Buddha Air (U4, Kathmandu) intends to divest up to 70% of the shareholding in its international subsidiary as a means of raising the capital needed to fund its growth plans.
The managing director of the privately-owned Nepali carrier told a press conference in Kathmandu last week that according to the current plan, the Basnet family would retain a minority stake in its international arm but that its domestic unit would continue to be wholly-owned.
“Our international unit will be turned into a public company,” Managing Director Birendra Bahadur Basnet was quoted by The Kathmandu Post. “We will retain 30% stake in the international unit, and the public and local and foreign investors will have the remaining 70%."
Buddha Air will use the strength of its recently inaugurated international operations to help attract interest in the sale. An IPO is provisionally scheduled for 2020 by which time Buddha Air will have leased two unspecified narrowbody jets to start direct flights from Kathmandu to the key Indian cities of Mumbai International, Bengaluru International, Chennai, and Hyderabad International by March 2020. As such, it has been in talks with both Airbus and Boeing over the planned procurement of either A320 Family or B737-8 equipment respectively.
“After operating for six months, we have planned to issue initial public offering (IPO)," Basnet added. "The six-month period will be enough to convince potential strategic partners and the public about Buddha Air’s future path.”
The 21-year-old carrier only started international flights in June/July this year with 2x weekly flights from Kathmandu to Varanasi, India using its ATR72-500 fleet.
By August 2021, the carrier plans to add two more jets and begin operations from the upcoming international airport in Pokhara which is expected to be completed by July 2021.
However, unlike other Nepali carriers, it will target the tourist segment while avoiding the Nepali migrant diaspora, a market demographic that is largely the preserve of Nepal Airlines (RA, Kathmandu) as well as foreign airlines. To that end, it will avoid Bhairahawa Gautam Buddha International Airport in favour of serving Pokhara which, Basnet said, Buddha Air would develop into a premium tourist destination along with Lake City which "has the potential to become a key tourist destination.”
“We will not be focused on the labour market as we cannot compete with giant foreign airline companies currently serving Nepal. We want to impact the tourism market instead of the ever-increasing Nepali labour market. Our aim will be to bring high-end tourists," he said.
The executive said Buddha Air's first wave of international growth would target destinations within one to three hours flying time from Kathmandu which, aside from the aforementioned Indian cities, include Guangzhou, Bangkok Suvarnabhumi, and Dhaka. Thereafter, In the second phase, the carrier plans to connect Kathmandu with Moscow, Seoul Incheon, and Japan directly.
Buddha Air currently operates three ATR42-300s, six ATR72-500s, and two Beech 1900Ds on scheduled flights covering 10 towns across Nepal as well as Varanasi in India.
