|
|||
|
|
|||
|
RNAC |
Future Clouded By Politics After virtually destroying an efficient engineering, marketing and management system, the 'air mafia', backed by politicians, is set to demolish a cabin crew that has steered RNAC through turbulent political weather. By KESHAB POUDEL Good morning. Welcome aboard RA Flight Number 205 to New Delhi on this Boeing 757 aircraft. This is Captain Zhu (not real) speaking. We hope you will enjoy the flight, which will last under 90 minutes. Thank you. Until 1993, it was very unusual to hear a foreigner's voice from the cockpit of a Royal Nepal Airlines flight. RNAC's two B727 and two B757 used to fly to all destinations in Asia and Europe with its own engineers and crew. As soon as RNAC haphazardly sold its two Boeing 727s in 1993, it began to lease aircraft from foreign airlines. Since then, flying a foreign aircraft with a foreign crew has become a habit for Nepal's flag carrier. (See box) There is only one leased aircraft - South-West China Airlines B757 - in RA's fleet. If another B767-300ER is inducted from next month, as planned, voices of Nepalese crew members will become even rare.
With two of its own B757 aircraft operating in 13 destinations, along with the leased B757, each aircraft is flying an average of 300 hours a month. Sometimes that figure goes up to 350 hours. RNAC's comparative operation chart for 1997\1998, 1998\1999 1999\2000 show that the maximum flight hours of its aircraft was 1,021 in March\April. The lowest hours ranged from 786 to 861 in June-July. RNAC recently added two flights a week to Bangalore and one flight a week to Osaka. This means about 100 hours has been added to its schedule. The logical question that follows is: Does RNAC require another aircraft to fly those 100 hours? When the B767-300ER is inducted, RA aircraft may find themselves underutilised. According to a plan prepared by the airline management, the two RA aircraft are allocated 260 hours and 237 hours respectively in a month from 1 December to 24 March and 311 hours and 260 hours from March to November. The China South West aircraft will fly 294 hours and 300 hours whereas the B767 will fly 326 hours and 339 hours respectively in the two operation schedules. As RNAC requires a maximum of 1,100 hours to maintain its existing 13 routes, why does it need another aircraft? "We need new aircraft for the new Bangalore route and for additional flights to Osaka, Delhi and Mumbai," says RNAC Executive Director Hari Bhakta Shrestha, in an October 2, 2000 letter to the Ministry of Culture, Tourism and Civil Aviation. Hidden Agenda: With four aircraft in its fleet, some suspect the RNAC management may float the idea of selling its two B757s. The hurried plan to add the B767-300ER to the fleet, employees say, is part of a well-planned conspiracy to leave RNAC without its own jets.
The management vehemently rejects such suspicions as nonsense. Given the history of the corporation, however, nothing can be ruled out. A study of parliament's Public Accounts Sub-Committee on RNAC Management Efficiency in 1994 (popularly known as the Dhamija Report) pointed to how the board summarily sacked 137 senior employees. These employees did not have a blemished record. In fact, more than half were earlier honoured for their efficiency. But they were sacked without the knowledge of the personnel management department. Interestingly, the RNAC board of directors handed over the airline's sole European ticketing agency to Dinesh Dhamija and sold two B727 aircraft that were in working condition. Appearing before the sub-committee, then executive chairman Bhubaneswor Daibagya revealed that he got the list of employees from the ministry. This assertion showed that the RNAC board only executed decisions imposed from outside. Although the RNAC Act of 1962 describes the corporation as an autonomous and independent body, the government exercises control through the board members it appoints. With a weak institutional base and regular political interference, over the last decade, RNAC has turned from a self-sufficient organization into one wholly dependent on the government. The expansion of operations has been very sluggish in terms of number of aircraft. But the organization has produced a large pool of air crew, efficient aviation engineers, and marketing and management experts. The private airlines have been able to flourish on the infrastructure created by RNAC. According to a study, more than 99 percent of engineers, flight crew and marketing experts working in the private sector today are former RNAC employees. If politicians continue to play their dirty games in the corporation, Nepal's aviation sector may go into reverse gear within a few years. The country will have to hire engineers, crew and marketing experts from abroad. Unions Against Lauda Deal Normally, airline staff should be pleased by any addition to the fleet. However, RNAC's two unions and the Pilots' Association are adamantly opposed to what is going on. The three unions argue that the airline would collapse financially if the new plane is added. "We don't need a new plane at a time when the three existing ones are not being used optimally," says Captain S.R. Shrestha of RA's Pilot Association." RNAC will go bankrupt if we induct the new aircraft." The other two employee unions agree. "The agreement signed between the RA management and Lauda Air is illegal because there is no official stamp on the papers," says Shaligram Acharya, president of Royal Nepal Airlines Employees Association. The management advances its own set of arguments. "RNAC needs a new aircraft to fly in the new routes and to meet the demand during the Destination Air 2002," says Executive Director Shrestha in his letter to the ministry. The management argues that the addition of the aircraft will bring huge payoffs in enhanced credibility of the carrier. In a highly competitive market, no airline can survive without wide-body aircraft, it says. "Every government has had a common prescription for RNAC: injecting a lethal doze of medicines," says a pilot. "Since 1992, RNAC has spent US$ 99.4 million in leases," says N.B. Rai chairman of RNAC Employees Union. "RNAC will pay Rs.1.87 billion for leasing a new aircraft for 18 months." Even in such an adverse situation, RNAC has managed to survive. But this time the situation has reached such a point that RNAC may find it virtually impossible to sustain itself. "The management must cancel the deal to rescue the airline," says Rai. Air Mafia and Weak Institutions Even for Minister of Culture, Tourism and Civil Aviation Tarinidutta Chataut, recent developments are not surprising. He anticipated what was in store when he found himself surrounded by the 'air mafia' after his appointment in March. The mafia find fertile ground in a country with weak institutions and inexperienced leadership. Political leaders come to grips with this reality only after they are trapped by the mafia. Scandals are not new in RNAC. Even during the Panchayat days, when the second Boeing 727 was bought, reports of kickbacks circulated widely. Later when RNAC bought its two existing Boeing 757, similar reports did the rounds. Whenever RNAC wants to lease a new aircraft, the 'air mafia' immediately enters the fray. The management has not done a good job in trying to explain why it needs new aircraft. "All newspapers are advancing their own agendas. I see a reflection of the mafia in newspaper reports," Minister Chataut said recently, commenting on the lease controversy. (See Spotlight June 23, 2000) In the eight months since he was appointed, Chataut has made four unsuccessful bids to lease an aircraft. But he abandoned the effort after he saw the controversy it generated. Chataut - a Congress leader representing the far western region -has avoided several rounds of controversies with his timely intervention. But he seems to be trapped in a new controversy in the process of leasing a Boeing 767-300ER aircraft from Lauda Air. Executive Chairman Shrestha has made four attempts to lease an aircraft in his eight-month tenure. Tender Process There are reasons to suspect the motives of the RNAC board of directors. From issuing the tender to endorsing the lease agreement, the board has acted in utmost haste. The documents prepared to support the lease are often contradictory. Interestingly, all three tenders were submitted by ICTC - a Nepalese industrial group. The first three bid made in March were canceled when the board could not get satisfactory tenders. When RNAC published another tender on 2057\4\29, it received three tenders with ICTC as the sole agency. A board decision of October 2, 2000 revealed how ICTC offered the new aircraft proposal. The ICTC - the local agent of all three companies - informed the RNAC board that representatives of the three companies, including Sunrock, an Irish aircraft leasing company, Ansett Worldwide Service Australia, and Inland Investor put forth several criteria. "The ICTC's activities are legitimate and transparent. We don't believe in underhand dealings," says Ram Shrestha of the ICTC. "There are vested interests that are working against us." On September 20 and 21, ICTC apprised RNAC that Lauda Air was willing to lease its aircraft. According to RNAC's board of directors' decision of October 2, 2000: "After receiving the information, a team led by Executive Chairman Shrestha, member Tirtha Lal Shrestha, instructor pilot Binaya Kumar Shrestha, deputy director of the Aviation Department Udaya Krishna Shrestha and deputy director of the Engineering Department Rajendra Mohan Singh left for Vienna, capital of Austria. After discussions with the board of directors and the concerned government office on the physical, technical and aviation quality of the aircraft, an agreement was signed between the two parties on September 27, 2000. The board decision said the induction of the aircraft would increase passenger capacity and the profit margin according to a paper presented by legal adviser. On October 2, 2000 the RNAC board endorsed the agreement and agreed to send US$ 1,005,000 as bank guarantee and US$ 1,005,000 as advance payment to Lauda Air. The board also requested the Ministry of Culture, Tourism and Civil Aviation to make a recommendation for foreign currency to make the payment. Accordingly, Nepal Rastra Bank released the foreign currency. Arguments in Favour of the Plane Opposition to the Lauda Air lease is so strong. The deal now has to be cleared by the employee unions, the Public Accounts Committee and the Supreme Court. One argument the RNAC management is advancing now is that the airline will lose the security deposit of US$ 1.5 million (equivalent to Rs. 7.8 million) if the aircraft is not inducted in the fleet before December 1, 2000. According to the deal, the term of lease shall commence on December 1, 2000 and shall remain in force for 18 months. Clause 2 of Royal Nepal Airlines Act 1962 says RNAC is an inseparable and autonomous institution. According to Clause 4, the government can appoint seven members to the board of directors. Under Clause 7.1, the government can issue directives to the corporation keeping in view the national interest. It is the duty of the corporation to follow such directives. Clause 7.2 authorizes the board to act on behalf of the management. RNAC maintains that the decision to lease the aircraft is also based on a corporate vision on fleet policy that was formulated a year ago. As RNAC is struggling for its very survival, political parties and members of parliament are preoccupied with procedural matters of leasing. The report presented by RNAC to the ministry and the parliamentary committee has been haphazardly prepared and provides no technical and professional justification for the lease. Despite the RNAC board's insistence that there is nothing wrong in the deal, Public Accounts Committee has revealed many controversial points in the procedure of leasing the Lauda Air plane. The Supreme Court has issued a show-cause notice asking the concerned officials to explain why it should not issue a stay order. RNAC's Debacle RNAC's debacle began with the sale of its two B727s in 1993 when the voice of opposition was virtually non-existent. Besides weakening the organization financially, the sale of the aircraft destroyed RNAC's engineering department which was capable of major overhauling of Boeing 727s. RNAC lost millions of rupees in the Dhamija and Chase Air scandals and the lease of a Turkmenistan Air plane. "We will not allow those mistakes to be repeated," says Acharya, president of the RNAC Employees Association. Rai, the president of RNAC Employee Union, supports Acharya's view. "There is no financial and operational justification to prove that the new aircraft is required," says Rai. Pilots are equally unhappy over the decision. "It is not in the interest of RNAC and it will destroy the efficiency of the flight crew," says Captain S.R. Shrestha. Determined Management Despite the opposition, the aircraft seems set to join the RNAC fleet. It will be a miracle if the deal is canceled. Minister Chataut, who railed against the 'air mafia' eight months ago, is conspicuous by his silence now. "These elements have proved more powerful than the minister as they distribute a large amount of slush money to the all the parties in power," says an aviation expert. RNAC has to pay US$ 1.5 million a month just to fly 300 hours. If hidden costs are include, the corporation will pay more than US$ 2 million -- which is equivalent to buying a new aircraft. RNAC signed Aircraft WET (AMI) Lease Agreement with Lauda Air on September 27, 2000 to lease the aircraft. Under the agreement, RNAC will pay US$ 3,700 per hour for B767-ER under the AMI (Aircraft Maintenance and Insurance) Basis. The price includes US$ 350 in crew cost per hour. "Adding a new aircraft in the fleet is not a controversial decision if it is taken after a through study," said Bharat Bahadur Karki former executive chairman of RNAC. "The question now is where will they fly 300 hours?" asks Karki. What to Do? It is not important whether there were procedural lapses in aircraft leasing process. The important question is what benefits would a fourth aircraft will bring to improve the technical, crew and financial capabilities of RNAC. "If we lease a new aircraft, we will start flights to new destinations and bring more tourists to Nepal," says Shrestha. But others see a wider move to destroy RNAC at any cost. For a land-locked country like Nepal, air transport provides the lifeline at a time of national crisis. Policy makers and planners, by continuing to undermine RNAC, ignore this critical reality. The anti-Lauda move erupted so suddenly that it seems to have some backing of other vested interests, analysts say. "If the deal is canceled, the credibility of the country will be tarnished. No reputed airline or leasing company will ever come," says an expert in defence of the deal. "We don't need to introduce who these PAC members, lawyers and newspapers are. They oppose each and every move and tarnish the image of the country," says an analyst. Almost every lease purchase deal signed by RNAC has plunged into some kind of controversy or the other. In recent years, no executive chairman has completed his tenure without a major controversy. "To avert controversies, I tried to develop a procedure," says Karki. "But I was thrown out before completing my term," says Karki. In 1988-89, Nepal's biggest hydro power project could be completed only after RNAC carried diesel to the site. It was RNAC which covered the gap created by the recent nine-month suspension of Indian Airlines flights to Nepal. RNAC aircraft also help in the process of national integration because it injects a sense of national pride in remote areas shunned by other carriers. No one opposes expanding the national flag carrier. But expansion is meaningless without strengthening the internal organization, cabin crew, engineering department and, most importantly, without a clear marketing strategy. At a time when internal structures are weak, it would be very difficult to generate much-needed energy and spirit to operate the aircraft. PAC's Role The PAC has to go beyond procedural matters and ask the authorities to justify their intentions. The PAC can initiate a debate on the wider aviation sector without getting entangled in issues of procedure. It can discuss various aspects of fleet expansion and technical strategies. Such a debate should be conducted in an academic and professional manner, rising above the imperatives of politics. "Just cancelling the tender on the ground of procedural mistakes will not benefit the airline. It will only erode the image of the airline in the world," says an expert. "If RNAC has the appropriate marketing strategy, then the acquisition of wide-body aircraft would be a good decision. But I have not seen such a strategy," says Karki. Pleasing the Employees Hoping to boost the morale of its employees, the RNAC management working to give better facilities to crew members, technical staff and other workers. "This is not a question of granting better facilities and other benefits, but it is a question of the very survival of RNAC," says Captain Shrestha. In the Lauda Air deal, there is a provision to send two pilots as supernumerary crew. Many see this as an effort to please new pilots, whose actual duty during the 18-month lease period would be little more than to sit next to the passengers. "If the management is really sincere about using Nepalese pilots, why should they start the training before operations begin?" asks a senior pilot. Employing Nepalese pilot in leased aircraft, experts say, is not easy. The pilot requires a license from the country in which the aircraft is registered. To please junior pilots, the RNAC management has promoted many new recruits to fly the international sector. After the induction of the fourth aircraft, a Nepalese pilot will fly under 15 hours a month compared to the 50 to 60 hours a month now. Some 50 to 55 pilots licensed to fly 757s are waiting for their turn. If they do not get the opportunity to fly, their efficiency will decline. The more a pilot flies an aircraft, more efficient he or she becomes. If Nepalese pilots are made to fly for 18 months taking a back seat, their efficiency and international exposure will be ruined. The performance of Nepalese pilots on the international sector today is considered to be at par with world standards. The unfortunate situation today is that old and experienced pilots are retiring and newcomers do not have enough experience. Frequent Change in the Management In the last 10 years, RNAC has seen 13 executive chiefs. Instability in the management has damaged the total system. 1. Captain Bobby Shaha July 1, 1990 2. Sher Bahadur Pandey October 1, 1991 3. Bhubaneshwor Daibagya - February 1993 4. Pradip Pandey - November 1993 5. Kalyan Dev Bhattarai - February 1995 6. Udaya Gurung - December 1995 7. R.R. Shrestha - April 1, 1997 8. Madhav Sharma - January 1998 9. Bharat Bahadur Karki - June 1998 10. Honkong Rana - October 1998 11. B.K. Man Singh - January 1999 12. Bharat Bahadur Karki - June 1999 13. Hari Bhakta Shrestha - May 2000 Aircraft Leased 1. December 1993-1996 Airbus 310 US$ 3300 per flight hour 2. June-September 1996 B727 per-block hour US$ 2250 3. October-June, 1997 B727 US$ 2845 per flight hour 4. December 1997 B727 US$ 2024 per flight hour 5. June-October 1998 B737 6. October 1998 - B757 Turkmenistan 7. China South-West Airlines - January 2000 RNAC's Share Flight disruption of RNAC, which carries more than 25 percent of the annual tourist flow to the country, may have negative impact on the overall growth of tourists. According to the statistics of the Ministry of Culture, Tourism and Civil Aviation, in 1999, RNAC carried 123,458 out of a total 421,243 tourists arriving by air. This was 23.93 percent lower than that of 1998. In the same year, Indian Airlines increase its percent by 10.44 by carrying 133,840 passengers. The management believes that the induction of the new aircraft will increase the flow of tourists. "In fact, the prosperity of the travel trade also relies on the marketing abilities of RNAC," says Hari Bhakta Shrestha, executive chairman of RNAC. "Some forces are trying to sabotage us." Hotelier and others in the travel business see the expansion of the fleet as a positive move. "If RNAC operates to more destinations, we can expect more tourists," says Bhola Thapa, president of Nepal Association of Travel Agents. Solution: Some prescribe privatization as the best way to keep RNAC out of controversy. But others believe privatization will be just another debacle in a country like Nepal where the private sector is not very strong. The experience of the first three privatized industries have shown that the government should take great care before adopting this solution. Frequent political intervention a major cause of RNAC's decline. If ministers and bureaucrats allow the corporation to operate independently and professionally, many believe it will start showing benefits. In the short term, the government can hand over the management to renowned international airlines like it did in the early 1970s when Air France managed the carrier. "RNAC needs to be privatized but only before strengthening it economically and managerially," says Karki. As the nation itself is in the hands of an inexperienced political leadership with no political goal, it would be no surprise if RNAC went bankrupt soon. But there is still to start a professional debate on strengthening the airline. National Civil Aviation Policy National Civil Aviation Policy, 2050 (Amendment 2053) has the following to say about RNAC: In order for the Royal Nepal Airlines Corporation to move ahead with the pace of time in the international air service; and since it is observed that there is a need for increasing the number of standard and reliable aircraft of greater seat capacity, making its management more efficient and competent with the private sector airlines in the domestic sector, RNAC will be divided into international and domestic services. His Majesty's Government shall look for foreign airlines as joint-venture partner to invests in the Royal Nepal (international) Airlines. The airlines from the private sector currently in operation and private investors shall also be invited to make investment on a priority basis. His Majesty Government shall keep 51 percent of the shares of the RNAC (domestic) with the rest to be floated for private shareholders. In so distributing the shares, priority shall be accorded to the airline companies currently in operation. His Majesty's Government shall gradually reduce the portion of its share. |
Send your feedback to the
editor: spotligh@mos.com.np |
