The Nepalese Tourism Ministry has formally tasked the management of Nepal Airlines (RA, Kathmandu) to prepare the carrier for corporatisation and transformation into a company, which would pave the way for a potential privatisation, The Kathmandu Post has reported.

The airline is currently a state-owned entity and as such is not subject to the normal law governing commercial businesses.

In order to go ahead with the transformation, the ministry also asked the full cabinet to approve increasing the paid-up capital of Nepal Airlines to NPR20 billion rupees (USD170 million). The carrier's formal paid-up capital has been unchanged since it was founded in 1958 and amounts to only NPR370 million rupees (USD3.1 million).

The carrier currently has some NPR40 billion rupee (USD340 million) in debt, mostly related to loans from the fleet renewal programme which saw Nepal Airlines adding two A320-200s and two A330-200s.

The government has been unsuccessfully trying to privatise Nepal Airlines since 2007, although the commitment to this idea varied over time. Lufthansa Consulting came the closest to signing a contract for advisory services in 2016, but the deal was eventually called off by the government in Kathmandu.