Israeli company IAI has cancelled its contract with Nepal Airlines Corporation (NAC) over unpaid bills for a rented engine worth nearly Rs 420 million for a narrow-body aircraft. With this decision, the corporation's Lumbini narrow-body aircraft will no longer be able to fly. With the aircraft grounded, the corporation will have to lose business worth crores of rupees daily.

Israel Aerospace Industries Limited (IAI) has cancelled the engine lease agreement after failing to pay the engine rent despite repeated requests. In a confidential email received by Kantipur, Nepal Airlines Corporation (NAC) said that the engine lease agreement has been cancelled due to the failure of the company to pay the remaining 417.1 million rupees to the Israeli company.

The corporation has been flying with a rented engine on a narrow-body aircraft named Lumbini since 2080 Magh. Its daily rent is 2,400 US dollars (approximately 338,000 rupees). Additional charges are added to the rent at the rate of 240 dollars (33,000 rupees) per hour and 240 dollars (33,000 rupees) per flight cycle. The corporation has been using the rented engine for about 22 months. In the meantime, three ministers (Sudan Kiranti, Hit Bahadur Tamang, Badri Pandey) and three governments have been changed in the Ministry of Tourism.

In the agreement that Israel made with the corporation at that time, it stipulated that the rented engine should fly for 10 hours every day or an additional delay fee would be charged. This engine rental was for only three months. But after 20 months, the corporation has neither paid the rental amount nor been able to bring back its engine, which was repaired 8 months ago, from the Israeli workshop.

The corporation's aircraft has been grounded for 86 days, undergoing repairs in Israel

'Israel Aerospace Industries Limited has announced the termination of the aircraft engine lease agreement with Nepal Airlines Corporation with immediate effect,' the email reads, 'The company has not paid Nepal Airlines an amount equivalent to approximately US $ 3,136,512 (about Rs 420 million) for a long time and has not paid despite repeated demands.'

In an email sent by Shimon Pritas, Director of IAI in Israel to the corporation's Continuing Airworthiness Manager Engineer Mahesh Kumar Marita, it is clearly written that 'Nepal Airlines has seriously violated the terms of the lease agreement.' He has instructed to stop using the leased engine currently installed on the corporation's aircraft and return it immediately. “Nepal Airlines should immediately stop using the engine, keep it in a safe condition, and return it to IAI’s facility as per the agreement,” the email, sent to several directors of the corporation, including the Civil Aviation Authority of Nepal, Nepal’s regulatory body, said.

In addition to the Rs 420 million for the leased engine, the corporation will have to pay around Rs 1.12 billion for the detailed repair of two engines of the Lumbini Airbus. The corporation had signed a lease agreement for the engine in 2080 Bhadra. According to the lease agreement, the leased engine is not owned by Nepal Airlines but is the property of IAI. The Israeli company has clarified that even though Nepal Airlines was allowed to use the engine, the agreement was automatically terminated due to non-payment. Similarly, the corporation has been asked to pay the rent and late fees so far. If the corporation does not pay its obligations including rent, it is written that the corporation will have to take legal action and go to court and bear the costs involved.

The corporation has to pay around Rs 1.12 billion to this Israeli company for the detailed repair of two engines of the Lumbini Airbus, in addition to Rs 420 million for the rented engine. Executive Chairman Yuvraj Adhikari has returned home after completing his term on Friday without resolving this dispute. According to relevant sources, Adhikari had called the Nepal representative of the Israeli company to his residence in Naxal last week for discussions. A participant said that after Adhikari went beyond the agreement and talked, the representatives of this agent company left his house.

Meanwhile, the directors of the corporation have responded by saying that the new leadership after the arrival of the new minister will resolve the dispute with the Israeli company and will not comment on the flawed and weak agreement made by the retired executive chairman Yuvraj Adhikari.