Lufthansa team briefs ministers on NAC overhaul plan
KATHMANDU, APR 18
The Germany-based Lufthansa Consulting and German Aviation Capital on Friday made their detailed presentations at the Finance Ministry to provide consultancy and management services to improve the performance of Nepal Airlines Corporation (NAC) and enhance its operational efficiency.
Both the companies, subsidiaries of the Lufthansa Group, were invited by the government in response to their proposals to turn around the national flag carrier.
Government officials said that a five-member team from the companies made a “convincing” presentation before Finance Minister Ram Sharan Mahat, Tourism Minister Deepak Chandra Amatya and secretaries from the ministries.
The officials added that further discussions on their proposals would be held between the Finance and Tourism ministries and the NAC. “Particularly, the modality to be adopted to induct them at the NAC would be discussed,” said an official at the Finance Ministry. “As the government should abide by the prevailing laws and regulations while inducing any foreign firm at a public enterprise, the ministries will hold discussion whether it is possible to endorse the plan directly by the Cabinet or the Public Procurement Act (PPA) should be amended,” said the official.
As per the PPA, firms or strategic partners should be inducted at a public enterprise through a competitive bidding process.
Lufthansa Consulting is an international aviation consultant for airlines and is an independent subsidiary of the Lufthansa Group. Similarly, German Aviation Capital is an aircraft leasing company based in Frankfurt. The two companies had submitted their proposals to the Prime Minister’s Office last month. The national flag carrier has also kept an option open for their proposal stating that it was a positive offer.
The corporation has received two separate proposals from the German companies. Lufthansa Consulting has proposed providing services in three phases. In the first phase, it will conduct a gap analysis to identify the airline’s shortcomings. The gap analysis period will last a month and NAC will have to pay a fee of 295,000 euro for the service.
In the second phase, the company will take over NAC’s management. It will appoint its own people to the top management posts like chief executive officer, chief financial officer and chief marketing officer.
The second phase will last a year, and it may be terminated if NAC thinks it is capable of handling things on its own. However, the contract can be extended for two years. NAC will have to pay a fee amounting to 2 percent of its annual revenue. In the third phase, the German company will hand over the management to NAC.
Meanwhile, German Aviation has proposed that if the NAC signs an agreement with Lufthansa Consulting, it will help the airline lease four narrow-body and two wide-body jets. “However, the financing modality on leasing the aircraft has not been discussed,” the official said. In July 1970, the then Royal Nepal Airlines Corporation (RNAC) had invited experts from Air France under a programme to improve management, and they handled most of the managerial positions until 1973. In 1972, RNAC acquired its first jet, a Boeing 727, in cooperation with Air France.
The government has been considering privatising NAC or bringing in a strategic partner for the last decade. In 2007, it had initiated a plan to hand over NAC’s management to a foreign strategic partner so that it could reform and rescue the troubled carrier. However, the plan fell apart.
Presently, the NAC holds a meagre 6 percent market share on international routes. It serves four international destinations. NAC’s share in the domestic market stands at an even more miserable 1.33 percent. It flew 20,591 passengers in 2013, down 44 percent from the previous year.
Source: The Kathmandu Post
