Nepal Airlines (RA, Kathmandu) has sought urgent government intervention to shore up its weak financial position which has worsened with the acquisition of two A330-200s earlier this year.

According to the Kathmandu Post, the airline's management held a press conference last week wherein a white paper warned the state-owned carrier faced possible bankruptcy unless the government stepped in.

Management said the airline's long-term debt had now soared to NPR32.89 billion Nepali rupees (USD288 million) as a result of the A330 acquisition. The aircraft were acquired under the expectation they would be used to open up new longhaul routes to Saudi Arabia, Japan, South Korea, Australia, and Europe but have thus far been restricted to medium-haul routes to Bangkok Suvarnabhumi, Delhi Int'l, Doha Hamad Int'l, and Hong Kong Int'l. As such, the two jets generated just NPR264 million (USD2.31 million) in revenue between August 1 and September 15 against costs of NPR756 million (USD6.63 million). In addition, the carrier has to make quarterly payments of NPR1.14 billion (USD9.99 million) for the two aircraft.

Overall, the A330 acquisition has worsened Nepal Airlines' financial position to the extent that its debt-to-equity ratio has gone from 14.40:1 to 39.28:1. Its total liabilities now stand at NPR41.37 billion (USD360.5 million).

Nepal Airlines' executive chairman, Madan Kharel, has since pled with the government to support the airline until such time that it can operate the two A330s in a viable manner.

NAC's worsening financial position will only make it harder for the state to find a willing strategic investor for the airline.

However, last week, Ethiopia's Ambassador to Nepal, Asfaw Dingamo Kame, met with Nepal's Tourism Minister Rabindra Adhikari in Kathmandu to discuss possible cooperation between Nepal Airlines and Ethiopian Airlines.

Renowned for running viable ventures in one of the world's most difficult operating environments - Africa - Ethiopian Airlines is looking at developing Kathmandu into its first non-African hub.

“We need to sign an air service agreement first to form a partnership to invest in Nepal Airlines. We can also start with a codeshare agreement,” Kame told The Kathmandu Post adding that Ethiopian would shortly submit a proposal to Nepal Airlines.