Nepali Times
Economic Sense
Royal Nepal And Corruption


The national icon of corruption has never failed to grab headlines. Each new deal by the flag carrier is invariably followed by controversy and provides an excellent platform for political mud-slinging. In the absence of other ecoomic activities, RNAC is one of the few areas that the corrupt can make a killing. The corporation, with its Rs 6 billion expenditure, represents an outflow of about 1.6 percent of the national GDP, making it one of the largest disbursements. Politicians and others therefore love to dip their fingers into this honey pot. That is why it is also the best example of the business-politics-bureaucracy nexus-raking in millions at the cost of the nation.

It is almost a given that corruption cannot be rooted out from Royal Nepal Airlines. That is why some people argue that the corporation should be left alone and that one should look at the positive side of the aircraft deals. More aircraft, albeit with some money made on the side, will certainly contribute to the nation's tourism business. That is the kind of rationale behind advertisements in the print media (not this one) supporting the decision to lease the Lauda Air 767.

The airline is yet to explain why it did not approach Boeing or Airbus Industrie directly instead of using an agent out of Australia. The only answer can be that the kickbacks are now based on lease rentals which ensures a steady flow of cash rather than a one-time payment, and that is why the corporation never even thought of buying a new aircraft and stuck to leasing.

The issue is not about this one aircraft deal alone but with the way the corporation stands today. With accumulated losses more than double the capital invested, financial solvency is a mirage. Added to that are debts to be repaid and outstanding dues climb to infinity. The break-even level of operation is always above the capacity limit. This means that the airline has to carry more passengers than its planes can carry if it is to meet expenses and overheads. The corporation has always taken comfort from the fact that it is less bankrupt than Indian Airlines and has used the financial situation of the Indian company as its benchmark for operations.

A corporation led by political appointees and saddled with over 1800 disgruntled employees may find it difficult to get a management company that can work a turnaround. The question of handing over the airline on a management contract therefore does not arise at all. Even if the government tries to sell it off, it may not find takers for a near-insolvent company. For one, the real state of finances at the corporation is unknown since the last time its accounts were audited was five years ago. Even the prime real estate at New Road may not be able provide the attraction that many people believe it will. So the government actually has no option but to keep Royal Nepal Airlines flying somehow so that politicians can keep interfering and milking it for what it's worth. t

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(11 JAN 2013 - 17 JAN 2013)