Kathmandu: Nepal’s national flag carrier, Nepal Airlines Corporation (NAC), is becoming increasingly entangled in a debt trap tied to the purchase of four international aircraft.
While the airline claims to have been making quarterly installment payments, its total liability on loans taken for the procurement of two Airbus narrow-body and two wide-body jets has escalated sharply—from an initial Rs 34 billion to over Rs 52.5 billion.
In 2013, NAC signed a loan agreement worth Rs 10 billion with the Employees Provident Fund (EPF) to finance the purchase of two Airbus A320 narrow-body aircraft. Despite paying back installments for more than a decade, the remaining balance still stands at over Rs 10.21 billion.
By the end of the fiscal, the airline had paid Rs 10.93 billion toward the narrow-body aircraft alone—meaning it has already paid more than the principal but still owes more due to accumulating interest.
In addition to the narrow-body aircraft, NAC borrowed another Rs 24 billion—Rs 12 billion each from the EPF and the Citizen Investment Trust (CIT)—to acquire two Airbus A330 wide-body aircraft. These loan agreements were signed in May 2017 at an annual interest rate of 9 percent. Since then, the debt from this deal alone has ballooned to Rs 42 billion.
When combined with the narrow-body loans, NAC’s total aircraft debt now exceeds Rs 52.51 billion. The corporation’s overall liabilities, including an additional Rs 3.14 billion loan taken to procure Chinese aircraft—which remains entirely unpaid—have crossed Rs 55 billion. Accounting for all debts, NAC’s total loan burden is estimated to be nearly Rs 56 billion.
So far, NAC has only repaid Rs 9.93 billion of the wide-body aircraft loans—Rs 4.91 billion to EPF and Rs 5.01 billion to CIT. In total, it has paid Rs 20.86 billion for all four Airbus aircraft. This includes Rs 10.93 billion for the narrow-body jets and Rs 9.93 billion for the wide-body ones.
Despite these repayments, NAC failed to pay its scheduled installment to EPF by July 2024. It did, however, manage to pay Rs 100 million to CIT for that quarter.
Loan providers confirmed to Clickmandu that this marked a deviation from the airline’s earlier practice of paying both institutions equally.
The annual interest burden from NAC’s aircraft loans alone now exceeds Rs 3.5 billion. However, the airline has only managed to pay Rs 200 million for the wide-body aircraft and Rs 530 million for the narrow-body aircraft in recent months—far below what is required.
These quarterly payments total just Rs 2.12 billion annually, well short of what’s needed to cover the interest and principal. As a result, the outstanding debt continues to grow, exacerbated by compounding interest and delayed payments.
When the loans were first issued in mid-2023, NAC’s international fleet debt stood at Rs 46.41 billion. It rose to Rs 51 billion by mid-2024 and has now crossed Rs 52.5 billion, contrary to expectations that the amount would gradually decline with regular installments. The corporation has publicly acknowledged this growing burden.
According to NAC spokesperson Subash Dangi, the airline paid Rs 530.9 million toward the Asar 2082 BS installment for all four Airbus aircraft. The corporation claims that under the leadership of Managing Director Yubaraj Adhikari, a total of Rs 7.92 billion in loan payments have been made over the past four years.
The airline has appealed to the government and lending institutions to restructure its debt, citing severe financial disruptions caused by the COVID-19 pandemic. NAC has specifically requested waivers on compounded interest, penalties, and late fees incurred during the pandemic period. It is also asking lenders to increase the number of installments to ease the debt repayment schedule.
Despite these appeals, NAC’s financial health remains precarious, with mounting liabilities threatening its long-term sustainability. As interest accrues and payments remain partial, the corporation’s debt trap deepens—raising urgent questions about the viability of its current operations and the strategic decisions behind its fleet expansion.
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