The airport needs to handle 10 international and 100 domestic flights to meet its daily expenses as per CAAN
-- BY TAMISH GIRI
At 6:55 am on May 16, An Airbus A320 of Nepal Airlines landed on the runway of the newly-built Gautam Buddha International Airport in Bhairahawa, marking the beginning of a new era for the Nepali aviation industry. Nepal had inaugurated its second international airport, 70 years after Tribhuvan International Airport in Kathmandu handled its first international flights.
The completion of the most-anticipated airport project brought smiles to the faces of people involved in the tourism and aviation sector. Travel trade entrepreneurs eagerly awaited the inauguration of the new airport as they believe it would work as a catalyst in ramping up international tourist arrivals.
However, the $76.1 million airport is handling only a handful of international flights. As the number is very low compared to the magnitude of investment, people have started questioning the rationale of the multi-million-dollar airport built using foreign loans.
Requesting anonymity, a tourism entrepreneur shared his disappointment over the lack of flights at the new swanky international airport. “No preparation has been made to bring in flights. I think they have made no preparation for the future. They are doing things piecemeal,” he added.
The project was built with $37 million in loans and grants from the Asian Development Bank, while the OPEC Fund for International Development has extended credit of about $11 million. According to the Civil Aviation Authority of Nepal (CAAN) - the state-owned airport operator and civil aviation regulator, the airport needs 10 international flights and 100 domestic flights to meet its daily operational cost. However, only Jazeera Airways from Kuwait and Himalayan Airlines, a local carrier, are operating international flights from the airport currently.
Jazeera Airways currently operates three flights a week to Gautam Buddha International Airport (GBIA) from Kuwait City. Though the airline started daily flights on September 16, it has again reduced the frequency to three flights a week. If news reports are to be believed, the airline is cutting flights further raising speculations over the fate of the airport.
However, an official of Jazeera Airways in Nepal, dismissed rumors that the Kuwait-based carrier was withdrawing from Nepal. According to the official, the airline enjoyed 90-100% occupancy during the Dashain-Tihar festive season. However, occupancy of outbound flights stood at only around 50%, the official added. “We currently operate three flights a week from Bhairahawa. All our inbound flights have 100% occupancy, while the outbound flights have 50-70% occupancy,” the official added.
CAAN, for a long time, has been saying that various international airlines are eager to fly to GBIA. However, industry insiders, analysing the marginal number of flights, have accused the aviation authority of misleading and circulating the wrong information to cover up its failure to bring in flights at GBIA.
Sanjeev Gautam, former director general of CAAN, said it would be wrong to point fingers only at CAAN for the failure to attract international airlines. “CAAN fulfilled its responsibility by successfully completing the construction of the airport and making it ready for flight operations. Nepal as a whole and the government has failed to utilise the airport,” he said, adding: “Had the plan been executed correctly and the airport promoted well, the airport would have been busy by now.”
Of late, CAAN has devised a plan to shift the pressure of labour traffic from Tribhuvan International Airport to ease congestion at the airport serving the capital city. GBIA could be the beneficiary of this decision.
Gautam said air traffic congestion at TIA can be reduced by about 25% after all the flights carrying labour traffic are shifted to GBIA.
Meanwhile, Gyanendra Bhul, the information officer for CAAN, said Jazeera Airways has submitted an application for increasing the frequency of flights to GBIA. He said the airline has sought permission to increase flight frequency to five times a week from the existing three. The airline has been permitted to operate two more flights in a week from the last week of November, he added.
At present, Jazeera and Himalayan Airlines operate flights to Kuwait City and Kuala Lumpur, respectively from GBIA. Bhul shared that Himalayan Airlines was planning to shift its base to GBIA and operate flights to Kuwait and Doha from Bhairahawa. According to Bhul, even Nepal Airlines, the national flag carrier, is planning to start international flights from GBIA.
CAAN has waived off landing, parking, and navigation charges at GBIA for international airlines until May 15 next year. Likewise, it has offered a 50% discount on ground handling charges from November 1, 2022, to May 15, 2023. Nepal Airlines Corporation (NAC) has been providing ground-handling services at GBIA. The national flag carrier charges $3,000 for double-aisle aircraft and up to $2,500 for single-aisle aircraft. NAC pays 15% of the ground-handling fees that it mobilizes to the CAAN as a royalty, according to Bhul.
GBIA, the international airport of 4E category, has a 3000-meter runway which is 45 meters wide. Three double-aisle aircraft can be parked in its parking bay at a time. Likewise, it can park five single-aisle aircraft. According to Bhul, the airport can support the take-off and landing of bigger jets like Airbus A380, and Boeing 787 and 777. It can handle 400 passengers every hour and plans to take charge of 15% of the air traffic of TIA by 2025.
Airports with large passenger traffic capacity are profitable. The majority of airport revenue, about 56%, is generated from aeronautical activities such as terminal, landing, and passenger charges paid by airlines. Likewise, about 40% of the revenue comes from non-aeronautical activities, such as car parking, advertising, and car rentals, and the remaining four per cent is generated from non-operating activities, such as passenger facility charges and bank interest.
CAAN, at present, is only generating income under aeronautical operations from landing, parking, navigation, communication, and ground handling. However, the aviation authority hasn't been able to collect satisfactory revenue due to limited flight operation.
The scope of revenue is likely to increase from helicopter handling, advertisements, rents and other special services requested by the airlines, Bhul added. GBIA needs between Rs 700 million to Rs 1 billion in revenue to keep afloat with its operation charges. The operational cost increases with every passing year.
In terms of business, the airport needs 15 international flights by single-aisle aircraft, ten by double-aisle aircraft and several domestic flights to meet its operational expenses. “However, Rs 500 million can meet the present expenses as there are fewer flights in operation,” Bhul added. At present, Buddha, Yeti, Shree, Saurya and Guna are operating 25 domestic flights to GBIA every day.
An official of international airlines told New Business Age that CAAN, sooner or later, will handle the airport well by bringing more international flights. He added that CAAN has been meeting with representatives of international airlines and encouraging them to start flights to and from GBIA, offering them attractive packages. The sole purpose of building the international airport in Bhairahawa is to facilitate the movement of Buddhist pilgrims to the Lumbini-Kapilvastu region. In 2019, an encouraging number of international Buddhist tourists visited the region. The number has been growing over the years and is expected to grow further in the coming days.
Untapped Buddhist market
Gautam alleges that the government has failed to promote the airport properly. South East Asia and East Asia are home to about 90% of the Buddhist tourism market. “We have failed to promote Nepal in this market. Had we done it correctly, a large number of Buddhist pilgrims would have come to the Lumbini-Kapilvastu region. It would have increased the demand for flights in the region,” he added. Similarly, Gautam suggested to the government to keep the airport busy by opening labour offices and other facilities in Bhairahawa airport to facilitate the smooth movement of labour traffic.
Tarai is the most populated region in the country. About 50% of the country’s population lives here. A significant volume of labour traffic originates in this region. By providing all labour-related offices and facilities at Bhairahawa, the government can ease pressure TIA's pressure by shifting labour traffic to Bhairahawa.