High-level panel recommends restructuring Nepal Airlines into 3 companies

KATHMANDU: A high-level study and advisory committee has proposed restructuring Nepal Airlines Corporation into three separate entities under a corporate model to improve efficiency and competitiveness.

The committee recommended overhauling the corporation’s capital structure, ownership, management, and operations to transform it into a profitable and professional institution.

The committee, chaired by former Supreme Court Justice Anil Kumar Sinha, was formed by the Cabinet in Oct 19 last year.

Its report suggests that the government immediately meet the corporation’s capital needs through state-owned financial institutions or government funds.

Under the proposals, Nepal Airlines Corporation would be converted into a public company under the Companies Act, 2063, with proper registration of investment and shares. The committee recommended splitting the corporation into three entities:

• Nepal Airlines Company Limited – handling international services.

• Nepal Aviation Services Company Limited – handling ground-handling services.

• Nepal Airlines Corporation (Domestic Services) – managing domestic flights under continued state oversight.

The first two companies are proposed to be listed on the Nepal Stock Exchange (NEPSE), while the domestic service entity would remain under indirect government control.

The panel also recommended removing the ‘executive chairman’ position and appointing CEOs through open competition under a time-bound performance-based contract system.

Regarding capital allocation, the committee proposed:

• Nepal Airlines Company Limited: Authorized capital Rs 50 billion, issued capital Rs 40 billion, paid-up capital Rs 34 billion.

• Nepal Aviation Services Company Limited: Authorized capital Rs 25 billion, issued capital Rs 20 billion, paid-up capital Rs 16 billion.

• Nepal Airlines Corporation (Domestic Services): Capital Rs 5 billion.

The report emphasized converting existing government loans of Rs 2.9 billion into equity to ensure the residual domestic entity’s capital remains positive. Loans from the Employees Provident Fund and Citizen Investment Trust would also be converted into equity, providing a total of Rs 50 billion for the new two companies.

Once the new companies achieve sustainable profitability, they would be listed on NEPSE, with an initial public offering (IPO) offering opportunities for public investment, enhancing citizen ownership.

The committee also recommended appointing experienced executives for the international airline and exploring possibilities for international management partnerships. Ground-handling staff would receive retraining to meet international standards and provide competitive services.

Additionally, the panel suggested a special act, if necessary, to facilitate structural transformation and recommended providing at least four twin-engine and 18-seat aircraft for domestic services.

For Terai trunk routes, aircraft with more than 64 seats are suggested. The committee concluded that restructuring Nepal Airlines into three efficient, transparent, and competitive companies would strengthen and sustain Nepal’s aviation sector in the long term.