NAC seeks concessional loan from int’l lenders

The Nepal Airlines Corporation (NAC) is making efforts to secure a ‘soft loan’ of around Rs 135 billion from an international agency to manage its internal debt and acquire new aircraft, but it was unsuccessful in obtaining the loan. Due to the high interest rates associated with internal loans, the corporation pursued a soft loan; however, foreign entities did not express interest.

NAC Spokesperson Ramesh Poudel informed that after the initial loan application was not received, the corporation made repeated requests to international financial institutions for an 18-million-dollar soft loan for financial management and aircraft acquisition. “Since we did not receive any responses to our loan application, we have resubmitted the proposals,” said Poudel.

With the NAC’s current loan interest rates exceeding 10 percent, the corporation sought subsidized loans with interest rates below 5 percent. The NAC is obligated to repay around Rs 50 billion in loans obtained from the Employees Provident Fund (EPF) and Citizen Investment Trust, primarily used for purchasing Airbus aircraft. The corporation aimed to utilize Rs 55 billion to settle Airbus-related debts, Rs 75 billion for new aircraft acquisition, and Rs 5 billion for a hangar.

The NAC’s strategy involved acquiring loans at favorable interest rates to manage debts and procure new aircraft. Poudel said, “We are seeking loans with favorable interest rates to facilitate internal management and new aircraft acquisition.”

The NAC plans to purchase three Airbus aircraft for international flights and expects domestic and foreign financial institutions to offer loans at subsidized interest rates. The corporation will provide physical assets, aircraft, projects, or other collateral as required by the lenders to secure the loan. Given its a government-owned corporation, the Nepal government will also provide backing. Currently, the NAC operates only four aircraft on international routes.

NAC officials opine that the pursuit of low-interest loans from foreign sources positively, as it is crucial for business expansion and acquiring new aircraft.

The NAC is considering the purchase of new aircraft with a concessional loan, which is expected to boost tourism promotion. However, the process of aircraft procurement in Nepal has consistently been mired in controversy.

It has been six months since the airlines began the process of acquiring three aircrafts for domestic operations, but the arrival of these aircraft has been delayed. On October 22, 2023, three companies responded to international tenders to supply three narrow-body aircraft: Hindustan Aeronautics Limited (India), de Havilland (Canada), and Aircraft Industries (Czech Republic). Although applications have been received, the NAC is yet to complete the evaluation process and make a selection.