ICRA Nepal grades long term and short term facilities of Yeti airlines worth NPR 2847.57 Million and USD 16.88 Million

ICRA Nepal has placed the ratings assigned to the bank loan limits of Yeti Airlines Private Limited (Yeti or the company) on watch with negative implications. These ratings include the rating of [ICRANP] LBB@ assigned to the company’s long-term loans and the rating of [ICRANP] A4+@ assigned to the company’s short-term loans (including non-fund based limits). The graded facilities are worth NPR 2847.57 Million and USD 16.88 Million.

The ratings for Yeti have been placed on watch with negative implications, given the expected impact of Covid-19 on the Nepalese tourism sector and hence the domestic aviation sector. The initially assigned ratings drew comfort from the Government initiatives in celebrating 2020 as a Visit Nepal Year which has been cancelled recently, amid the global coronavirus outbreak. The outbreak resulted in a marginal decline in tourist arrivals in January-February 2020, with a sharp decline expected in the months to follow. The period of March-May is considered the second peak season for tourism-related activities in Nepal, given the conducive environment. Hence, the seasonality in revenues for tourism sector entities is likely to accentuate the level of impact.

Additionally, a decline in the arrival of foreign tourists would result in lower USD earnings, which offer better margins to the players. In the last few years, domestic aviation sector players witnessed increasing competition with multiple aircraft additions by major players. This resulted in sharp decline in local currency fare and hence USD earnings had supported the profitability of the aviation sector players, including Yeti, in recent years. Yeti also carries a sizeable USD loan and operational cost obligations and hence this would add up to forex risks as well.

Yeti Airlines Private Limited is a domestic airlines company incorporated in 2002, with its registered office in Tilganga, Kathmandu. It is currently the second largest company in the industry in terms of the number of passengers carried. Yeti currently operates flights to eight trunk routes and mountain flights through a fleet of five Jet-streams (J-41) and five ATR 72-500 aircraft. Yeti belongs to the Thamserku Group, which has a presence in multiple tourism-related sectors including domestic and international aviation, expeditions, adventure travel, trekking, hotels/lodges, travel agencies, etc. The company was promoted by Mr. Lhakpa Sonam Sherpa and the Late Ang Tshiring Sherpa, both renowned tourism sector entrepreneurs of Nepal. Mr. Lhakpa Sonam Sherpa is currently the Chairman of Yeti while Mrs. Chanda Sherpa is the Managing Director.

Source: ICRA Ratings Nepal