A recent report by the credit ratings agency ICRA Nepal of domestic operators gives Buddha Air an A- score for long-term credit, which means the company is considered to be servicing its financial obligations in a timely manner, and has low credit risk. Yeti and Shree have scored B+, meaning they are at higher risk of default. The airlines’ standings for short-term credit ratings gives Buddha an A2+, and Yeti and Shree at A4.
Indeed, key financial indicators show that all three airlines are doing as well as, if not better, than pre-Covid years. Buddha Air’s operating income was Rs6.8 billion in 2018-19, dropped to Rs4.9 billion in 2019-2020, and further to only Rs3.3 billion last year.
In 2021-22, operating income has rebounded to Rs7.7 billion. The OPBIDTA operating margin for Buddha Air was also a healthy 14%, although it is down from the peak of 31.8% in 2017-18 when fuel prices are lower.
Buddha Air is marking 25 years of operation this week. It started operations on 11 October 1997 with a Raytheon 1900D flight from Kathmandu to Pokhara. Today, it is the biggest airline in Nepal with 16 aircraft. This Dasain saw record numbers of passengers – the unseasonal rains affected flights, but there was a higher demand for tickets because landslides blocked many highways during the holidays. Buddha Air, set a record of flying 8,835 passengers on a single day on 8 October.
Yeti Airlines has also added another aircraft bought from Virgin Australia to its fleet, bringing the total to five ATR-500s. But the carrier is facing pressure from maturing debt repayment schedules for which the strong USD has not helped. The high interest rate on borrowings from Nepali banks has made the situation more precarious.
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