Nepal Airlines Corporation, the national flag carrier, is all set to resume flights to Bangalore and Mumbai, India, from September 1, after a gap of almost a decade. This has become possible after NAC bought two Airbus A320 aircraft. NAC has set a target to gradually increase the number of destinations and is working on a plan to further add two wide-body — Airbus A330 — aircraft within 18 months to be competitive in the market. Ramesh Shrestha of The Himalayan Times spoke to Sugat Ratna Kansakar, Managing Director of NAC, on issues of fleet increment, service to new destinations, Chinese aircraft and hiring of a management consultant, among others.

Where has the preparation to resume services to Indian destinations — Bangalore and Mumbai — at a competitive price reached?

There is no doubt that NAC had served well in these destinations during its heydays. India and China are the big markets as we all know in terms of population and we should tap tourists from these countries to boost tourism here. Mumbai and Bangalore are the locations where the number of middle-class families is increasing and they can afford to come to Kathmandu for vacation. Next, we are planning to fly to Kolkata. We will have an introductory airfare scheme for a period of one month. We will make sure that the airfare is not costlier than that offered by other Indian airlines. As we have four aircraft now, reliability will improve. There has been improvement in punctuality based on the experience in flying the Kathmandu-New Delhi sector in the last two months. Preparation is also underway to fly to Guangzhou of China and to Dubai.

There is no doubt that NAC has to offer quality service at a cheaper price to be competitive. However, will it not affect in paying back the loan that NAC took for the procurement of the two Airbus A320 aircraft?

We have a clear business plan for loan repayment and it will be cleared within the given timeframe. It is a business and we are doing promotional campaigns. This cannot be considered a loss making move and is rather an investment in a way. What is more important is that there is no alternative other than moving forward in a competitive market and help boost tourism. In any country you will see that the national carrier is the backbone for tourism. And, this is exactly why in many countries of the world, the government assists the national carriers. For example, Air India had received $7 billion from the government to make sure that the airline did not collapse in 2012.

NAC has resource crunch and is already in debt. In such a situation, what is your plan to increase the number of aircraft?

To exist in the market we need to improve service, increase the number of aircraft and invest more. If we do not expand our services then it will hurt the tourism sector. For the survival of the tourism sector and its exponential growth, Nepal Airlines must thrive. We have a plan to buy two A330 aircraft within 18 months and two more A320 aircraft in the next phase. As part of the preparation, 12 different divisions of NAC are set to start their departmental works within one to two weeks to determine their line of actions to bring two A330 aircraft. In the initial phase, the two wide-body aircraft will replace the two existing Boeing 757 as these aircraft are consuming too much fuel and the maintenance cost is also increasing. Even the operation cost has been increasing.

What is the estimated resource required for the two A330 aircraft and how will NAC manage it?

We are requesting the government to finance the procurement of two wide-body A330 aircraft. It can either be through a grant or a loan. Each year, the government has failed to meet the target to utilise capital expenditure. In such a situation, it can provide Rs 25 billion for two wide-body aircraft from that unused resource at a cheaper interest rate of seven or eight per cent. Currently, we are paying 12 per cent interest to Employees Provident Fund. If the government refuses to give a loan, we will also have to look for other alternatives to find a financier from the international market which will have a higher interest rate and include foreign exchange risk. For NAC to thrive, at least one aircraft must be added to its fleet every year and we also need to

expand destinations accordingly. One of the obvious reason to buy A330 aircraft is that it can fly directly from Kathmandu to London and that is one of our prime objectives which will facilitate not only tourism arrival but also Nepalis staying in countries like the UK, USA and Canada. Similarly, it has become necessary to increase service and intervene in airfare. Kathmandu is one of the most expensive air destinations in the world. This clearly means we will have to come up with reasonable price to force other airlines to slash their pricing and attract tourists. As we are a state enterprise, we do not need to make a huge profit but provide cheaper services.

Will it be possible for NAC to operate service to European destinations as there is European Union (EU) ban on Nepal-based carriers?

The EU blacklisting problem is expected to be solved within the next one year or one-and-a-half years. There are seven factors related to NAC which we have to improve and we will be doing it within the next few months. There are other issues related to the Civil Aviation Authority of Nepal and the private sector airlines. It is said that there is also a possibility to remove only NAC from the EU blacklisting. So there is a ray of hope to get approval to fly to EU destinations.

If Nepal continues to face EU restriction, will it not be difficult for NAC’s two wide-body aircraft to sustain by flying to limited destinations?

As I already mentioned, first it will replace the Boeings and we will gradually increase flights to other destinations. We are not going to fly directly to EU destinations from the very next day we buy the wide-body aircraft. We can expand service to China, South Korea and Japan. We have air service agreements with 36 countries but are flying to only seven nations. Some South Korean nationals have already been asking us to link Korea with Nepal through NAC flights. Last month, I met two visitors from Korea and they were asking us to start service as there is a problem in existing services like long transit hours in Hong Kong, Bangkok or Kuala Lumpur and expensive airfare. Japan is also a big market. When we used to operate flights to Osaka, the annual tourist arrival had reached 55,000 per annum. Now, It has come down to 30,000. If we have direct flights to Japan the number of tourists visiting Nepal will increase. No matter where a tourist comes from — Japan, Korea, USA or Canada — the main constraint is the expensive airfare. A lot of tourists first calculate on how much they need to spend on the airfare to come to Nepal.

It looks as if NAC is focusing only on international air service and there is no new plan for domestic service?

Compared to international service, it is true that we have less focus on the domestic sector. This is because the money is in international service. It will boost tourism sector by bringing in more tourists. Moreover, there are lot of private sector companies providing service in the domestic sector and they are doing good, I guess. But, the private sector has not operated flights in sectors that have a low market or are loss making. Focusing on such sectors, we do have a plan to operate services by cross subsidising what we earn from international service as part of our corporate social responsibility or national development.

What has happened to the plan to operate Chinese planes and increase domestic service?

The decision reached to bring the Chinese aircraft and operate them has faced problems because of technical difficulties related with the planes.

We are discussing with the Chinese companies regarding the issues and they have promised to revisit all technical issues and the result of the revisit is expected to come before September 15. We may then have to sit with government officials and Chinese representatives to reach a final decision on the Chinese aircraft. Chinese parties have said that they will look for possibilities to make available insurance coverage at a cheaper rate and cut the price of spare parts. As per the decision, we are yet to bring one MA60 and three Y12e aircraft.

Finally, what is happening with the plan to hire management consultants to reform NAC?

We have a plan to hire four or five experts under the management consultancy plan for a period of two years. They will help us make NAC more dynamic, modernise the organisation with a computerised set up, and help control spare parts inventory and tariff, among others. It will be more like taking assistance from world renowned experts having experience on working in the airline field for 20-25 years as we lack such expertise for improving management and modernising the organisation. That’s why we are issuing a tender to find the best experts at the lowest possible price. The Ministry of Finance has agreed to bear the cost of consultancy charge.