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Nepal Airlines Under Investigation for Unpaid Engine Lease to Israeli Company

Nepal Airlines Under Investigation for Unpaid Engine Lease to Israeli Company
Dispute Over Unpaid Lease and Engine Possession
Nepal Airlines Corporation (NAC) is currently under formal investigation by the Civil Aviation Authority of Nepal (CAAN) following allegations of unpaid dues related to leased aircraft engines from Israel Aerospace Industries Ltd. (IAI). The dispute involves two V2527E-A5 engines, identified by serial numbers ESN V10312 and V2527E-A5, which were leased by NAC. The outstanding payments reportedly amount to USD 3.13 million. IAI terminated the lease agreement after Nepal Airlines failed to return the engines and settle the overdue payments. These engines were installed on the ‘Lumbini’ aircraft, a narrow-body jet that has been grounded for several months.
Regulatory Response and Potential Implications
A confidential letter dated November 3, issued by CAAN’s Flight Safety Standards Department and signed by Engineer Rishiraj Panta, Chief of the Continuing Airworthiness Management Department, demands that Nepal Airlines provide a written explanation within three days. The letter seeks clarification regarding the delayed payments and the continued possession of the engines despite the lease termination. IAI had formally notified NAC of the lease cancellation on October 22, 2025, following multiple unanswered reminders.
The letter was also circulated to the Ministry of Tourism and Civil Aviation, the Director General of CAAN, and the Deputy Director General of the Aviation Safety and Standards Regulation Department. It warns that unresolved financial disputes of this nature could adversely affect Nepal’s international aviation reputation.
Industry experts caution that the investigation may have serious repercussions for Nepal Airlines, including financial penalties, reputational damage, and potential legal action from the Israeli lessor. The controversy could undermine investor confidence, potentially leading to a decline in the airline’s stock value if perceived as indicative of broader financial instability. Operational disruptions may also provide competitors with an opportunity to increase their market share. Furthermore, the incident is expected to prompt heightened scrutiny of lease agreements and financial transparency within the aviation sector.
CAAN has underscored the urgency of resolving the issue promptly to prevent further escalation and to protect Nepal’s standing in the global aviation community.

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