After several failed attempts to offload its five Chinese planes, the Nepal Airlines is now awaiting guidance from its line ministry on the next steps.

The six condemned planes—four 17-seater Y12e aircraft and two 56-seater MA60 aircraft—were acquired between 2014 and 2018 for Rs6.66 billion in grants and loans. One plane crashed in Nepalgunj.

Since 2020, the five remaining planes have been left unused on the eastern side of the runway at the Tribhuvan International Airport in Kathmandu. Officials report that most of the aircraft are rotting away.

“Both options—leasing and selling the aircraft—have failed,” said Ramesh Poudel, spokesperson for Nepal Airlines. “We have sought suggestions from the tourism ministry on what to do next.”

“It’s been months since we asked for their guidance,” he added.

Another Nepal Airlines official revealed that the tourism minister had recommended the airline’s board of directors decide. “However, the board has yet to meet,” the official said.

In July 2020, the Nepal Airlines board unanimously decided to stop flying the Chinese planes as their operating costs exceeded their revenue. Since then, the aircraft has remained grounded. Yet, the airline continues to pay parking fees, insurance, and other charges for the defunct fleet.

The airline issued two separate notices, inviting interested parties to lease the planes. The first, on September 14, 2022, had an October 31 deadline, later extended to November 16. However, no bidders came forward.

Following the unsuccessful lease attempts, the management opted to sell the planes. On January 19, 2023, Nepal Airlines requested proposals for a full appraisal of the two MA60 and three Y12e aircraft. An American company determined their total value at Rs220 million.

However, fearing that selling the planes at such a low price might attract scrutiny from anti-corruption bodies, the airline conducted its internal assessment.

Based on the Nepal Airlines’ own valuation, the asking prices were set as follows: MA60 with registration 9N-AKR: $8,225,501; MA60 with registration 9N-AKQ: $4,922,235; Y12e with registration 9N-AKV: $2,412,671; Y12e with registration 9N-AKT: $2,358,860 and Y12e with registration 9N-AKS: $1,658,517.

The airline's combined asking price for the five planes was $19,577,784, significantly higher than the American company’s appraisal.

Despite hopes that the sale would alleviate some of Nepal Airlines' financial burden, no buyers were found, even after a second sales auction.

The Nepal Airlines had signed a commercial agreement with China AVIC in November 2012 to procure the six aircraft—two MA60s and four Y12es. China provided a grant and concessional loan totalling 408 million Chinese yuan (Rs6.67 billion) for the purchase.

Of this aid, a grant of 180 million yuan (Rs2.94 billion) covered the cost of one MA60 and one Y12e aircraft, while a 228 million yuan (Rs3.72 billion) loan funded the purchase of an MA60 and three Y12e aircraft.

As per the agreement, the Nepal government must pay 1.5 percent annual interest, along with a service charge and management fee of 0.4 percent of the overall loan the Ministry of Finance takes.

The ministry, in turn, charges Nepal Airlines 1.75 percent annual interest on the disbursed loan amount.

The deal included a seven-year grace period during which Nepal Airlines was not required to make interest or principal payments. This grace period ended in March 2021.

“The grace period has ended, but the finance ministry has not yet issued any official letter to the Nepal Airlines requesting loan repayments,” said an airline official, speaking anonymously.

In July 2024, a meeting between finance ministry officials, the Nepal Airlines, and Chinese representatives focused primarily on loan repayments for Pokhara Airport, which was also funded by China—ignoring the topic of aircraft loan repayments.

Nepal Airlines officials acknowledge that the grounded planes have become more of a burden than an asset. Operating them proved financially unsustainable due to frequent breakdowns and a shortage of trained pilots.

The airline remains in deep financial trouble, with nearly Rs50 billion in debt.

Officials lament that the Chinese-made aircraft turned into “white elephants” shortly after their arrival and doubt there will be any buyers.

The MA60 is a turboprop airliner produced by Xi’an Aircraft Industrial Corporation. At the same time, the Y12e is a twin-engine turboprop utility aircraft made by Harbin Aircraft Industry Group—both subsidiaries of the Aviation Industry Corporation of China (AVIC).

Though intended to serve remote airports in the Tarai region, the planes spent more time grounded than airborne during their brief operational lifespan.

When they were taken out of service, the planes had accumulated losses of Rs1.9 billion—nearly half of their original cost.

Nepal received the first batch of planes in 2014, but delivery of the remaining aircraft was delayed due to problems with the initial models. The second batch arrived in January 2017, and the final two Y12e planes were delivered in February 2018.

While the finance ministry officially owns the aircraft, it remains the responsibility of Nepal Airlines to operate—a costly arrangement that continues to strain the airline's fragile finances.