Nepal Airlines (RA), based in Kathmandu, has faced a setback in its attempt to offload five disused Chinese-made aircraft, with the Aviation Industry Corporation of China (AVIC) declining to take them back. The request, made in December 2024, was rejected by AVIC, which suggested that Nepal Airlines explore other solutions.
The aircraft in question were part of a deal struck between Nepal Airlines and China’s state-owned AVIC during the previous decade. As part of a government-facilitated arrangement, the airline acquired four Y12E aircraft and two MA-60s. Two of the planes were gifted, while the remaining four were provided under soft loan terms. However, Nepal Airlines quickly found the aircraft unsuitable for its needs, grounding them in 2020.
Currently, the airline has five of the original six planes remaining after one Y12E was written off following a runway incident. These grounded aircraft remain in Kathmandu, where they are described as “visibly rotting” and continue to rack up costs. The airline incurs NPR200 million (USD1.47 million) annually in insurance and parking fees, putting further financial strain on the cash-strapped carrier.
During a December 2024 meeting, Nepal Airlines Chairman Ubaraj Adhikari reportedly asked AVIC to take the aircraft back as a goodwill gesture, but the aerospace conglomerate refused. Instead, AVIC offered to assist the airline in finding alternative solutions, including helping to sell or dispose of the aircraft, provided that Nepal Airlines clears its outstanding invoices for technical support and spare parts. Nepal Airlines has reportedly agreed to fulfill these payment obligations.
Efforts to sell, lease, or otherwise dispose of the aircraft in the past few years have not yielded success. Sales campaigns in 2022 and 2023 garnered no serious interest. With little enthusiasm for another round of selling, the airline is exploring other options. AVIC suggested that a renewed campaign could attract buyers from China. Alternatively, AVIC proposed transferring the aircraft to domestic organizations such as the Nepal Army Air Wing or the Civil Aviation Authority of Nepal, though it remained unclear how these entities could make use of the aircraft, which would require extensive refurbishment before they are airworthy again.
Meanwhile, Nepal Airlines has reached out to Nepal’s Ministry of Finance for guidance on how to proceed with the aircraft issue. The government may also revisit the matter directly with Chinese officials.
Since the planes were grounded five years ago, China has expressed support for Nepal Airlines, but has been reluctant to allow the aircraft to be divested, fearing it could harm the reputation of the aircraft types and their manufacturers.
Adding to the complexity of the situation is a long-term loan of NPR3.72 billion (USD27.3 million) that Nepal Airlines secured from China. The seven-year repayment holiday on both interest and principal ended in 2021. Despite no payments being made in 2023, China has not actively pursued the outstanding debt, although interest continues to accrue at concessional rates.
