NAC to buy at least one aircraft yearly, says Kansakar
Nepal Airlines Corporation (NAC)is now aggressively engaged in purchasing wide-body Airbus aircraft. The NAC will be purchasing new aircraftannually from now onwardso as to rectify its past weaknesses when a shortage of planes not only shrank its global market but also dented its image. NAC’s managing director Sugat Ratna Kansakar is now pushing ambitious plans to revamp the flagging company with new Airbuses and a new market strategy. Laxman Kafle of The Rising Nepal talked to Kansakara bout the progress being made in aircraft procurement and his other plans. Excerpts:
Where has the process to purchase two wide-body aircraft reached?
The process to buy two wide-body Airbus A330-200 aircraft from an American supplier company, ARR Corp, is moving smoothly. We just sent about Rs. 8 billion to the company as the first installment. We have reached a loan agreement of Rs. 12 billion each with the Employees Provident Fund (EPF) and Citizen Investment Trust (CIT) to purchase them. Both state-owned institutions are providing the loans at 9 per cent interest rate with the government acting as guarantee. Out of the total loans, we received Rs. 4 billion each from the EPF and CIT. Now, there is no doubt about procuring the new aircraft because we have already dispatched the first installment. Earlier, the NAC had sent Rs. 100 million to AAR Corp as lock-up money. We are fully confident of buying them within the scheduled delivery dates - first plane in May and the second one in July 2018.The cost of both the two wide-body Airbuses is Rs. 24 billion.
This is the first time NAC is purchasing the wide-body aircraft. How do you feel as the NAC chief?
Definitely, we feel proud of the present progress in the purchase of the wide-body Airbus for the first time in the 59-year-long history of NAC under its own ownership. In the past, it had operated wide-body aircrafton lease. The NAC had not added a single aircraft in the last one-and-a-half-decades.
As the NAC chief and responsibility given to meby the government, I have to purchase the aircraft and extend its services to many more destinations. The NAC is an institution meant to provide air service, but it does not have sufficient airplanes. In such a situation, how can the NAC provide services to the customers? The government has boosted our willpower to buy wide-body aircraft. This is very positive. In think, the government now understands the importance of the national flag carrier for the overall development of the tourism sector.
Why did the NAC fail to purchase new aircraft for solong?
It is sad that the Corporation did not purchase aircraft for a long time despite the growth of air transport worldwide. The onus lies on the MD and those in higher positions to purchase the aircraft. Politicians and the bureaucrats are equally responsible for buying new aircraft from their respective sides, but they also miserably failed. Around 20 years ago, Nepal Airlines’services were considered the best in South Asia. But now you knowwhere it is.
You have said that operating the aircraft is more challenging than buying them. What is your plan to operate the planes successfully?
Definitely, it is more challenging to operate the planes successfully. Now we are making plans to operate them in a way that will uplift the institutional status of the NAC. We are working out to recruit pilots and engineers to extend our destinations. We will start online booking of tickets from the first week of July. Likewise, managerial reforms are on the cards. As a commercial institution, we have to enhance the productive capacity and managerial efficiency. After procuring the new aircraft, the NAC seeks to operate flights on some existing destinations and to South Korea, Saudi Arabia, Japan and a few cities of China. We are in talks with Japan to secure landing permission there. Our vision is to purchase two airlines every year, if possible. If not, at least one plane annually.
How do you assess the services of NAC at present? With the addition of new planes, can the NAC make a big leap in its business and market expansion?
At present, the NAC is providing services to eight international destinations -- Hong Kong, Bangkok, Kuala Lumpur, Delhi, Mumbai, Bangalore, Doha and Dubai. After purchasing two more aircraft, the NAC will have five aircraftin its international fleet. The NAC covers only 10 per cent market of Nepal's international air services, and the rest by 26 international airlines. Tribhuvan International Airport sees business worth more than Rs. 100 billion, and the NAC occupies a paltry 8-10 per cent (Rs.8/10 billion) in its global aviation market.
We have two Boeing aircraft, but only one is in operation and another has been put on auction. Nobody participated in the bidding process despite extension of the auction deadline. As per the NAC regulations, we will look for interested parties to sell it through negotiations. Likewise, we called a tender for an Airbus for a period of two months to substitute the Boeing which needs to be sent outside for maintenance in mid-July, which will take almost 45 days.
Two companies have responded to the tender notice for the wet lease of an Airbus aircraft. We are mulling to lease an aircraft of Bhutan Air for two months from the point of cost. A temporary replacement is needed, so the schedules of flights will not be affected.
Definitely, we hope that our market will increase up to 17 per cent from the existing 10 per cent after the addition of new aircraft. The NAC will gradually expand its destinations and regain its previous stature.Now, we have ambitious plans to expand the market. We have to instill faith in the people that NAC can operate the wide-body Airbus smoothly.
If NAC gets the new planes, will it be able to compete with the private airlines?
Why not? We are still competing with the 26 private airlines despite the very few number of aircraft. The private airlines have more airlines than us. So the new planes will help in strengthening our competitiveness in the days to come. The occupancy on NAC's international flights is higher than that of other international airlines.
Having said this, the people often complain of frequent cancellation of NAC flights and its poor management. How long will this persist?
Air transport services are technical and a very sensitive area.We have to operate flights carefully. The flight cancellation problem will remain until the NAC has sufficient planes. If we have sufficient planes, we can immediately use another plane if one plane hits a snag. To ensure safety, captainsare not allowed to fly planes until the engineers give them the formal nod. They must ensure that the planes are sound technically. It is not wise to compare NAC with those airlines that possess around 100 airlines.
Could you highlight how the Chinese aircraft were bought?
The NAC has received four Chinese aircraft out of the six agreed upon. We have obtained two 56-seater MA60 and two16-seaterY12e. As per an agreement signed between the NAC and AVIC International Holding in December 2012, China was to provide two aircraft in grant while arranging soft loans to purchase four aircraft. We will purchase the remaining two aircraft (Y12e) soon after appointing and training the pilots.
The European Commission (EC) has put a ban on Nepali airlines from flying into the airspaceof the European Union since 2013. What internal progress has been there to remove Nepal from the black list?
The Civil Aviation Authority of Nepal (CAAN) is working actively to improve the safety standards as per the International Civil Aviation Organisation (ICAO) to remove the ban at the earliest possible. The European Commission (EC) has banned all Nepal-based airlines from flying into the European Union, terming them “unsafe”. The ICAO team is coming to Nepal in July to review the ban. We expect the ban to be removed from 2018. Out of atotal of 200 countries, seven countries, including Nepal have been blacklisted by the EC.
How has the ban affected Nepal's airlines services in the EU nations and overall tourism development of Nepal?
Definitely, this has sent a negative message to the international community about Nepal’s aviation services. It has directly hit aviation and overall tourism development of the nation. This has impelled the foreigners to hold negative perception about Nepal’s airlines. We have been shock shelled by the ban as Nepal’s air transport is good.
Would you like to add anything?
NAC and the tourism sector have a close relation. Tourism cannot flourish without strengthening the capacity of the national flag carrier. So, further support and investment by the government are a must to boost the national carrier. At present, we need planes and also capital. I just sent a letter to the Ministry of Tourism Culture and Civil Aviation to increase the equity to Rs. 20 billion from the existing Rs. 350 million. The NAC will be financially strong if the government increased the capital as per our proposal.