By Navin Singh Khadka

The presently tumbling international aviation business must have come as a relief for Royal Nepal Airlines Corporation’s mismanagers.

The sluggish global airlines industry, they may think, could justify the shambles RNAC today is in.

There is, for sure, no connection between the two, though. While the international aviation business dwindled after 9/11, the national airline had begun to see the "beginning of its end" long-long ago.

Echoing their political masters, office-bearers in the state-run airline term RNAC’s recently pulling out of the European route as a smart move. "If the decision was not taken, RNAC would be suffering from the same woes other international airlines are facing now," they claim jubilantly.

Reality, however, remains that RNAC had decided to pull out of the European sector even before the September 11 attacks in the USA.

And the decision last August came under compelling circumstances that the state-run airline neither had the cash nor adequate aircraft to maintain its operation in all the destinations it was flying to.

Unable to operate the two leased aircraft — a Boeing 767 of Lauda Air and a Boeing 757 of China Southwest Airlines — they had to be flown back even before their lease period expired.

Left behind is the ailing national flag carrier with only nine aircraft — two Boeing 757s and seven Twin Otters — in its fleet, half the size it was till 1987. "Those were the years that can be called RNAC’s golden age," says Narendra Bajracharya, President of Hotel Association Nepal (HAN).

Until mid-90’s, the airline accounted for over 40 percent of inbound tourists by air. Last year, the figure dipped to around 25 percent. Around 90 percent of the total inbound tourists reach Kathmandu using one or the other 15 international airlines operating to and from here.

Revealing the pathetic state of the national airline is its financial status: an overdraft of Rupees one billion while its total liabilities are Rupees 1.5 billion.

The national flag carrier plummeting to the nadir is not an overnight development, though. Not to talk about the small-scale irregularities in it, the corporation is perhaps one of the most infamous public enterprises rocked by series of scandals involving ruling politicians over the years.

Dhamija scam, Chase Air scandal, and the recent Lauda Air racket are solid proof of how politicians take the national flag carrier for a ride (See:BOX). And if these are not enough, take this biting reality: RNAC has not brought out its balance sheet for the last four years.

Now that the national airline has been "sucked" almost to death, "serious discussions" are afoot to secure its future. Besides holding in-door and public brainstorming meetings, the government earlier this month formed a high level committee to determine the national flag carrier’s future course.

"The committee is weighing all options and we will definitely submit our report by the deadline (January 31, this month)," said Nagendra Prasad Ghimire, Joint Secretary at the Ministry of Culture, Tourism and Civil Aviation, who is also in the high-level committee.

The discussion is a positive move toward privatization, says Douglas Clark, an Advisor to the Privatization Cell in the Finance Ministry. "But, all options have been kept open for discussion."

Another participant in the discussion, Joy Dewan, President of Nepal Association of Travel Agents (NATA), says one of the option has been merging RNAC with any established carrier. "While discussing RNAC’s present difficulties, the focus has been on the government’s interference in the corporation."

Going by the push and pull in the tourism industry, there clearly are two lobbies, one advocating the privatisation of the national flag carrier and the other stressing on the government ownership.

In a broad sense, it’s a tug of war between the government and the private sector. Evidently, those in the power would not like to lose the rein they are holding to make the national flag carrier trot their way.

Ponder over what Bal Bahadur K.C., Minister for Tourism and Civil Aviation, said recently at an interaction program: The country does need a national flag carrier and the government is there to support it. "If RNAC is criticised for its feeble state, how can the critics help to restructure it?"

If that is any indication, the government appears in no mood to privatise the airline but is preparing for its "restructuring" — as has been the lip service of the government since the restoration of democracy in 1990.

The private sector, on the other hand, has already begun to voice for the corporation’s privatization. "If we let RNAC go the way it is going now, its future is pretty uncertain," says Bajracharya whose recent research showed that the national flag carrier spends 4.6 million Rupees a year for parking its grounded Avros.

To prove their point home, the advocates of RNAC’s privatisation have with them an effective ammunition — the National Civil Aviation Policy 1994 that clearly states that the government would look for a foreign international airlines to jointly invest on the international sector of RNAC (See: Box).

Every government, observers say, that came to power since the policy-formulation, made the mockery of the document and continued to solely clutch the national flag carrier for their vested interests — aircraft leasing deal topping the list.

In the last 10 years, the feeble airline has spent on aircraft leasing well around above 70 million US Dollars — the amount the corporation could well use to buy a brand new Boeing 767.

Interestingly, all the aircraft-leasing deals over the years have taken place in the 11th hour when the national airline badly needed an aircraft to press in its international routes. It is this last hour business-doing modus operandi of almost all the governments that explains how tax-payer’s money was being siphoned out to ruling politician’s pockets. (See: Box)

While in the name of managing the national flag carrier, the national coffer’s money is being doled out, even the private sector has not been able to give a responsible guidance to steer RNAC’s course.

Here is how: When the corporation, amidst a storm of controversy in the country and the Parliament, leased in a Boeing 767 of Lauda Air in 2000, almost all the associations of tourism entrepreneurs unanimously welcomed the move. "We need to have such a wide-body aircraft to operate in European sector," they had said.

Interestingly, when the national airline last year terminated its operation to Europe, the same private sector was there applauding the corporation’s decision. As Birendra Bahadur Deuja, Acting Secretary at the MoCTCA, puts it, "The private sector has not been consistent in giving direction to RNAC."

The flop-show of handling RNAC by the public and private sector comes at a time when the global aviation business is on the wane. Air Traffic in America, world’s biggest aviation market, for instance, was down by about 25 percent during last October and November.

Following a combination of the recession and September 11 attacks, the number of Americans flying across the Atlantic is down by over 30 percent. America’s big airlines, such as American and United, are each bleeding cash at a rate of US Dollars 10 million to 15 million a day, reported The Economist magazine in its November 24 issue last year. "In the third quarter, they lost a combined US Dollars 2.6 billion even after receiving state aid worth over US Dollars two billion."

Same is the situation in Europe where traffic fell by over 10 percent in September and October, while flights from Europe to America and Asia fell by 35 percent and 17 percent respectively. After 9/11, two flag carriers in Europe — Swissair and Sabena — have collapsed and other big carriers such as British Airways and KLM are being driven into loss for 2001 and 2002, the same magazine reported.

Until the latest slump, international air travel had grown in the last 15 years except during the Gulf Year in 1991. Yet, revenues per seat have been falling because of greater competition with only a third of mainstream airlines in Europe, America and Asia earning enough to cover their cost of capital, which is eight percent on average, aviation experts say.

These prevailing avianomics, however, do not seem to affect RNAC — scanty, of course, it is in the world aviation business — as it is getting bogged down into the quagmire of inefficiency, irregularity and corruption each passing day.

Will the government-formed high level committee be able to rescue the national flag carrier or will it too fizzle out like one of those committees RNAC has had for umpteen times to decide its fate over the years? Just wait and watch.

Scandalous Flights

1. Dhamija Scam: The first widely-reported scam that rocked the national flag carrier in 1995 revealed how the now ruling Nepali Congress President Girija Prasad Koirala, then Prime Minister, had allegedly misused his office to appoint Dinesh Dhamija, on the basis of nepotism, RNAC’s General Sales Agent in Europe.

When the present main opposition CPN (UML) then came to power and "unilaterally" revoked the agreement with Dhamija, the Europe-based agent who had registered his company with the capital of Pound One, moved court and finally walked away with millions of dollars in an off-the-court settlement with the national airline.

Press had then reported that Koirala had exerted pressure to make the agreement — between RNAC and Dhamija — unreasonably favourable to the Europe-based agent, at the cost of the national airline.

2. Chase Air Scandal: Under political pressure, RNAC in 1998 was made to pay an advance money to lease in an aircraft that the national flag carrier was never delivered.

The then coalition government-partner CPN (ML)-appointed RNAC Executive Chairman Hongkong Rana paid 800,000 US Dollars to a little known Chase Air to lease in a Boeing 757 from the American Company. While the money reached Chase Air’s account in the US, the agreed aircraft never touched the runway of the Tribhuvan International Airport.

Later, it was found that Chase Air was a US Dollar one registered fraud company that possessed no aircraft at all.

3. Lauda Air Racket: This was recorded as Girija Prasad Koirala’s second RNAC-related "watergate scandal" that dogged him until he stepped down from premiership last year.

The racket caused big hue and cry in the national political spectrum and the Parliament as the then Koirala Government, on the basis of personal negotiation, leased in a Boeing 767 from Austria-based Lauda Air defying the Commission for Investigation of Abuse of Authority’s (CIAA) instruction to lease aircraft only through global bidding.

Koirala’s government pressurised Nepal Rastra Bank to release one million US Dollars as advance payment to Lauda Air even as the Central Bank had pointed out that this Austrian airline company had not sent its counter bank guarantee to RNAC.

Instead, the corporation, besides the advance money, sent its bank guarantee of one million US Dollars to Lauda Air triggering suspicions. In the wake of the racket, the then Civil Aviation Minister Tarini Datta Chataut resigned. After its investigation, CIAA implicated him and nine RNAC officials including the then chairman of the corporation in the scandal.

Koirala was handed out a stern warning while the then RNAC Chairman Hari Bhakta Shrestha and other officials were sent behind the bars. The implicated ones, though they are out of custody for now, will have to face court trials.