Loans of Rs 34 billion that Nepal Airlines Corporation (NAC) took under government guarantee to buy four Airbus aircraft had grown to Rs 55.92 billion by the end of fiscal year 2025/26, figures from the Financial Comptroller General Office (FCGO) show.
The total comprises Rs 44.68 billion in principal and Rs 11.24 billion in accumulated interest. It is Rs 21.92 billion, or about 64.5 percent, more than the original borrowing. The rise is not all unpaid interest: the reported principal itself has increased by Rs 10.68 billion, because unpaid interest and penal interest were added to the loans.
How the loans were taken
The Rs 34 billion came from three agreements with two public institutions. The Employees Provident Fund (EPF) lent Rs 10 billion on June 18, 2013 for two Airbus A320 aircraft, at 12 percent a year. EPF lent about Rs 12 billion on June 11, 2017 for one A330 wide-body aircraft, and the Citizen Investment Trust (CIT) lent Rs 12 billion on June 12, 2017 for the second A330. Both A330 loans carried 9 percent interest and a 15-year repayment period.
The Auditor General’s 2024 report puts the actual EPF agreements at about Rs 9.981 billion and Rs 11.996 billion. The Rs 10 billion and Rs 12 billion figures are the rounded guarantee amounts.
Interest capitalized
The Auditor General’s 61st annual report said NAC did not pay interest on time and EPF’s board decided to capitalize it.
EPF’s loan principal rose to about Rs 28.5735 billion.
The report said EPF had not obtained an additional government guarantee for the larger liability, and had made loan-loss provisions of only Rs 1.7957 billion.
A government evaluation reported in November 2025 said interest and penal interest on the CIT loan were also capitalized, taking the amount owed to about Rs 17.83 billion. The 63rd annual report of the Auditor General put total outstanding principal and interest at Rs 55.47 billion, made up of Rs 31.33 billion owed to EPF and Rs 21.12 billion to CIT.
Airline’s records differ
Preliminary NAC records cited in August showed Rs 16.54 billion repaid on the four loans and Rs 46.22 billion remaining. That is Rs 9.70 billion below the FCGO-derived figure. NAC’s spokesperson acknowledged that its figures differed from those held by the lenders.
NAC paid Rs 530,955,281 in loan instalments at the end of Asar 2082. It said the payment covered the full instalments for the two A320s but only partial instalments for the two A330s.
The Public Debt Management Office put the balance at about Rs 49.34 billion as of Oct 16, 2024.
Aircraft revenue and use
NAC’s internal calculations put annual gross revenue at about Rs 12 billion for the two A330s and Rs 6 billion for the two A320s, Rs 18 billion in total. The airline’s flights cover fuel, maintenance, crew, airport charges and loan payments.
A February 2026 review of NAC’s schedules found the A330s, which have 274 seats each and a practical operating window of 18 hours a day, flew up to about eight hours a day on average. The two A320s flew 11.5 hours and seven hours a day against a 16-hour reference, or about 72 percent and 44 percent. NAC’s spokesperson, Archana Khadka, said more destinations were needed to fly the aircraft more.
A 2016 business plan for the wide-bodies targeted about 16 operating hours a day and routes including Japan, Saudi Arabia, Guangzhou and South Korea. Japan flights began in March 2020 and Guangzhou in September 2025. South Korea had not been launched as of February 2026.
Wide-body operations lost money in earlier years. Reported losses were Rs 1.53 billion in 2074/75, Rs 3.59 billion in 2075/76, Rs 4.01 billion in 2076/77, Rs 3.73 billion in 2077/78, Rs 3.00 billion in 2078/79 and Rs 3.28 billion in the first 10 months of 2079/80.
They sum to Rs 19.14 billion.
The narrow-body international operations and ground handling were the main sources of profit.
The Kathmandu-Narita route has earned more. NAC reported about Rs 798 million in passenger and cargo revenue over two months, mid-May to mid-July, carrying 6,209 passengers from Kathmandu and 5,483 from Narita.
Maintenance disruptions
An investigation committee led by former Civil Aviation Authority Director General Triratna Manandhar estimated that a prolonged grounding of A320 9N-AKX caused losses of more than Rs 1 billion.
In August and September this year, both A330s were out of service. Makalu was sent to Italy on Aug 9 for a C-check normally lasting about 20 days, and a fault was found in an engine part. Annapurna was grounded at Narita on Sept 14 after engine damage and returned to service on Sept 23. Preliminary estimates put repairs at at least Rs 500 million, with about Rs 420 million in missed flight revenue.
Both A330s are approaching a major overhaul at about 6,000 flight cycles.
Corporation finances
NAC’s preliminary figures for 2025/26 show revenue of Rs 23.40 billion against expenditure of Rs 24.40 billion, a deficit of about Rs 1 billion. Revenue was up 12.5 percent. Ground-handling income was Rs 5.71 billion, about 24 percent of the total. Projected financial expenses were Rs 4.10 billion. An audited loss of about Rs 1.51 billion was recorded for 2023/24.
A government evaluation put NAC’s interest coverage ratio at 0.66, meaning operating income covered 66 percent of interest.
