The health of Nepal Airlines Corporation (NAC), a 53-year-old government entity, started deteriorating about 25 years ago when its business growth ground to a halt. In the same period, the number of foreign airlines coming to Nepal has been increasing and their business flourishing. Presently, Nepal’s share in international air travel, according to Tribhuvan International Airport (TIA), is less than four percent.
The total business volume is estimated at around Rs 80 billion per annum. It’s a pity that the sole owner of NAC, the Government of Nepal, has been completely ignoring this business opportunity for the past 25 years while remaining focused on trivial issues, which should be the headache of mid-level managers of NAC.
It is unfortunate that the stagnant business growth of NAC over the last 25 years has been treated as a minor issue by the majority of policymakers and decision-makers in the government, with the apparent assumption that NAC is just one among 38 state enterprises. Common sense and universal business principle clearly indicate that the owner of NAC is making a grave mistake by ignoring the main issue of business expansion by shifting the focus to the less important management works.
The prerequisite for business expansion in airline industry is acquisition of aircraft, especially for operation in the lucrative international sector. Of course, being a public undertaking, domestic air service cannot be ignored. But volume-wise, total domestic air service business volume is less than 10 percent of the international volume. In this light, the obviously priority should be acquisition of a few more aircraft for international routes.
There are only two ways by which to acquire aircraft—either by leasing them or through their outright purchase. As the option of leasing seems to have been completely ruled out in Nepal, the only remaining option is acquisition by direct purchase.
The responsibility for the purchase of aircraft, each costing millions of dollars, rests with the domain of a particular airline company. It can never be left to the discretion of managers and other junior workers. Hence, the government is solely responsible for the serious judgment of error in not buying a single aircraft in the past 25 years. It is sad that policy-makers and decision-makers in the government are always trying to camouflage this lapse by diverting the focus to other trivial issues like questions over service quality, efficiency, irregularities, negligence and discipline, to name a few.
The ground reality is that these management and staff problems in NAC are almost identical to those hampering the progress of the other 37 government-run corporations, or any government office for that matter. So, it makes no sense to single out NAC and “penalize” the national flag-carrier by not expanding its business. Ironically, NAC has traditionally been one of a few government-run organizations which were not incurring losses.
Broadly, any business or industry can be categorized either as monopoly or market-oriented. Due to inherent nature of international air transport industry, every country enjoys certain exclusive rights, which indirectly helps them monopolize some air routes. This right, if exercised, could be of tremendous benefit to countries like Nepal. For instance, none of the 27 airlines flying into Nepal can operate direct long distance flights between Nepal and lucrative destinations like Europe, Japan, Australia and South Korea. They can operate only connecting flights whereas Nepal gets the sole privilege of operating direct international flights from the country. Any businessman will see the almost monopoly business as a big opportunity. But many in Nepal don’t even consider this option, which in turn has fueled the opposition to purchase of long-range wide-body aircraft.
Another excuse which often crops up during discussions on NAC is similar failures of a few airline companies in other parts of the world. But most of those airlines are really big entities. It will be unfair to compare a small company like NAC with giants in the field like Kingfisher, Japan Airlines, Air India and Malaysian Airlines. Much like the failure of some big shopping centers and departmental shops in Kathmandu does not imply that even small shops selling similar goods and materials will incur similar losses. Moreover, it has to be understood that in no trade or line of business can there be zero risk.
The national flag-carrier is the prestige of Nepal, a country with tremendous tourism potential. It must be saved at any cost. Thus the owner of NAC, the government of Nepal, must play a more proactive role in expanding the airliner’s business. The nearly 30 million Nepalis will surely have something to feel proud about when NAC aircraft will one day land in New York, Sydney, Frankfurt, Japan, South Korea and many more tourist-generating destinations of the world. I believe NAC has a robust business plan; now the onus is on the government to put it into practice.
The author is former Executive Chairman, Nepal Airlines Corporation
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