NATIONAL8 (Spotlight Weekly]

‘RNAC Will Do Better If We Are Allowed To Work Independently’

—RAJESH RAJ DALI

When RAJESH RAJ DALI was appointed executive chairman of the Royal Nepal Airlines Corporation (RNAC) eight months ago, the organization was in total disarray following the Lauda Air controversy. The national flag carrier was on an erratic course well before Dali’s arrival. Financially, it was on the verge of bankruptcy. Dali, an aviation expert who was general manager of Tribhuvan International Airport, took some "unfortunate" but bold decision to rescue RNAC. After deciding to operate flights with the two aircraft it owns and pulling out from the European sector, RNAC is now gradually moving toward recovery. Dali spoke to KESHAB POUDEL at his office on various issues relating to RNAC and tourism promotion. Excerpts:

How do you evaluate the position of Royal Nepal Airlines Corporation after your decision to pull out of the European sector?

Until a few months back, we were very much dependent on leased aircraft. Now we are operating flights with the two Boeing aircraft we own. One of the aims of the management should be to maintain reliability and punctuality in the airline. I am now trying to maintain both. As our marketing and operation schedules are now based on two aircraft, we are in a position to manage flights properly. When we relied on short-term lease of aircraft, our schedule always failed to meet the target since we had to plan and market keeping in mind the lease.

As you say, RNAC’s financial position was very bad until a few months ago. What is the situation today?

Since we are operating our own aircraft, the financial position of the airline is on the way to improvement. We don't have economic liability and the aircraft can fly just by incurring operation costs. After pulling out of the European sector and some other routes, we have started a vigorous marketing strategy in order to save money. As the routes are fixed, there is a greater possibility to make profit. The indication of the first month was encouraging in terms of occupancy and income. Occupancy is about 80 percent. The scenario is changing in Hong Kong, Delhi and Bangkok. If we maintain the present rate, RNAC will be able to sustain itself.

What arrangements have you made after the cancellation of European flights?

After the cancellation of European flights, we have made all kinds of arrangements to shift passengers. We are now transferring our passengers to other airlines. RNAC can still issue tickets to Frankfurt and send the goods through other airlines. Of course, there is a need to develop a system for handling. We have increased the frequencies of the flights to New Delhi to pave the way for more foreigners to come to Nepal. We have 12 flights a week to New Delhi. We pick up passengers from New Delhi as a connecting flight. This is more reliable. Our two aircraft will sustain the route. To maintain our contact in the European route, we are exploring the possibilities of linking our schedule with other airlines. Even after the pullout from the European sector, there are many ways to bring in tourists. We can bring tourists from Europe by signing special agreements, code sharing and joining alliances with other airlines. We have passed a tumultuous phase and landed in a stable position.

After RNAC’s withdrawal from the European sector, what impact will Nepal tourism’s sector face?

There will be a very nominal impact on the tourism sector. We operated on the route with three and four aircraft and had trouble in sustaining them. I don't want to talk about the past, but we have learned many things. On the basis of frequency of flights, our two aircraft will bring virtually the same number of tourists. We had 28 flights when RNAC had three aircraft. That means we were in a position to carry 5,000-6,000 tourists. By operating two aircraft now, RNAC will still carry 6,000 tourists.

How do you see the passenger flow in RNAC?

In business, everything can be made by evaluating existing capacities. When RNAC had three aircraft, the coverage was less than 50 percent. Now it has increased by many folds. The average coverage is now above 80 percent. You cannot fetch more passengers just by operating more aircraft and flying to more destinations. It is very difficult to sustain an airline by operating two medium-hull aircraft in long routes. If we want to fly long haul, we should have wide-body aircraft. As RNAC is not in a position to buy such an aircraft on its own, we need support from the government. We will fly on the European route if government support us. I will like to remind you that the existing two Boeing 757 were brought with support from the government.

Why did you choose to pull out from the European sector?

As I have already told you, RNAC has lost millions of rupees in the European sector. If we evaluate the situation of the last year, Nepal has faced several problems and tourist arrivals were low. In such a situation, keeping additional aircraft does make economic sense. Airlines cannot continue operations by incurring loss. RNAC is now in a better financial position. As you know, carrier has a 43-year history and it can operate flights anywhere at short notice. But an airline cannot sustain when it loses money. If we purchase a new wide-body aircraft and make proper plan, we will resume flights. At a time of declining tourist arrivals and tough competition, a wise policy would be to wait and see. If the number of tourists goes up, we will operate more flights.

How do you justify your decision to pull out of the European sector?

Internationally, the airline business is very competitive. If we are unable to provide reliable and punctual service on competitive international routes, we will be replaced by other airlines. In the present scenario, we must be punctual and reliable.

What is your operational schedule now?

Earlier RNAC flied to 37 places within the country and 13 international destinations. Now we have reduced our international destinations to eight and are pulling out from some of domestic routes where private airlines have regular flights. We are currently operating on profitable routes. We will continue to monitor tourism flow. RNAC can expect a sound future even with its two Boeing aircraft. In the domestic sector, we want to fly to remote areas.

What are the major constraints you are facing?

RNAC needs effective operating tools, including rules, regulations and operating manual. These tools must be flexible. I am trying to bring changes in the tools by making them more flexible. RNAC has already proposed new by-law and amendments to financial rules and operating manual. The new tools will help to make RNAC more effective.

What role will the national flag carrier play to bring in more tourists?

The national flag carrier has to play a very important role in developing the tourism sector. Only a strong national flag carrier can sustain tourist inflow. No country can successfully harness tourism by depending on foreign airlines. When the flow of tourists declines, airlines will cut down their flights. That is why we need a strong national flag carrier. If the nation's civil aviation and national airlines are strong, then we can expect to bring in more tourists. If national flag carrier is weak, the tourism industry cannot survive. The national carrier always invests in exploring new routes. Others will fly on routes they find profitable. But RNAC cannot do this without government support.

How do your describe RNAC’s overall contributions?

RNAC has shown the way to other airline to fly in the European sector. After operating successfully for more than 14 years, RNAC explored the market for other airlines also. Now half a dozen foreign airlines are operating flights from Europe. It is on the investment of RNAC that other airlines are making profit. But the route is not profitable for us. At the wider national level, the airline business can not be judged on profit and loss alone. The country can profit even if the airline loses. Airlines need to invest to maximize profits.

You joined RNAC when it was on the verge of bankruptcy. How are you changing the situation?

When I joined RNAC, it was in turmoil internally and externally. There was almost a situation of shutting down. RNAC did not have money to pay salaries. I started my job with an aim to rescue the airline from bankruptcy. I tried my best to maintain cash flows and reduce costs. I also ordered a study to identify the loss-making sector. When I joined RNAC, there were four aircraft. Two aircraft were leased from foreign airlines. We were in no position to pay the operating costs, as the flow of passengers was very low. After analyzing the position, the question of whether RNAC needed aircraft arose. In a situation when the tourist flow was so low, only vigorous marketing could sustain such a fleet. At that time, the scenario was not good. After discussions with officials, I concluded that we were not in a position to keep the aircraft. RNAC cannot expand routes to support other airlines. When we have 800 seats available, there were fewer than 200 tourists. We can fly on such sectors, only if the government gives subsidies.

You are operating with two aircraft. If one has a technical problem, how do you hope to maintain your schedule?

Since we have only two aircraft, our service is more reliable. We have developed a flight schedule that can be met by our two aircraft. We have fixed targets. Even if there is a technical problem in one of our aircraft, we will make temporary arrangements. We have directives and procedures to hire aircraft in such a situation. The airlines industry is highly perishable business. The airlines need to spend a lot of money in marketing. You cannot judge performance within months, as you need to have patience to make profit. An airline that loses money in the first year may maximize benefits the following year. We need to develop our potentials in marketing and operations. Airlines business requires high investment.

There are many legal ambiguities and intervention from different organization. Are you in a position to take risks?

I proposed the new regulation to make the provisions clear. As long as the rule and regulations are ambiguous, no one will take risks. There should be clear rules and regulations that will allow the management to take decisions. In the airline business, we need to take quick decisions. If rules and regulation are not clear and there is frequent political and other intervention, it is impossible to operate the airline in profit. If we are allowed to work independently, RNAC will definitely do better.

Are you confident that RNAC will make profits?

If I continue to get support from RNAC's staff and the government, I am sure the airline will make profits. I have received the full cooperation of the RNAC staff. The trend of the last few days has been very encouraging. I think the airline will see a different economic situation soon. No one can guarantee that an airline will generate profit within a few months. Sometimes it takes a couple of years to make profit. At a time when there is intense competition, airlines have to carry passengers for low fares. We pulled out of the Singapore sector because the Bangkok-Singapore fare was very competitive. The fare of the two-hour flight is just US$40. How can we operate flights on such a route?