Nepal Airlines Corporation (NAC) has agreed to have a foreign firm as a management partner, but said the selection should be done through a competitive bidding process in order to ensure the best products and services after the government asked the troubled carrier for its input on a possible revitalization plan.
Potential management partners German-based Lufthansa Consulting and German Aviation Capital have offered to make a 76 percent capital injection into NAC. The government had also asked the national flag carrier about the the type of policy intervention needed to improve its efficiency.
Last Friday, a NAC board meeting had approved the management plan as the act governing the airline’s operations states that it can enlist a foreign management partner with the government’s go-ahead.
“The process of inducting a foreign management partner will be taken ahead after the government clears the way. A request for proposal (RFP) will then be issued to hire the foreign partners,” said Buddhi Sagar Lamichhane, joint secretary at the Tourism Ministry and a member of the NAC board.
NAC officials said they were not in favour of having a single party for its management takeover plan.
However, some officials said that they were keeping their options open and could join hands with a single partner by tabling a proposal at the Cabinet if the government thinks that the interested candidate can provide the best quality products and services.
During a joint presentation made at the Finance Ministry last month, the two German companies which are subsidiaries of the Lufthansa Group, had proposed overseeing three major departments, namely commercial, operation and engineering, besides holding the post of chief operating officer to help the struggling flag carrier enhance its operational efficiency.
Initially, German Aviation Capital had proposed that if NAC were to sign an agreement with Lufthansa Consulting, it would help the airline finance four narrow-body and two wide-body jets.
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 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 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 the management back to NAC.
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 the French carrier.
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.