained fleet compatibility with NAC’s existing Boeings, management seems to have decided to ditch Boeing for Airbus. Now that the decision has been taken, the question will arise what to do with the superannuated 757s, it is not feasible for a small airline like NAC to keep two jet types in its stable.

And even though the wide-body order has been replaced with a narrow body, there is a sense of optimism about the growth of aviation and tourism in Nepal. Other countries with large migrant workforce and tourism potential like the Philippines and Sri Lanka have long-haul wide-body flights to diaspora markets. Nepal Airlines has guaranteed traffic from Kathmandu to many points in India, the Gulf, Southeast Asia, it must not stop at two narrow body planes.

NAC now has two years to upgrade its governance and modernise management. Political interference, corruption, politicised unions, employee favouritism, irregularities on aircraft leases have prevented the airline from realising its full potential. It has got so bad that the airline now makes most of its revenue not from flying, but from ground handling. Although fleet augmentation was necessary, it will not keep the airline afloat if management remains as it is.

When Royal Nepal Airlines Corporation acquired two 727s in the 1970s and added state-of-the-art 757-200s in 1985, it had a good reputation for service and reliability and had a virtual monopoly on international flights. The new A320s, however, will compete directly with international airlines with better service, young fleets, and international networks. NAC needs to reinvent, reposition, and perhaps even rebrand itself in the next two years.

The flag carrier is not only an airline company, it is also a symbol of Nepal’s national pride. Even though the existing 757s are old and the in-flight service poor, Nepalis have a sense of pride flying an airline that flies our flag. But let’s admit it, that pride has taken a dent lately.

With a reinvigorated management, visionary leadership, political stability, efficiency, discipline, and service quality, there is no reason it can’t fly high again. The success story of Ethiopian Airlines serves as an excellent example. With a fleet size of more than 80 planes, including the Boeing 787 Dreamliner, Ethiopian is the leading and fastest growing airline of Africa. Nepal’s aviation market is estimated to be worth more than $1.10 billion, this gives Nepal Airlines a huge opportunity as the sole flag carrier.

Hardik Gurung is a graduate student at University of Houston at Clear Lake in the United States.

Read also:

Keep the flag flying by Vijay Lama

Nepal by air

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