The future of Nepal Airlines Corporation (NAC), Nepal’s national airline, looks bleak. Poor leadership and a lack of vision left the company in debt of over SR 40 billion. In the past five years alone, the NBOD has had five different executives at its helm and none of them has been able to do anything to reduce the massive debt the company incurs each year.
Things have gotten so bad that the money given to him to buy four planes by the Employee Provident Fund and the Citizen Investment Trust is likely to be wasted. Of all the aircraft the NAC has, it only uses six. The other six were immobilized at Tribhuvan International Airport (TIA) in Kathmandu. Although the company only operates six aircraft, it still employs nearly 2,000 staff, including people working on the ground at TIA.
Even though it has such a large number of employees, NAC has not been able to provide the service that other Nepalese airlines provide. Domestic travelers mainly use Buddha, Yeti, Shree, and Summit airlines while international travelers use Qatar, Turkish and Himalayan airlines for NAC. So should the NAC be phased out and privatized as it keeps making the same mistake over and over again?
Different management teams: different policies
One of the main reasons for the poor performance of the NAC is the constantly evolving leadership. In the past five years he has seen five CEOs. And, with each bringing new policies and altering decisions made previously, the company has not moved forward despite purchasing new planes.
The NAC in 2009, under the leadership of Sugat Ratna Kansakar, decided to purchase a narrow-body and a wide-body aircraft from Airbus. But, the decision was criticized even though the NAC had already sent an advance to Airbus. In 2011, the NAC, under the leadership of Madan Kharel, abandoned its idea of buying a narrow-body plane and buying two widebody jets. This trend of an MD revoking the decision taken by the previous MD continues to this day.
According to Achyut Pahadi, a former board member, a NAC Twin Otter aircraft has been grounded at TIA for more than a decade awaiting repairs. If the plane had been repaired at the time, it would have cost only $ 100,000. But, the indecision of different management teams has led it to gather dust at TIA rather than be repaired and operated or sold elsewhere.
“It’s going to take about $ 1 million now, I think. It has happened so many times, ”says Pahadi.
The decision to buy the widebody aircraft is one example. Various reports suggested that the CNA was not purchasing the widebody aircraft. But then MD Kansakar didn’t listen to anyone as he brought two jumbo jets to Nepal.
Things continued when Dim Prasad Paudel was the managing director of NAC when he decided to sell a few Chinese planes. This decision is again modified by the new president Ubaraj Adhikari, because the NAC wants to fly these planes again.
“We plan to use all the planes we have. But, I think it will take at least a year, ”says Adhikari, adding that the company obtains a budget of Rs 23 billion to revive.
This is not the first time that the CNA has asked the government for money. Paudel, had asked the government Rs 5 billion to repay the loans with interest. This money was not returned to him. He had also suggested that NAC transform into a state-owned company and move forward. But it didn’t go well with NAC staff who opposed the plan and staged a protest. What the new MD does will be interesting to see.
The scourge of political appointments
Political appointments are one of the main reasons the NBOD is in this state. With each change of government, the head of the NAC changed, which created more uncertainty. Paudel’s future at the CNA is uncertain after Prem Ale’s appointment as Minister of Tourism. Relatives of the Minister of Tourism believe that Paudel will be invited to resign when he has nearly four years left in his post. He has not yet resigned and has been invited to appear before the Minister of Tourism in the coming days.
What makes political appointments easier are vague laws. On September 17, 2018, the government of the day appointed Madan Kharel president of the NAC. He was appointed giving him the right to lead the management team of the company as executive chairman. This means that the existing MD Kansakar has lost his powers.
Even though Kansakar did not have much power, he refused to resign and continued to serve as managing director. It is only at the end of his term that he leaves office.
Section 5 of the Nepal Airlines Corporation Act states that the chairman will have the same powers as the general manager. When this happens, the MD’s role is almost useless. But, the law does not say that the person will have to resign or be fired. The person will be in the office and will have all the privileges even if he is not working.
There are still a few options
It is clear that political appointments are rife at the NBOD. But, while this is happening, there have been discussions about improving things. There are many reports that if it works the way it is, it will soon go bankrupt. Despite this, the government and society itself have shown no interest in making changes.
Over the past two decades, seven high-level committees have prepared reports on the ASB. Almost all of them came to a similar conclusion on how the CNA should be rebuilt.
On February 4, 2002, the committee headed by Damodar Prasad Gautam submitted a report to the Ministry of Tourism indicating that the NAC had a debt of 2.44 billion rupees. With the report, the NAC was looking for a long-term loan of Rs 1.5 billion.
Before giving him the loan, the government asked Gautam to prepare another report to make sure the company would make money. In response, Gautam, in his report, suggested that two different companies be registered – one for domestic flights and one for international flights – and move forward. The suggestion also talked about following the public-private partnership (PPP) model and giving shares to people interested in investing in the company.
To study its perspective, the government then formed a high-level committee in 2003 under the leadership of Shankar Sharma, a member of the National Planning Commission. The committee headed by Sharma submitted a report to the government, stating that the only way things could go forward was through privatization or disbandment.
Like Gautam, the committee headed by Sharma also talked about the formation of two public companies. If funds were not available in Nepal, the report spoke of giving 60 percent of the company’s ownership to an international airline.
In 2005, ICAO also submitted a report which also stated that the government should reform the NAC and privatize it. Following this report, the government set up a committee in 2006 headed by Kedar Lal Joshi. The report echoes the stations prepared by Gautam, Sharma and ICAO.
This problem came to the surface in 2010 when a deputy secretary in the tourism ministry, Murari Bahadur Karki, was asked to prepare another report. In his report, he suggested the same and prepared a modality for distributing company shares to staff and others. The report suggests that the government keep 49 percent and that the rest be turned over to the company and manage the airline. It was also planned that the government’s shares would be sold to NAC employees, tourism entrepreneurs and Nepalese citizens.
Even recent reports have called on the government to privatize the airline. A report prepared by former secretary Sushil Ghimire also suggested the same in 2019. In the report, the committee said the company established in 1958 was in need of an overhaul because the organizational structure at the present time does not ‘didn’t make sense. He said an overhaul was needed to make it sustainable these days.
Are things going to change?
The budget plan for the current year mentions restructuring the CNA to make it commercial and competitive. This included an open call for interested organizations to submit their proposal to become partners and lead the company into the future. But, this plan did not take shape due to protests from CNA employees. The government has not been proactive in moving this file forward since then.
“We need to keep the NAC autonomous,” said former tourism secretary and NAC board member Kedar Bahadur Adhikari. “The downfall of the business should be on the politician’s head. If they had left him alone, the airline would be booming. “
He says the NAC Act should remove the provision of having both a chairman and an MD because he thinks that creates a wedge. While he thinks the provision was put there with good intention, it slowly became a provision that benefited political appointments.
According to him, the only way for the CNA to improve is to remove this provision and make it autonomous. He says the company should operate with corporate law where shareholders start questioning those in power.
“Only then will everything go smoothly,” says Adhikari.
He also believes that top managers should work to achieve their goals. If they don’t, he thinks they should be fired.
“If a football coach loses five games in a row, he will be sacked. It should be the same for the MD of the NAC. If the person is not able to fulfill his duty, he must be shown the door. But before that, the person must have complete freedom to do what they need to do to achieve these goals, ”adds Adhikari.
He adds that the lower-level NAC workforce lacks proper management and training. To change things, you have to train them, but with that, the work environment must also change, says Adhikari.
“If the politicians stop demanding their share and leave the NAC alone, things will automatically change. All they need is proper training and leadership, ”he says.