Nepal Airlines Corporation (NAC) have made a plea to the government to invest capital worth Rs. 20 Billion as equity investment in the state-owned enterprise in order to keep their increasing debt levels in control.
At present, NAC’s debt-to-equity ratio is around 76 percent. This figure is expected to reach over 90 percent after future transactions in the coming months. NAC has recently taken first installment loans worth Rs. 17 billion from the Employees Provident Fund (EPF) and Citizen Investment Trust (CIT) in order to fund the purchase of two wide-body aircraft. That figure is expected to double after the second installment is distributed.
Due to high debt to equity ratio NAC has not been able to obtain loans from other institutions to develop its infrastructures. Hence it is now relying on equity investment from the government in order improve the financial health of the national flag carrier.
“We are planning to purchase two more narrow-body aircraft to add more flights to the Gulf countries as a large number of migrant workers are employed in the Middle East,” said Sugat Ratna Kansakar, managing director of NAC. “NAC needs to expand its flight network and add more flights in the potential destinations, which will have a multiplier benefit in the country’s economy,” he added.
Kansakar also touched on the fact that the ministry needs to support the national flag carrier because the country would benefit tremendously due to the growth of the tourism sector as well as the expansion of national airlines network. “No country without a strong network of its national flag carrier has achieved high growth in tourism sector.” he added.
The Ministry of Culture, Tourism and Civil Aviation — parent ministry of NAC — has forwarded NAC’s proposal to the Ministry of Finance. However, according to authorities at the Finance Ministry, they are not convinced with NAC’s proposal.