Once dubbed as the success story of Nepali aviation sector, the Cosmic Air—one of the leading private sector airlines of the country — is in the soup after two Irish companies announced that they have canceled their air lease agreements with the Cosmic.

Seven party supporters staging a motorbike rally against ‘regression’ at Tinkune, Sunday, Apr 02 06. nepalnews.com/rh

In separate public notices carried in the front pages of major broadsheet dailies on Sunday, the AerCap Ireland Limited and AerCo. Ltd– owners of Fokker 100 aircraft– said the Cosmic Air (Pvt.) Ltd. had no authority to possess and operate their two Fokker 100 jets (9N AHO and 9N-AHN respectively).

In their notice, the Irish companies said they had leased two Fokker 100 aircraft to the Cosmic Air on 18 January 2005 and 1 April 2005 respectively.

“The Cosmic Air Pvt. Ltd. had for some time been in default under the above mentioned Aircraft Operating Lease Agreement which resulted in us terminating the leasing of the aircraft (with effect from) 15 March 2006.”

They said they had already informed the Civil Aviation Authority of Nepal (CAAN) of the termination of leasing and had requested for the safety of the passengers and the aircraft to ground the said aircraft.

They warned that any operation of those aircraft “would be the flagrant violation of the aviation law of the country and thus unlawful.”

Despite several attempts by Nepalnews, officials at the Cosmic Airlines were not available for comments. A receptionist with the Cosmic said the company officials were in an “emergency meeting.”

Similarly, officials at the CAAN also refused to comment on the controversy.

A Fokker 100 aircraft belonging to Cosmic Air (File Photo)

A Fokker 100 aircraft belonging to Cosmic Air (File Photo)
In October 2004, the Cosmic Air had acquired its first 105-seater Fokker-100 jet in lease from AerCap Ireland Ltd. Later, the number rose to four. Cosmic Air was operating its flights along domestic routes as well as to Dhaka, Delhi, Benares and Kolkata with its planes.

It also gave a hard time to established air carriers by offering discounted fares and attractive offers to the passengers.

The Airlines made proud announcement in May last year that it had a market share of over 50% in its domestic sectors, 44% along Kathmandu-Delhi-Kathmandu and 43% along Kathmand-Dhaka-Kathmandu sector.

The poor financial health of the Cosmic Air became public in November last year when it had to halt all of its domestic operations after the state-owned Nepal Oil Corporation refused to sell fuel to the company unless it cleared past dues. Fokker 100 planes returned to Nepali sky after the Company paid its first instalment of Rs five million out of Rs 125 million it owed to the NOC.

According to reports, Cosmic Air owed over Rs 500 million to Machhapuchre, Lumbini and other banks in the country.

The Company also owed Rs eight million to the Civil Aviation Authority of Nepal (CAAN)—a regulatory body by the end of the last year. It could not be known whether the Company had been able to clear its outstanding dues to various banks and CAAN.

Led by Captain R. P. Pradhan, the Cosmic Air entered into the aviation sector with two MI-17 helicopters in 1997. Until two years ago, it had a few helicopters and small planes operating in the domestic sector.

SOE Group—the holding company of the Cosmic Air—also has Evco International, Cosmic Motorcycle, Cosmic Merchant Bank, Raybren International, EVCO service center, Jomsom Mountain Resort, Mystic Himalayan Tours, Mystic Himalayan Resort and Cosmic automobiles under its belt.

Last year, the company incurred a loss of Rs 620 million.

The Irish companies have not revealed how much money the Cosmic Air owes to them. Reports say upon receiving communications from the Irish companies, the Cosmic Air management was able to obtain a stay order from the Lalitpur Appellate Court in Patan last month allowing the company to continues its operations.

Nepal Samacharpatra daily on Sunday quoted Upendra Karki, marketing director of the Cosmic Air, as saying that the lease agreement with the Irish Companies had not been expired as yet. “They tried to take back their planes even before the expiry of the lease agreement. Now, we have the interim order from the court and we are yet to get refund out of the ‘advance’ we had paid to them,” he added.

According to the NSP news report, two of the Fokker 100 planes are already grounded due to technical reasons and the company was operating its flights with the two planes, whose lease agreement have been terminated by the Irish companies.

The episode has not only raised questions regarding the operations of one of the leading Nepali aviation companies, tourism entrepreneurs say it may deal a blow to the already flagging tourism industry of the country.