For nearly five years now, a cluster of Chinese-built aircraft has sat idle at Tribhuvan International Airport (KTM), their presence turning from promise to burden. What was once projected as a step toward strengthening Nepal Airlines (RA)‘ domestic fleet has instead become a lingering financial and operational dilemma. During this time, Nepal has seen the A330 widebody scandal (the biggest of its kind in Nepal), the massive corruption during the construction of Pokhara International Airport (PHH).
The aircraft, unused and silent, have effectively become an albatross. Nepal Airlines cannot sell them. It has failed to lease them. It has not been able to return them to service. Nor can it send them back to China. In the meantime, they generate no revenue, only losses — quietly draining the already fragile finances of a state-owned carrier that has never registered a profitable year in its six decades of existence, Nepal Times reported.
Nepal Airlines is already weighed down by a debt exceeding Rs 50 billion, and the grounded Chinese fleet has only deepened the crisis. Loans taken by the government of Nepal to procure these aircraft continue to accrue interest. In the past year alone, the interest burden tied to the Chinese-made Modern Ark 60 (MA-60) and Yùn-12 (Y-12e) aircraft added more than Rs 681 million to outstanding liabilities.
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What the Grounded Fleet Costs Every Year the Annual Financial Drain
The financial drain does not stop at loan interest. Even while grounded, the aircraft require continuous upkeep. The Office of the Auditor General — Nepal’s constitutional supreme audit institution — confirmed in its annual report that insurance, parking, engine maintenance, and manual revisions together cost Nepal Airlines nearly Rs 200 million annually:
- MA-60 aircraft — Rs 115 million per year
- Y-12E aircraft — Rs 85 million per year
- Annual loan interest — Rs 681 million
- Total annual burden — ~Rs 881 million, against zero revenue return
Inside Nepal Airlines, there is growing frustration. “We have been trying to sell or lease the aircraft since 2022, but no one — nationally or internationally — has shown an interest,” said a senior airline official on condition of anonymity. CH-Aviation reported in April 2025 that the five remaining aircraft are “visibly rotting” at Kathmandu.
How the Fleet Was Acquired A Decade Long Backstory
Timeline of the Chinese Aircraft Debacle
November 2011 — Technical teams from both Nepal and Bangladesh visit China to inspect the MA-60 and Y-12 aircraft. Bangladesh’s team concludes they are “not suitable” and declines. Nepal’s team recommends proceeding.
November 2012 — Nepal Airlines formalises a commercial agreement with Aviation Industry Corporation of China (AVIC) for six aircraft — two 56-seat MA-60s and four 17-seat Y-12Es. Total financing: 408 million yuan (~Rs 6.67 billion), comprising 180 million yuan in grants and 228 million yuan as a soft loan at 1.5% annual interest.
April–November 2014 — First MA-60 delivered April 27; first Y-12E on November 14, both as grants from China. At delivery, Nepal Airlines had no trained pilots qualified to fly the planes.
January–February 2017 — Nepal Airlines purchases a second MA-60 and a second Y-12E using soft loan financing.
February 2018 — Two further aircraft acquired, completing the six-unit fleet purchase.
March 28, 2020 — A Y-12E (9N-AKU) lands 60 metres short of the runway at Nepalgunj Airport and skids into nearby grassland. Five people on board are evacuated safely. Investigators cast doubt over the aircraft’s suitability for Nepal’s terrain.
June 29, 2020 — Nepal Airlines’ board decides to ground the entire Chinese fleet permanently. The seven-year loan grace period ended in March 2021.
September 2022 — Nepal Airlines issues a public notice seeking to lease the planes, extending the deadline after receiving no response. Not a single bidder comes forward.
December 2024 — Executive Chairman Yubaraj Adhikari raises the issue with AVIC, proposing China take back the planes. AVIC declines, noting any sale requires Beijing’s approval.
2023 — An independent American appraisal values the entire five-aircraft fleet at just Rs 220 million. Nepal Airlines sets its own asking price at ~USD 19.6 million, creating a tenfold valuation gap.
April 2026 — A private party from Pakistan expresses interest in the Y-12E planes through diplomatic channels. Nepal’s Finance Secretary directs Nepal Airlines to explore returning aircraft to service — pushing the airline back to square one.
The Procurement Decision and Why It Is Considered Nepal’s Worst Aviation Choice
Nepal Airlines proceeded with the purchase despite red flags that were visible from the outset:
- The MA-60 lacked both FAA and EASA certification
- The Y-12E had no EASA approval
- In 2013, Myanmar grounded several MA-60s and Indonesia ordered special safety checks following multiple incidents within weeks of each other
Former Nepal Airlines board member Achyut Pahari has been unequivocal about some of the problems we touched upon before and was quoted in The Kathmandu Post to have said:
“It was prompted by greed for commissions. They submitted a fabricated report. The Y-12E was compared with the Twin Otter, and the MA-60 with the ATR-72. Flying these planes now would mean throwing good money after bad.”
The Defense Mirror’s account quotes a retired Nepal Airlines official confirming that Bangladesh’s team “reported back to their government that the plane was not suitable for their country, but the Nepali experts said that it was fine for Nepal.”
Because the deal was conducted at the government-to-government level, Nepal’s anti-graft bodies have not pursued a formal probe, according to former officials.
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Nepal Airlines’ Wider Financial Crisis and ongoing operational struggles
The Chinese aircraft debacle does not exist in isolation. Nepal News reported in January 2026 that NAC’s accumulated debt has reached Rs 52.46 billion — and that even if the corporation earned an annual profit of Rs 5 billion, it would not be able to repay this debt within a decade.
Nepal Airlines tops the government’s list of loss-making public enterprises, according to the Ministry of Finance. Rising Nepal Daily’s November 2025 analysis notes the latest reform proposal even suggests converting large portions of loans into equity simply to keep the balance sheet from collapsing. Nepali Times documented that NAC received Rs 31 billion in government bailouts over the years — yet still never turned a profit.
The Office of the Auditor General found NAC’s current ratio at just 0.60 — meaning its current assets cover only 60% of short-term liabilities, a deeply distressed indicator.
A High-Level Study and Recommendation Committee, whose report was submitted September 5, 2025, stated that NAC’s financial condition is “alarming” and recommended dividing the corporation into three separate entities. The committee was led by former Justice Anil Kumar Sinha — now serving as Minister for Culture, Tourism, and Civil Aviation.
Nepal’s Diplomatic Deadlock with Beijing
AVIC representatives clarified in December 2024 that under the intergovernmental deal, the aircraft had first been transferred to the Chinese government before being handed over to Nepal Airlines — meaning any sale requires approval from Beijing. AVIC declined to take the planes back but offered to help identify potential operators.
A private party from Pakistan has now expressed willingness to purchase the smaller planes, formally approaching Nepal through diplomatic channels. However, any deal still hinges entirely on Beijing’s consent. “If the government seeks consent from Beijing, the sale could move forward,” said an official at the Tourism Ministry.
The Revival Cost Rs 2 billion and a Long Road of Repairs and Recovery
Reviving the fleet — the option now directed by Nepal’s Finance Secretary — would require:
- More than Rs 2 billion in investment
- Hiring instructor pilots (scarce domestically and internationally)
- Years of new captain training
- A reliable spare parts supply chain
Today, the Chinese aircraft remain where they have been for years — parked, unused, and steadily decaying. Around them, Nepal Airlines continues its struggle to stay afloat, burdened not only by debt but also by decisions made long ago whose consequences are still unfolding.