National 4 (Spotlight Weekly)

“Third Aircraft Is Essential For The Survival Of RNAC”

— Mohan Prasad Khanal

MOHAN PRASAD KHANAL, managing director of Royal Nepal Airlines Corporation (RNAC), has long experience in working in the airlines. In his four-decade long career at the RNAC, where he started his job from the post of traffic trainee, Khanal, has seen many ups and downs. At his last leg of career, Khanal wants to see the airlines flourishing again. He said his only wish is to add another aircraft and turn RNAC into a reliable international airlines. After his appointment as a managing director, Khanal has been constantly making efforts to build the RNAC as a strong and reliable airlines. Khanal spoke to KESHAB POUDEL and SANJAYA DHAKAL at his office. Excerpts:

What lessons the RNAC management has learnt from recent incidents when two of your aircrafts were grounded?

It is a very rare incident to ground two aircrafts disrupting all the flight schedules. This was unprecedented. Despite taking all kinds of precaution, such incidents can happen. The incident proved our arguments that we cannot increase the RNAC’s reliability with such a small fleet. I have been saying for long that the RNAC requires third aircraft. Third aircraft is essential for the survival of RNAC.

What are you doing to advocate the need for the third aircraft then?

We have two options to bring the aircraft. The first way is to bring through the lease and other through lease-purchase. In lease agreement, the airlines cannot bring an aircraft on the long-term basis. When the RNAC brings the airline on short-term lease, it always lands into controversy. Therefore, it will be better for the RNAC to buy aircraft on the basis of lease purchase. We are also considering to bring an aircraft on lease purchase basis like in the past. Management has proposed to bring another Boeing 757 aircraft and the board has already accepted our proposal. A committee has been formed by the board, which is now studying the way to bring an aircraft in a transparent manner as well as to study the issue of finance. If things go smoothly, the third aircraft will be included in our fleet within four to five months.

Have you suffered any major financial loss by the interruption of your flights for a couple of days?

The financial loss, though significant, is nothing compared to the loss of credibility and reliability and image. We used to lose money even when flights were disrupted due to bad weather. Airlines have to bear such cost. I am very much concerned about the credibility. I am worried that the RNAC has hurt its goodwill. We might have lost some amount of money in transferring and rescheduling the passengers. We estimate that the airlines had lost about Rs.1 million per day.

Some newspapers blamed the incapability of the RNAC for the grounding of the two aircrafts. How do you look at it?

One cannot blame the technical capability. Since the RNAC does not have full technical capability to handle Boeing 757, we have maintenance contract with Royal Brunei. Since no airlines can fly its aircraft without being air worthy, the RNAC follows the process of air worthiness strictly. The pilots cannot fly aircraft without confirming that the aircraft is safe. No one needs to doubt our safety measures. We cannot compromise with safety measure. We always place highest priority on safety matter. So far as improving our capability is concerned, it is true that we have not developed our own capability to totally handle the aircraft in the last 15 years. In case of Boeing 727, the RNAC’s technical staffs had fully built their capability within few years.

You have long experiences in working in the marketing. Don’t you think that the policy makers should have done something to prevent such incident?

So far as purchasing the aircraft is concerned, the RNAC’s financial position was not sound. We were in confusion for long. When the government declined to stand guarantee despite our calls we could not purchase an aircraft earlier. But now, I am confident that the RNAC can buy aircraft on its own and we don’t need any guarantee from the government. If we are allowed to work independently and receive support in amending certain laws and regulations, the RNAC can handle other matters professionally.

When you were appointed as the managing director seven months ago the airline was close to bankruptcy, how do you look at its present financial situation?

The financial situation has improved a lot in the seven months. Although the financial situation was on the process of recovery even before my appointment, the situation, I can say, has improved further. Two years ago, the RNAC had a deficit of about Rs.2.58 billion and now the deficit has been reduced to Rs.1.10 billion. Because of recent incidents, the deficit might increase by Rs.10-20 million. In the airline business, deficits of Rs.10-20 million is nothing new. If the airline operates as it is doing now, we will be in surplus position within a year paying all our remaining debts.

How much tourists does the RNAC cater?

Despite reduction of our destinations to 10 places, we still have major share. When we had four aircrafts a decade ago, we used to fly to 13 destinations including Europe. Although our share has reduced, the RNAC has received award for earning highest amount of foreign currency this year as well. I guess we have around 30 percent of market share.

The government had proposed to turn the RNAC into a private company. What is happening to that proposal?

In its budget announcement, the government had proposed to divide the RNAC into two companies – domestic and international and to privatize it. Since we are the government owned corporation, it is our duty to follow the government’s decision. We don’t want to make any dispute on that. I have suggested another way through my own experience of working in the RNAC and having witnessed the privatization of other government and public sector utilities. Unlike the privatization of other public sector, the RNAC should be made a joint venture company. We have already suggested the government to make move for joint venture. The joint venture has three advantages. First it will bring the financial equity. Second, by joining with big international airlines, we can increase our capability and thirdly, we can take advantage of their vast marketing network. Keeping these three objectives in mind, we should go for joint venture. If we go for joint venture, the airlines will dramatically transform into a major airlines in two to three years.

Do you see any possibility coming of a major international airline to joint venture with the RNAC?

No major airlines will automatically come to invest seeing our image but we have to take the initiative. As you know the present image of the RNAC is not good. We have already started the reevaluation of our assets. After completion of our asset evaluation, the investor can gauge the overall situation. I am confident that we can convince some major airlines. Since the RNAC has about 45 years of history, a strong pool of manpower, the major investors do not have to worry. Of course, our image has been damaged in the last couple of years. In the international market, our image is still satisfactory. I agree that our reliability is poor. But, once we have third aircraft, our reliability will improve.

There are so many domestic companies trying to start international airlines. Being an experienced person, how plausible do you think such ambitions are?

It is very, very difficult to operate the international flights by private sector. To operate international flights, you require huge investment. This is one of the biggest capital intensive industries. If you want to buy one brand new Boeing 757 aircraft, the cost of such aircraft is about US$ 90 million and it is equivalent to Rs.7 billion. The amount is not a joke. Even if you buy a second hand, it costs US$ 30 to 35 million. Even if the aircraft is bought on lease, the airline has to pay at least US$ 200,000-270,000 per month. It is just a rental charge. You need to spend 35 to 40 percent of your total costs in fuel alone. This is enormous task. It is very difficult to run a successful international airlines.

How do you see the situation now in the RNAC?

There are many problems within the RNAC. From the mentality of employees to backlog of previous money and working system, rules and regulations, there is a need to bring change. If the RNAC wants to be a friendly airlines for 21st century, it must have mentality and working environment to fulfill it. We don’t have such environment inside the RNAC or outside at present.

What is the situation of domestic sector right now?

There is certain improvement in domestic sector. We have now seven twin-otter aircraft while Avro is grounded. There was just two twin-otter aircraft a year ago and most of the aircraft were grounded because of lack of maintenance. After initiating maintenance, we have now four twin-otters flying in the service. But I am not satisfied with the present situation. I am trying to bring the fifth twin-otter in operation. Thanks to the support from my colleagues, we are bringing the fifth twin-otter soon. After completion of leasing a big aircraft, I will concentrate my effort in domestic sector. We are considering selling off the remaining two twin-otter aircraft.

Do you have made any other achievements?

Other achievement is that we have collected Rs.38 million from the government. It was due with the government for the last two decades. The cabinet has already decided to pay our due.

Since Nepal is a landlocked country, Nepalese exporters say that they cannot deliver goods on the date demanded by the importers. Don’t you think the national flag carrier can do something to increase the capability of cargo to other countries?

Following the withdrawal of our flights to Europe, our cargo capacity has declined but other international airlines have come in to fill the void. Since the RNAC does not have big capacity, we could not carry enough cargo. We used to carry 4 to 5 tons of cargo. Since many airlines are coming to Nepal, the situation has become better. Despite our withdrawal from European routes, other airlines have increased their capacity. This is a positive side for the tourism development in Nepal.