With the end in travel restrictions, Nepali airlines have been stretching their wings again. But recovery still seems to be a long way off due to various reasons.
--BY TAMISH GIRI
Before the government announced the ban on flights as a response to the surging global coronavirus transmissions in mid-March, Nepal-based travel agencies affiliated to the International Air Transport Association (IATA) made between Rs 500,000 to Rs 10 million in revenue from sales of air tickets of both domestic and international flights during fortnight sales. But as the country spiraled into the Covid-19 pandemic-induced crisis, such sales declined by over 95 percent which indicates how bad the situation has become for the aviation sector.
The aviation industry, which is considered as a ‘cash-burning business’, has been the worst hit from the fallout of the Covid-19 pandemic. According to the Airline Operators’ Association of Nepal (AOAN), the Nepali aviation industry lost more than Rs 10 billion in revenue over the last six months out of which 63 percent loss was bore by fixed wings (airplanes) operators, and the rest 37 percent by rotary wings (helicopter) operators. Fixed-wing operators witnessed 36 percent of the total loss occurring in the trunk routes and the other 27 percent on STOL (short-take-off-landing) route flights.
AOAN General Secretary Manoj Karki, who is also the Managing Director of Summit Air, says that domestic private airliners faced a daily revenue loss of around Rs 600 million during the closure of all domestic air travel.
In the fiscal year 2019/20, the total revenue of domestic airlines stood at Rs 18 billion. However, the amount declined to Rs 12 billion by April-May of the fiscal year 2020/21.
The loss incurred by the Nepal Airlines Corporation (NAC) stood at a staggering Rs 5 billion by the end of FY2019/20 in both domestic and international operations. Nevertheless, the national flag carrier was partially active in repatriation and charter flights during the period of commercial flight bans which helped to lessen its mounting losses to some extent.
Archana Khadka, the spokesperson of NAC, informs that the airliner is currently operating commercial flights regularly to both domestic and international destinations. “The ticket booking has been growing gradually. In international routes, we are currently operating scheduled flights to destinations including Narita, Hong Kong, Dubai, and Doha along with reparation flights to Dammam, Kuwait, Riyadh, and Jeddah,” she informs.
Before the Covid-19 outbreak, NAC operated regular commercial flights in nine international destinations including Bangkok, Kula Lumpur, Delhi, Mumbai, and Bangalore. In the international route, flights to Delhi, Mumbai, and Bangalore had the most occupancy rates in NAC flights that are currently closed due to restrictions from India.
“Despite this situation, NAC currently has 80 percent bookings in domestic flights. In international routes, most of the international flights arriving from the Middle East have full occupancy while the flights taking off from Kathmandu have fewer occupancy rates,” says Khadka. In the meantime, NAC is also preparing to start direct flights to Guangzhou, China.
Domestic airline operators that are resorting to various austerity measures like jobs and salary cuts and slashing expenses related to marketing and promotional activities, staff travel and other overhead spending. For instance, NAC has terminated contracts of 145 administrative employees as an immediate response to reduce its expenses.
Though there has been improvement in ticket sales following the lifting of the ban a month ago, aviation sector stakeholders are cautiously optimistic about the recovery as uncertainty still surrounds the air travel business due to the global and national surge of Covid-19 cases.
Karki says that the growing demand for air travel is due to the resumption of flights after a long gap and the upcoming festival season. “At present air tickets booking at Summit Air are close to 60 percent. The uptick in demand is primarily due to the upcoming festival season,” says Karki. As air ticket prices have fallen sharply, people travelling to domestic destinations are seen preferring air travel over bus and other modes of transport. In some major destinations like Jhapa, Biratnagar, Simara, Pokhara and Nepalgunj, the prices of air tickets are seen equaling bus fares thus prompting many people to travel by airplane.
According to the Civil Aviation Authority of Nepal (CAAN), the occupancy rate in domestic flights has reached 80-90 percent. Raj Kumar Chhetri, spokesperson of CAAN says that the number of regular flights currently operated in domestic routes is 50-60 flights a day and 11-15 in international routes. Among the domestic airliners, Buddha Air has been operating 17 daily flights, Yeti 11 flights, Tara 5-7 flights, and Simrik one flight a day in domestic routes. Meanwhile, foreign airlines like Air Arabia, Air China, Cathay Dragon, China Southern, Fly Dubai, Korean Airlines, Malaysian Airlines, Malindo Airlines, Qatar Airways, Turkish Airlines, NAC and Himalayan Airlines are operating flights to and from Nepal to various international destinations.
In spite of the resumption of flight operations and increasing demand for air travel, airline operators see recovery as a long way off. “I don’t think we will be able to achieve the revenue level of 2019 before 2023,” says AAON general secretary Karki. The sluggishness in business, according to Karki, is attributed to the low air fares.
For the next two years, most Nepali airlines are trying to promote domestic tourism by introducing various domestic tour packages to recover the losses.
The aviation sector regulator and the government have provided support to airlines after the emergence of the Covid-19 crisis. But the support has been limited in terms of trying to propel the recovery of the hardest hit sector. In a bid to provide relief to the airlines hard hit by the pandemic, CAAN reduced landing, parking and other charges for aircraft by 75 percent during the lockdown.
“Additionally, the central bank in the current fiscal year’s monetary policy has provisioned the loan repayment rescheduling to aid in the recovery efforts. Similarly, airlines are entitled to apply for the refinancing programme. But this has not been implemented as of now,” Karki informs.
Meanwhile, the Ministry of Culture, Tourism and Civil Aviation (MoCTCA) and Civil Aviation Authority of Nepal has been preparing to remove the US dollar fare provision on airfare to maintain uniformity in domestic flights for both Nepalis and foreigner travellers. The air fare review committee chaired by the Deputy Director General of CAAN Narendra Thapa has recommended the government to remove the US dollar fare currently applicable for foreigners except for some destinations across the country. According to the recommendation, airline operators can only charge fares in US dollar to foreigners for flights to Bharatpur, Jomsom, Pokhara, Lukla and Tumlingtar.
However, airline operators have voiced their stand against the proposal claiming that such a move would jeopardise the recovery of the Nepali aviation sector. They argue that the airfare could become more expensive for Nepali travellers if the greenback is removed. Currently, domestic airlines in Nepal have been charging fares in US dolllars for foreigners on all domestic flights. “Airline operators have been providing air transportation service to Nepali passengers at concessional rates while charging US dollar to foreigners,” mentions Karki.
According to him, AOAN has always voiced the need to keep the airfare in US dollars for foreigners, without which the domestic airlines would struggle to survive.