Kathmandu: AAR Corp, a US-based company, has been fined $55 million (approximately Rs 7.42 billion) by the US government after being found guilty of bribing Nepali officials during the procurement of two widebody aircraft for Nepal Airlines Corporation (NAC).
The company allegedly paid $2.5 million in bribes to secure a deal for the purchase of Airbus A330 planes. A statement from the US Department of Justice confirmed that AAR Corp violated anti-corruption laws, leading to the substantial penalty. The investigation revealed that an official from AAR admitted to bribing government officials in Nepal and South Africa, while also making $24 million in illegal profits.
The controversy traces back to December 2016 when NAC decided to purchase two widebody aircraft to address the need for long-haul flight capabilities, as the airline’s existing fleet of narrow-body planes was insufficient for longer routes.
Under the leadership of then-Prime Minister Pushpa Kamal Dahal, NAC’s board approved the purchase of two Airbus A330s with a seating capacity of 274 on January 26, 2017. A public notice inviting bids was issued in September 2016, with 10 companies submitting proposals, and AAR Corp was ultimately selected as the supplier.
In February 2017, NAC made an advance payment of $1 million to AAR, but complications arose during the contract finalization. AAR merged with German company Aviation Capital and Portugal’s Hi Fly to form a consortium, which set up a $1-capital company in Ireland to purchase the planes.
The consortium acquired two Airbus planes from the manufacturer and sold them to NAC for Rs 24 billion. Despite the involvement of multiple companies, NAC transferred $79 million to a German company’s account, raising suspicions about the deal.
The issue first came to light in mid-2017 when details of the payment became public. After the two planes arrived at Tribhuvan International Airport in 2018, allegations of corruption intensified, prompting the government to form a commission led by former Chief Justice Govinda Prasad Parajuli to investigate the deal.
However, due to procedural delays, the commission failed to proceed. Subsequently, the Public Accounts Committee of Parliament, led by Congress MP Rajan KC, conducted its own inquiry, uncovering irregularities worth Rs 4.36 billion in the procurement process. In April 2023, the Anti-Corruption Commission filed charges against 32 individuals, including former Tourism Minister Jivan Bahadur Shahi, NAC’s former Managing Director Sugat Kansakar, and former Tourism Secretary Shankar Prasad Adhikari, at the Special Court.
On December 6, 2024, the Special Court found 10 individuals guilty, including NAC’s then-chairperson Shankar Adhikari, Managing Director Sugat Kansakar, and board members Buddhi Sagar Lamichhane and Shishir Dhungana. However, former Tourism Minister Jivan Kumar Shahi and others were acquitted.
The widebody aircraft scandal has exposed significant governance failures and corruption in Nepal’s aviation sector, sparking calls for stricter oversight in public procurement. The case has raised concerns over transparency and accountability in high-value contracts involving foreign suppliers and the need for greater scrutiny of government dealings in such matters.