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A contractual dispute over the overhaul of the engines of one of its two Boeing 757s led to the grounding of the aircraft for nearly a year. And when the second jet went for an overhaul, the airline had no international flights for two months earlier this year.
Capt Kul Limbu, managing director of the airline, also flies international routes whenever he can. He shakes his head when he remembers how bad 2007 was for the airline, but he sees clearer skies ahead and is planning for a birghter future.
I believe this airline has great potential, it can quite easily be turned profitable," Limbu told Nepali Times in an interview in the cockpit of one of the 757s before flying the aircraft to Hong Kong last week. "All it needs is a board that understands the airline business, a government that leaves us alone and a realistic strategy for the future."
Limbu's plan is, in the short term, to acquire a third 757 in the coming months to augment capacity and boost income. With both jets now operational, the airline is trying to improve reliability on the Dubai, Bangkok, Hong Kong and Kuala Lumpur sectors that were badly hit last year. It has also restarted its long-standing morning shuttle to Delhi.
With the third jet, Limbu hopes to restart the other routes that have been shelved, like Bombay, Bangalore, Singapore and Osaka. But for this, he needs the board and government to agree to his proposal to lease the new jet. Going by past experience, the decision will not be easy because rival political factions will try to prevent each other from benefiting from the deal.
"What NAC needs is a transparent bidding process and a quick decision," says an airline analyst. "For this, there must be a consensus on honesty at the political level."
Once the international destinations are sorted out, the airline would like to revamp its much-neglected domestic routes. For this, there is a plan to add two 50-seater turboprops for trunk routes and find replacements for its Twin Otters for remote STOL airfields.
"None of this would have been a problem if the politicians interfered less and let the managers do their job," says Captain Vijay Lama, who heads Nepal Airlines' domestic operations. He says political parties have used the airline like a recruitment centre, with some staff more loyal to their political masters than to the airline's welfare.
In the long term, Limbu has drawn up a strategy to upgrade capacity with two widebodies after 2010 to launch services to Japan, Korea and Europe. But before that, Limbu would like to push a public-private partnership to get a foreign big-name partner to manage the airline. The board has approved the proposal and forwarded it to the Ministry of Tourism, but it's stuck there because of the political uncertainty.
With the airline restarting its cancelled operations, there is a sense of optimism, but in the end the main question is, can the airline be saved from the politicians?
Vijay Lama concludes: "We have flown through a lot of bad weather, but we now see blue skies ahead."
"The priority is to add a third jet"
Captain Kul Bahadur Limbu became managing director of Nepal Airlines in January. Last week, Nepali Times caught up with him in the cockpit of a 757 before he flew it to Hong Kong as RA409.
Nepali Times: The reputation of Nepal Airlines seems to have nosedived in the last two years. 
Kul Limbu: Look, a state-owned airline can only be as efficient as the state that owns it. The instability of the past few years and the political interference was bound to have an impact on the airline. From four jets and seven Twin Otters in the early 1990s, we are now down to two jets and four Twin Otters.
I believe this airline has great potential, it can quite easily be turned profitable which in turn can subsidise non-profitable domestic sectors. All it needs is a board that understands the airline business, a government that leaves us alone and a realistic strategy about the future."
How do you propose to do that?
The first phase is consolidation to restore public confidence in the airline. But to be reliable we urgently need fleet augmentation. We have sent a proposal for the lease purchase by Spring 2009 of a third 757, so that there is crew and maintenance compatibility. Our projection is that we can pay for this machine within two years by concentrating on Nepali passengers going to south-east Asia, Japan and the Gulf. All we need is a green signal for the board and from the government.
For the moment, we need to concentrate on Nepali passengers, providing them reliable, quality service at competitive rates. Until there is political stability in this country, tourism is too fragile to rely on as the main revenue generator.
So what is holding things up?
There is a phobia from the past about scandals. Everyone suspects that everyone else is trying to cut a deal so nothing moves forward. The decision has to be made by people who understand that without the addition of a new aircraft, you may as well close this airline down.
How serious is the fuel price crisis?
The 757 was a plane way ahead of its time when we bought them in 1985. Luckily, in terms of seat-mile calculations it is still quite competitive with more modern planes. And since we are a small airline, we have an advantage because our fuel bill is not critical. We need a bare minimum of three jets to run this airline properly, if we have that and good load factors to regional hubs, we can turn this airline into a profit in no time.
But we need look ahead beyond the 757s, and for that we have a business plan to induct a fuel-efficient widebody by 2010, restart our Europe flights and add another widebody by 2011 for Japan operations. But all that in the future, we first need to get the third 757 and take this airline back to cruising altitude.
How about domestic routes?
The ideal situation would be profitable international routes to subsidise the loss-making public service flights to remote areas. We have managed to get four Twin Otters back in the air and have resumed regular flights.
This autumn we will begin five flights a week Kathmandu-Pokhara-Manang and then regularlise the Taplejung route to open up Kangchenjunga, and then Talcha for Rara. In the next five years we'll have to figure out what to do with the ageing Twin Otters, but we would need two 50-seaters like an ATR-42 or the Dash 8 series for domestic trunk routes quite quickly.
Flying seems to be a passion with you.
That's right. Ever since I watched DC-3s on food drop missions over my home village in Terathum, I was determined to be a pilot. I got a Canadian government scholarship in 1975 for Twin Otter training, upgraded to 757 co-pilot in 1993 and captain in 1999. Being the captain of an airline that you are also managing director of gives me a real sense of responsibility. But, you know, I prefer the flying part. Because at 35,000 ft it's just you and the plane, you leave all the lethargy and inefficiency back down on the ground.
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