KATHMANDU: The Civil Aviation Authority of Nepal (CAAN) has sought a formal explanation from Nepal Airlines Corporation (NAC) after the national flag carrier allegedly failed to clear lease payments for an aircraft engine procured from Israel Aerospace Industries Ltd. (IAI).

According to CAAN officials, the Israeli firm reported that its lease agreement with Nepal Airlines for two V2527E-A5 engines—bearing serial numbers ESN V10312 and V2527E-A5—was terminated after the airline failed to return the engines and settle outstanding dues amounting to USD 3.13 million.

A confidential letter issued by CAAN’s Flight Safety Standards Department on November 3, signed by Engineer Rishiraj Panta, Chief of the Continuing Airworthiness Management Department (CAMD), instructs Nepal Airlines to provide a written clarification within three days explaining the delay in payment and the continued possession of the leased engines despite the contract being canceled.

The engine in question had been used on the ‘Lumbini’ aircraft, one of Nepal Airlines’ narrow-body jets that has been grounded for several months.

Despite repeated reminders, NAC reportedly failed to make the payment, prompting IAI to terminate the lease agreement through an official email notification on October 22, 2025.

CAAN’s letter, copied to the Tourism and Civil Aviation Ministry, the Director General of CAAN, and the Deputy Director General of the Aviation Safety and Standards Regulation Department, warns that the issue could harm Nepal’s aviation reputation internationally if not resolved promptly.