NAC making losses due to services to remote sectors

SANGAM PRASAIN
KATHMANDU, APR 27 -

Nepal Airlines Corporation (NAC) has been racking up losses of Rs 170 million annually from its domestic operation as it has been serving remote sectors at reduced airfares, said airline officials.

The national flag carrier said that the hefty losses were due to flying to remote sectors where operating costs are comparatively higher. A hike in the price of aviation fuel has added to its woes.

Although domestic air passenger movement grew 12.83 percent in 2010 compared to the previous year, NAC’s performance in the domestic sector has been weakening.

According to Tribhuvan International Airport (TIA), the number of passengers carried by NAC in 2010 dipped 11.84 percent to 47,081 from 53,406 in the previous year. In 2010, domestic airlines carried 1,554,701 travellers, or 176,833 more than in 2009.

A source said that internal management problems and customer dissatisfaction with NAC’s service were the major factors behind the carrier losing its image in the aviation market. However, NAC claimed that its losses were due to the low fare structure and increasing operating costs in the remote sectors. “Strikes and other forms of protests are launched if the government revises the airfare in the remote sectors,” said NAC spokesperson Om Gurung. “How can we make a profit by operating at cheap rates?”

NAC said that low seat occupancy was another reason for its losses. According to Gurung, airplanes operating in remote areas need to carry stock fuel that limits the number of passengers.

Moreover, passengers do not pay a fuel surcharge on NAC as on private airlines. “Private air operators do not fly to remote destinations where the operating cost is higher than the airfare,” said Binod Giri, chief of the safety department, Civil Aviation Authority of Nepal (CAAN).

Meanwhile, on the international front, NAC has not been able to expand its services for lack of aircraft. According to TIA, the carrier recorded a negative growth in passenger movement in 2010. It flew 232,577 passengers in 2010 compared to 237,751 in 2009, a drop of 2.17 percent.

With losses on both sectors, NAC is surviving on revenues from ground handling at TIA. NAC said that if it were to increase the airfare and expand its fleet, it could make profits. Currently, the carrier has three Twin Otters serving domestic destinations which are being used to the maximum on remote sectors.

Between 1972 and 1979, the Canadian International Development Agency donated seven Twin Otters to NAC. Among them, three are in operation, two are out of commission and two can be put back in service after maintenance, said an NAC official. “Within one month, the 9N-ABX Twin Otter aircraft will be back in the air,” said Achyut Pahadi, chief of the engineering department at NAC. It had been grounded for more than two years. Pahadi added that the fourth Twin Otter would be operated on the lucrative tourist sector of Lukla. Private airlines are making profits as they prefer to fly on tourist routes and shun remote destinations.