Nepal Airlines shake-up signals state asset sell-offs ahead

For investors, the planned restructuring of Nepal Airlines is a signal trade, not a direct one. The state-owned flag carrier has no listed shares, but the government's move to reshape a company carrying about NPR 56 billion (Rs 5,600 crore) in debt is the clearest signal yet that loss-making state enterprises are being prepared for private capital or a future listing.

The tourism and finance ministries have started internal work on the overhaul, following this fiscal year's (FY 2083/84) budget policy to convert the corporation into a company, reform its management and identify a suitable strategic-partnership model. Under the discussions, the carrier's statutory-corporation structure would give way to a corporate form in which the government remains dominant while a professional board — and eventually outside investors — take defined roles. Full privatization remains on the table.

Cabinet split over the endgame

The sharpest division is inside the government. Tourism Minister Khadga Raj Paudel has pushed for full privatization on the Air India model, telling a ministry meeting that a corporation with assets above Rs 10 billion should not consume billions of rupees in annual state support, and saying publicly he would sell the airline if it were his own company. Prime Minister Balen Shah opposes an immediate sale, while Finance Minister Dr. Swarnim Wagle is said to favour the company model, wary of political backlash.

Two reference points

The model most cited is Nepal Telecom, converted in 2061 BS (2004) from a wholly state-owned corporation into a company with 91% government ownership, worker and public-shareholder representatives on the board, and shares sold to the public. The other is Air India, sold to the Tata Group in 2022 after accumulated losses reached INR 77,000 crore through end-2021; Tata paid INR 18,000 crore and took over INR 23,000 crore of debt, after a 2018 attempt to sell 76% failed for lack of buyers.

Officials say the balance sheet is the hardest part: debt rescheduling, interest-rate relief and the use of fixed assets such as aircraft and land are under study, and no strategic partner is likely to enter a company while it carries the debt.

Market context

No listed vehicle trades the carrier, and the latest session showed the market indifferent to it: NEPSE rose 1.22% to 2,662.95 on 28 October, extending a five-session gain of 1.59%. The restructuring matters to the tape directionally — as a precedent for state assets that could eventually be listed or divested.

What to watch

The next market test is the joint recommendation the finance and tourism ministries are expected to deliver on a model, which would set the terms — and timeline — for any eventual stake sale or IPO.