Sugat Ratna Kansakar, executive chairman of Nepal Airlines Corporation (NAC), has been reinstated and given a clean chit over the fiasco that ensued following his attempts to purchase badly needed aircraft from Airbus. Vindicated and vehemently determined to turn the corporation around through aircraft expansion, he spoke to Terence Lee of THT Perspectives on future plans to give wings to the national carrier. Excerpts:
What is your number one priority now that you are back at the helm at NAC?
When you look at NAC, the first priority should be to get the aircraft and increase our product capacity. The aircraft we have now are running around-the-clock like a factory working 24 hours in three shifts. As an airline company, we also have limitations on the number of hours that our aircraft can fly and these are dictated by the suppliers. We cannot exceed them. But this constricts our scope for increasing revenue. Unless we increase the number of aircraft, we cannot increase our revenue by a single dollar. Aircraft purchase is the first priority and this is for both international and domestic service. For the survival of the corporation, acquiring aircraft is very important in the sense that we need money and profit. We have to cover our costs and pay salaries and bonus to our staff and we do not expect government subsidies.
What other challenges need to be addressed?
On the domestic side, the challenge is to provide service and connection to all the 47 airports within the country. Presently, we are only catering to 20 airports and there is huge scope in the domestic sectors as well. However, on the domestic front, we may need to look at cross subsidies. Cross subsidy works very well in many countries across the world in the telecom sector and it can work here. We can do the same thing in NAC with profitable sectors subsiding other remote and unprofitable sectors for the time being. In the domestic sector, the situation is actually a lot worse. We have aircraft that are even over 40 years old. There is the need to replace the whole fleet. With just two Boeings and five Twin Otters, NAC is in a sorry state. We need to buy aircraft urgently. Now that we have a new minister and new
government, we will consult and move ahead. We are working on a clear cut purchase implementation plan.
How will purchase be funded?
We don’t have money. There is need for funding aircraft both for the international and domestic operations. Fleet expansion and funding need to go simultaneously and this is the normal practice. We will adopt the same procedures as other international airlines when searching for funding agencies. While there may be some doubts in the minds of funding agencies about NAC’s capability to repay the loan, we have also made very realistic business plans to convince them. One option is funding from outside and most aircraft suppliers are ready to get a
finance organisation or commercial bank involved. However, the last purchase deal which ended in a fiasco was historical because the Employees Provident Fund was willing to lend NAC the money and also allow aircraft to be registered in the name of NAC. This meant that we could also sell the aircraft later at a good price. However, if we bring funding from abroad, it is likely that the aircraft will be registered in the name of the funding agency.
Shouldn’t improvement in the management come first?
Unless we can purchase aircraft, what is the use of management change and improvement? It’s like having good management in a factory when there are no machines. Under management improvement, there are various issues like hiring professional pilots, engineers and other things. There is also the issue of technical training, maintenance, etcetera and that will be managed by the suppliers and included in the purchase package. This is a universally accepted procedure.
What are the chances of reviving the Airbus deal?
Now we have a new board and a new minister and so we will talk to Airbus about whether they are ready to revive the old deal. If they are not willing to do that, we will have to start the whole process again. In that case, we might need to start from the scratch with re-tender and the prices may be higher. But all this has to be addressed after I have a detailed meeting with the minister of Tourism and Civil Aviation and the Finance Ministry because they will also be involved in the funding.
Is internal politics one of the root problems in NAC?
Actually this problem of division in the corporation was part of the internal problem and office politics has been a challenge for sometime now. There are always some people who will be unhappy with the establishment. This was the case when I was appointed
and it became very polarised.
I think we all have to understand that we need policies that are profitable so that even in a few years, we can distribute bonus to the staff. When I entered the corporation two years ago, there were fears that we were in the red and that we were a loss-making organisation that could
collapse any moment. I saw the reality was very different and we have to act now if we want to survive the competition. NAC is the only government corporation that has to face competition from 26 multi-national or foreign companies. All of them have the best
management teams with billions of dollars to back them and are leading airlines.
Do you feel victimised for the ordeal you went through? What would you like to say on the whole unpleasant episode?
On this topic, I actually don’t want to say anything. Of course, the entire episode put me in shock and I was
depressed. But now I take it as part of governance and there was nothing anybody could do at the Ministry of Tourism and Civil Aviation to prevent it. There are always two sides to a coin and so it’s a matter of perception. I did what I felt was right and required. What I did was totally by the book and transparent. I saw the need to act and I did, and till date nobody can pinpoint which rule or regulation of the law I broke in the process. However, others had a different opinion. The court has supported me and I take the whole episode as part of governance and I have accepted it.
After all you have been through, do you think NAC will ever get the much required aircraft?
I think unless there are other factors like political unwillingness, I don’t see a single reason why we should not go ahead with purchasing the aircraft. Even today, all the agencies agree that aircraft must be purchased. We will go ahead with the deal and hope that nobody will have a problem with that. I am confident that we can buy the aircraft and run them profitably. NAC is the same organisation that once operated services to London, Paris, Frankfurt and Osaka. If we can operate till London, we can now operate even to New York. If Bangladesh Airlines and Sri Lankan Airlines can, why can’t we? Are we inferior to them?