Nepal calls for bid to auction 5 defunct Chinese aircraft

Kathmandu [Nepal], December 21 : Dubbed "White Elephant," Nepal Airlines Corporation, the national flag carrier of Nepal, has called for a bid to auction five Chinese aircraft that have remained off the air for three years.
Issuing a notice Thursday morning, the Nepal Airlines Corporation called on the bidders on the basis of "As is Where is Basis" to sell it's two MA-60 and three Y-12 E aircraft.
"Nepal Airlines Corporation (NAC) invites all interested companies and individuals to submit their sealed tender document for the Auction Sale of Two MA-60 and Y-12 E Aircraft on as is where is basis," states the auction notice from the flag carrier published on Thursday.
According to the notice, the bidders have to send their sealed bid by February 4, 2024 (13:00 hrs- NST).
Imported with high hopes to fly to remote and unserved sectors, three 17-seater Y12 E and two 56-seater MA-60 aircraft have been gathering rust in the parking bay of Tribhuwan International Airport. One more that crashed in Nepalgunj has been deemed unflyable.
These aircraft have been grounded since July 30, 2020. Those remaining at the hangar of the airport in Kathmandu have been prepared for sale, as it has been gathering rust and dust along with piling debts for the already loss-bearing national flag carrier.
In November 2012, the NAC signed a commercial agreement with the Aviation Industry Corporation of China (AVIC), a Chinese government undertaking to procure aircraft.
China at the time had provided the grant and concessional loan assistance of 408 million Chinese yuan, equivalent to Nrs. 6.67 Billion.
Out of the total aid money, a grant worth 180 million yuan (Rs 2.94 billion) went to pay for one MA60 and one Y12e aircraft. The other aircraft were bought for 228 million yuan (Rs3.72 billion) with a soft loan provided by China's EXIM Bank.
Soon after their arrival, the NAC board realised that the aircraft needed more money to operate than to purchase and bring it to Nepal. In July 2020, the NAC board decided to stop the operation of aircraft and since then, they have been kept at Tribhuwan International Airport.
Before deciding to sell it off, the NAC also handed the aircraft to the government but it was ignored, and then the national flag carrier attempted to rent it, which also failed.
Though the planes are out of service due to high-cost operationalisation and are unfit to fly, the Ministry of Finance has started paying back the interest on the loans for the planes.
Annual interest of 1.5 per cent and service charges and management expenses of 0.4 per cent of the overall loan amount need to be paid. Two installments have already been paid, which include the interest on the loans that were provided by EXIM Bank.
As per the November 2012 agreement, China had given Nepal Airlines a seven-year grace period under which it would not have to pay interest or installment payments. The payback period of the loan is 20 years or by March 21, 2034. The planes have completed the seven-year grace period privilege.
The first quarterly installment of 10.9 million yuan (Rs205.67 million) was sent in September 2021, while the second installment was sent in March. The accumulated losses on the five Chinese planes have already crossed Rs 2 billion.
Before the planes were grounded, the total accumulated losses of these planes were Rs1.9 billion, nearly half the cost of the planes. With the planes grounded, the operating costs have dropped for Nepal Airlines, but it has to pay insurance premiums for the aircraft and parts.