Nepal's national flag carrier, the Nepal Airlines Corporation (NAC) has started the process of selling off five Chinese aircraft grounded at the country's airport for three years.
Three 17-seater Y12e and two 56-seater MA60 aircraft that were imported in the hope of serving remote and underserved areas have been rusting away in the parking lot of Tribhuwan International Airport. Another vehicle that crashed in Nepalgunj was found to be unflyable.
In order to sell off the aircraft, the national flag carrier has called for bids for the valuation of the aircraft. "The price of these aircraft will be decided after a complete valuation. After this, the process of selling these aircraft will be started by inviting a global tender. We initially planned to rent it out. Since no one showed interest, we have decided to sell these grounded aircraft," a NAC spokesperson Archana Khadka told ANI.
The aircraft have been grounded since July 30, 2020. Earlier in November, the NAC had signed a commercial agreement with the Aviation Industry Corporation of China (AVIC), a Chinese Government undertaking to procure the aircrafts.
China at the time had provided the grant and concessional loan assistance of 408 million Chinese Yuan, equivalent to NRs. 6.67 Billion.
Out of the total aid money, a grant worth 180 million yuan (NRs2.94 billion) went to pay for one MA60 and one Y12e aircraft. The other aircraft were bought for 228 million yuan (NRs3.72 billion) with a soft loan provided by China's EXIM Bank.
Soon after their arrival, the NAC board then realized that the aircraft need more cost to operate than to purchase and bring it to Nepal. In July 2020, the NAC board decided to stop the operation of aircrafts, and since has been kept in the Tribhuwan International Airport.Before deciding to put the aircrafts up for sale, the NAC also handed the aircrafts to the government which was ignored. Later, the national flag carrier also attempted to rent it, however, it failed as well.
Though the planes are out of service due to high-cost operationalization and unfit to fly, the Ministry of Finance has started paying back the interest on the loans for the planes.
Annual interest of 1.5 per cent and service charge and management expenses of 0.4 per cent of the overall loan amount needs to be paid. Two installments have already been paid which include the interest on the loans that were provided by EXIM Bank.
As per the November 2012 agreement, China had given a seven-year grace period under which Nepal Airlines would not have to pay interest and installment payments. The payback period of the loan is 20 years or by March 21, 2034. The planes have completed the seven-year grace period privilege.
The first quarterly installment of 10.9 million yuan (NRs205.67 million) was sent in September 2021 while the second installment was sent in March. The accumulated losses on the five Chinese planes have already crossed NRs2 billion.
Before the planes were grounded, the total accumulated losses of these planes were NRs1.9 billion, nearly half of the cost of the planes.