Aircrafts purchased from China in 2014 have now become a liability for Nepal due to poor performance and degraded functionality. Owing to this, Nepal Airlines is considering either leasing or selling its six grounded Beijing-made planes, news agency ANI cited a report by The HK Post.
The report suggests that the sale of these aircraft solely benefitted China as it has pushed Nepal into a vicious debt trap. Nepal had brought the China-made aircraft on hefty loans but it could not be utilised due to its heavy maintenance charge, thus pushing the country into a financial fix.
Nepal is trying to get rid of six Chinese aircraft, two Xian MA60S and four Harbin Y12S aircraft. Nepal Airlines had decided to stop flying them in July 2020, as they cost more to operate than the money they were earning.
According to the Nepal Airlines managing director Dim Prasad Poudel, a committee has been formed to determine the leasing rate, and they are scheduled to deliver a report within a week. After that, the report will be given to the board for approval. Prospective bidders (national and foreign) will offer their deals after the board approves them.
“Out of the two options recommended by the Finance Ministry—dry lease or outright sale—Nepal Airlines will try the first one. If there are no takers, we will go for sale. Both options seem difficult, but we don’t have an alternative,” Poudel added. It is pertinent to mention that “dry lease” means the owner will provide the bidding company only the aircraft, without the pilot or the crew, local newspaper The Kathmandu Post reported, citing Nepal Airlines officials.
The decision comes after Nepal Airlines reaffirmed its stance on Chinese-made planes, claiming that the planes have incurred significant losses since its purchase in 2014.
Nepal had acquired these flights from China in 2014. In July 2020, Nepal Airlines stopped operations of all of its Chinese aircraft including two Xian MA60s and four Harbin Y12s. The Nepali airlines said they couldn’t afford to fly the planes, so they were grounded.
The carrier has been straining to make payments on a loan since then, with an annual interest rate of 1.5 per cent, a service charge of 0.4 per cent, and administrative expenses of 0.4 per cent of the overall loan amount withheld by the Nepal Finance Ministry. The planes are owned by the Finance Ministry and operated by Nepal Airlines, which means the ministry charges the airline an annual interest rate of 8% on the disbursed loan.
A Nepal Airlines board member told HK Post that the Y12 aircraft has long been questioned for its functionality and performance, adding that the contract with China was the carrier’s “worst move.”
The arrangement was struck in 2012, and the planes were delivered to Nepal in 2014, 2017, and 2018, after which it received two presents (one MA60 and one Y12) two years later. Despite Nepal’s inability to carry out major maintenance work and a lack of competent workers and crew/engineers, the agreement was pushed through.
The warranty period of these aircraft expired this year and they are still grounded.
China sold these aircraft to Nepal nine years ago but did not assist Nepal in developing the necessary capacity to operate them. Nepal Airlines still lacks the trained crew/engineers and technical support needed to perform major maintenance on these planes. To ensure the proper operation of these planes, replacement parts and Life Limited Parts are required for at least three years, according to the report.
In November 2011, when the sale for the aircraft began, technical teams from both Bangladesh and Nepal had visited China to inspect the MA60s and Y12s. While Bangladesh had deemed the aircraft “not suitable”, Nepal went ahead and signed an agreement with the Aviation Industry Corporation of China (AVIC) to procure six aircraft. It appears Nepal was forced to acquire the aircraft, said the report.
Meanwhile, Nepal Airlines Corporation (NAC) has apparently been issued notice by AVIC to pay all debts incurred on the procurement of spare parts, training, technical assistance, and instrument purchase/installation before NAC ever considers re-operating these aircraft.
Like the China-made planes in Nepal, Pakistan’s poor quality Made In China missiles also ‘not working’
China is known for supplying sub-standard equipment that requires heavy maintenance charges. In July OpIndia reported how the low-quality Chinese-made Low-to-Medium Altitude Air Defence System (LOMADS) LY 80 missiles, which Pakistan inducted on March 12, reportedly did not function. Amusingly, Pakistan had deployed the LOMADS at nine locations in the country and the Chinese technician team had to be sent to each of these locations to fix the systems. Pakistan, desperate for the Air Defence System, has signed a contract with China for six more such systems.
