For nearly five years, a cluster of Chinese-built aircraft has sat idle at Kathmandu’s airport, turning a promise of domestic fleet expansion into a severe financial and operational dilemma for Nepal Airlines.
The state-owned carrier, already struggling to stay afloat, has been unable to sell, lease, or return the planes, which generate zero revenue while steadily decaying.
The grounded fleet has significantly deepened the crisis for the national flag carrier, which is already weighed down by debt exceeding Rs50 billion, reports The Kathmandu Post.
In the past year alone, interest on government loans taken to procure the Modern Ark 60 (MA-60) and Yùn-12 (Y-12e) aircraft added more than Rs681 million to the airline’s outstanding liabilities.
Even while stationary, the aircraft require constant upkeep, costing approximately Rs200 million annually for insurance, parking, engine maintenance, and manual revisions.
According to the Nepal Office of the Auditor General, roughly Rs115 million is spent on the MA-60 planes, while Rs85 million is allocated to the smaller Y-12e fleet.
Inside the airline, senior officials admit that attempts to find buyers or lessees since 2022 have been met with total market silence.
A decade of operational failure
The history of these aircraft dates back to a 2012 agreement with the Aviation Industry Corporation of China (AVIC) to procure six planes.
The first two arrived as grants in 2014, followed by four more purchased through a 408 million yuan (approx. Rs6.67 billion) mix of grants and soft loans between 2017 and 2018.
Under the terms, the Ministry of Finance retains ownership until the debt is cleared, charging the airline 1.75 per cent interest.
Operational challenges surfaced almost immediately, including a critical shortage of qualified pilots and the high cost of spare parts. By 29 June 2020, the board of directors decided to ground the fleet entirely.
Former board member Achyut Pahari described the purchase as one of the airline’s worst decisions, noting that Bangladesh had rejected the same aircraft in 2011. He alleged the technical evaluation was flawed, as it improperly compared the Chinese planes to the Twin Otter and ATR-72.
Diplomatic deadlocks
Efforts to dispose of the aircraft have hit a diplomatic wall. In December 2024, then Executive Chairman Yubaraj Adhikari requested that AVIC take the planes back as a gesture of goodwill.
However, AVIC clarified that because the deal was an intergovernmental agreement, any sale or return requires formal approval from Beijing.
While a private party from Pakistan recently expressed interest in the Y-12e planes, the Nepal Ministry of Finance has instead directed the airline to explore returning the fleet to service—a move officials estimate would require an investment exceeding Rs2 billion.
A massive valuation gap further complicates any potential exit. A 2023 independent appraisal by an American firm valued the entire fleet at just Rs220 million.
Fearful of scrutiny from anti-corruption bodies, Nepal Airlines set its own internal valuation significantly higher, at nearly $19.6 million.
Despite the mounting costs and lack of accountability, the government-to-government nature of the original deal has so far prevented formal investigations by anti-graft agencies.
