India, Pakistan Privatise National Carriers, but Nepal Airlines Reform Remains Elusive

While India and Pakistan have moved decisively to privatise their national flag carriers in an effort to curb losses and improve efficiency, Nepal Airlines Corporation (NAC) continues to struggle with mounting debt, weak management and prolonged policy indecision.

India privatised Air India three years ago, handing over control of the loss-making carrier to the Tata Group, while Pakistan recently sold Pakistan International Airlines (PIA) to a group of local investors for $482 million, according to international media reports. Both airlines had long remained dependent on state support and were burdened by operational inefficiencies before their governments opted for privatisation.

In Nepal, however, repeated proposals to reform Nepal Airlines—through privatisation, public–private partnership, management contracts or restructuring—have failed to translate into action, despite nearly three decades of debate and multiple government-appointed study committees. The airline, which remains fully owned by the state, continues to incur operational losses from flight services and relies largely on ground handling for revenue, while struggling to service loans taken to purchase aircraft.

Over the years, successive committees have recommended a range of options, including full privatisation, partial divestment, and bringing in international operators for management. At one point, bids were even invited for management contracts, while the airline also sought loans worth Rs 100.35 billion but failed to secure lenders. None of these initiatives progressed beyond the proposal stage.

The most recent government-formed study committee, chaired by former Supreme Court justice and current Minister for Industry, Commerce and Supplies Anil Kumar Sinha, proposed splitting Nepal Airlines into three separate entities—one for international operations, one for domestic flights and another for ground handling and aviation services. The committee argued that such restructuring would help expand business, improve accountability and enhance the airline’s capacity to repay debt. It also warned that the airline’s financial condition had become extremely alarming and recommended converting part of its debt into government equity.

Nepal Airlines has borrowed Rs 22 billion from the Employees Provident Fund and Rs 12 billion from the Citizen Investment Trust—both under government guarantees—to acquire two narrow-body and two wide-body aircraft for international operations. Although the airline has repaid Rs 8.45 billion in principal and interest so far, its total liabilities have continued to rise, while its share of the international aviation market has shrunk to 13.6 percent, according to its own data.

Despite Nepal adopting economic liberalisation policies after 1990, reforming the national flag carrier has remained politically sensitive. Persistent challenges—including political interference, resistance from employee unions, ageing aircraft, weak finances, lack of a clear reform roadmap and reluctance to dilute government ownership—have repeatedly stalled progress. Governments have floated plans to bring in strategic partners from time to time, but these have not been followed through.

Former tourism secretary Sushil Ghimire, who chaired the Nepal Airlines Reform Task Force in 2019, has argued that earlier recommendations remain relevant and that structural reform is impossible without strong political commitment. He has warned that continued state bailouts are unsustainable in an increasingly competitive aviation market.

Former Nepal Airlines General Manager Dim Prakash Paudel has also opposed full privatisation, instead advocating a joint venture model in which the government retains a stake while allowing private, public and international investors to participate. Such a model, he argues, would preserve the airline’s national role, including emergency evacuation flights, while improving management and financial discipline.

Although many countries have opted to privatise or restructure their national carriers, Nepal Airlines’ future remains uncertain. Despite its status as the national flag carrier, more than six decades of operating experience and growing outbound travel demand, decisive reform has yet to materialise. For now, while neighbouring countries move ahead with difficult but decisive choices, Nepal Airlines remains caught in a cycle of debt, debate and delay.