Reviving the Aviation Sector

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Reviving the Aviation Sector

--BY TAMISH GIRI

On May 2, the government suspended flights after it became clear that the second wave of the Covid-19 pandemic had hit the country. Domestic flights stopped from May 3, midnight, and international flights from May 5, midnight. Initially, airports were set to reopen on May 14. However, the restrictions lasted for about sixty days before international flights resumed again on 24 June, while domestic flights restarted on July 1. The re-imposition of restrictions on air travel shattered the aviation industry further which was gradually recovering from last year’s lockdown.

Manoj Karki, managing director of Summit Air and general secretary of Airline Operators Association of Nepal (AOAN), says that the situation is grim for the airline operators at the moment. “The domestic airlines business has shrunk by 70-80 during the two lockdowns. Summit Air’s business has also declined to 30 percent,” he shares.  

Sudarshan Bartaula, spokesperson of Yeti Airlines, says that the lockdown and the limitations set on the number of passengers allowed have resulted in the shrinking of Yeti’s revenue by almost 80 percent.

According to Karki, the lockdown has resulted in the domestic airlines losing around Rs 100 million per day.

After two-months of restrictions, the government allowed airlines to operate their usual number of flights with full passengers from July 15. “We used to operate 61 flights daily prior to the Covid-19 pandemic. It declined to zero during the lockdown last year. After the second lockdown this year, we restarted gradually with 31 flights with half the number of passengers,” informs Dependra Karna, communications manager of Buddha Air, adding, “The number of flights of our airlines slowly increased after the government eased the restrictions.”

Prior to the pandemic, mountain flights from Kathmandu and Pokhara used to be a major source of revenue for domestic airlines. The two sister companies Tara Air and Yeti Airlines used to operate around 3-5 mountain flights from Kathmandu and 1-3 flights from Pokhara regularly. Likewise, Buddha Air used to operate mountain flights regularly. Now, the airlines have been forced to completely stop their mountain flights.

Meanwhile, regular flights to the trunk route airports have been growing, while commercial flights on the STOL (short takeoff and landing) routes in the rural mountains have been declining.

Bartaula says that the commercial flights of Tara Air on the STOL routes have declined to only one flight a day. He informs that Tara used to operate 38 passenger flights to Lukla and Phaplu from Kathmandu during the peak season and also used to operate regular flights to Jomsom from Pokhara, Simikot, Bajura, Rolpa, and Talcha airport from Nepalgunj. “However, most of our flights to the STOL airports have been affected currently,” he says.  

According to AOAN General Secretary Karki, most of the airlines have resorted to operating cargo flights on the STOL routes. “Currently, passenger ticket demand for commercial flights on STOL routes are at their lowest mostly due to the lack of tourists,” he says. He thinks that the demand will slightly grow by 5-8 percent in the coming tourism season. "However, this growth will depend on the pace of the ongoing vaccination drive and Covid-19 rules for travel and tourism,” he adds.

After the easing of restrictions on air travel, demand for flights on trunk routes is growing gradually. Yeti currently operates 20 regular flights to Badrapur, Tumlintar, Biratnagar, Janakpur, Simra, Bharatpur, Pokhara, Bhairahawa, and Nepaljung. Likewise, Buddha Air has increased its flights on the trunk routes, operating as many as 60 flights a day. According to airline operators, the current weather condition has also contributed to the rise in demand for air tickets for such routes. “The damage to highways in different parts of the country caused by the recent floods and landslides has made people choose air travel over road transport. Similarly, the fear of contracting coronavirus while travelling by road has also played a role in increased air ticket sales,” says Karki.

According to Karna, Buddha Air is seeing good growth in passenger movements on the trunk routes. “We can cater to more than 8,000 air travellers a day, and we are yet to meet our full potential. The number will grow gradually with the situation moving to normalcy,” he shares.

While the situation is improving gradually for fixed-wing aircraft operators, it is still grim for helicopter operators. According to the Helicopter Society of Nepal, almost 40 percent of helicopters are grounded at the moment.

In the meantime, airline operators are facing further problems with the increasing fuel prices raising operation costs. “Aircraft fuel price has increased from Rs 65 per litre to Rs 87 in over two months. The price hike has come at a time when our cost of operations exceeds revenue,” says Karki.

International Flights
However, the situation is yet to improve in the international sector. Currently, only around 10-16 international flights are operating from Tribhuvan International Airport. According to the Civil Aviation Authority of Nepal (CAAN), Nepal Airlines, Himalayan Airlines, and Qatar Airways are operating international flights on a regular basis from Nepal. Similarly, Jazeera Airways operates five flights a week to Kuwait from TIA. Meanwhile, Turkish Airlines, Salam Air and Fly Dubai operate three flights a week to Istanbul, Muscat, and Dubai, respectively. Likewise, Air Arabia operates two flights a week to Sharjah and Abu Dhabi and Malindo to Kuala Lumpur. Additionally, Malaysian Air and Air India are operating flights to Nepal from Kuala Lumpur and Delhi. In the meantime, Singapore Airlines has resumed its flights to Kathmandu after 20 years.

Earlier, 20 airlines used to operate flights from and to Kathmandu. However, Thailand, Bhutan, Bangladesh, China, and Japan have restricted their connectivity to Nepal. “Even though CAAN has opened Chinese carriers to operate flights to Nepal, there has been no response, and flights to and from China are yet to resume,” says Raj Kumar Chettri, deputy director general of CAAN.  

According to Chhetri, the country’s aviation sector has lost over Rs 17.5 billion in revenue due to the Covid-19 crisis between March and November of 2020. “However, we are yet to assess the financial loss to the sector due to the second wave of the pandemic,” he mentions.

The Covid-19 pandemic has had a devastating impact on the Nepali aviation industry, causing a 72 percent reduction in the movement of international passengers in 2020 compared to 2019. The second wave suspended flights again and labour destinations like Malaysia, Kuwait, Bahrain, and UAE banned incoming air travel from Nepal to contain the spread of coronavirus.

“A few scheduled flights resumed in July 2021, but due to the restrictions imposed by countries on air travel from Nepal, most of the fights are one-way traffic. It is a significant loss of resources for Himalayan Airlines and the nation,” says Uajjwala Dali, spokesperson of Himalaya Airlines. Himalaya operated 299 flights between January to mid-March 2020 before the pandemic. The airlines looking forward to Visit Nepal 2020 had set a target of operating 1500 flights in 2020. But they had to cancel around 660 flights from mid-March to August in 2020. The airlines operated 89 repatriation flights during this period. “With the resumption of schedule flights in September, we operated 584 flights in 2020 against a target of 1500 flights, just 39 percent of our target. We have lost 61 percent of our business,” Dali adds.

She says that though regular flights have resumed currently, sales revenue has not yet reached average levels. In 2021, Himalaya Airlines was compelled to cancel 175 flights between 7 May and 30 June due to the second wave of Covid-19. Only 12 passenger charter flights took-off during this period causing a loss of 99 percent to the company’s business in the passenger segment. “On the cargo side, 62 flights took-off to bring urgent medical supplies. As the revenue of cargo flights was extremely low, we had to operate it to maintain the cash flow,” shares Dali.

Abdullah Tuncer Kececi, Nepal country manager of Turkish Airlines observes 2020 and 2021 as being the hardest years for the aviation industry. Initially, the airlines had globally stopped operations for two months before restarting in June 2020. “We are flying to more than 245 destinations globally at the moment. Turkish Airlines will be flying three weekly scheduled flights this month from Kathmandu,” he says.

As one of the businesses hardest hit by the Covid-19 pandemic, the airline industry is looking towards the government for support on its road to recovery. The governments of other countries are helping their airlines revive by injecting cash and providing policy-level support such as waivers in fees. “Our government should also consider providing direct or indirect financial support to Nepali carriers so that they can sustain themselves in the current adverse situation,” suggests Dali.
AOAN has formally requested the central bank to introduce relief measures specifically for aviation sector in the upcoming monetary policy. They also want the aviation sector to be included in the list of most affected sectors and allowed to restructure their loans with a refinancing scheme for two years at 2 percent interest rate.

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