Splitting CAAN: A Rational or Risky Proposition?

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Splitting CAAN: A Rational or Risky Proposition?

On August 2, the National Assembly, the upper house of the Federal Parliament, passed the Air Service Authority of Nepal (ASAN) Bill, 2076 and Civil Aviation Authority of Nepal (CAAN)Bill, 2076. While the parliamentary endorsement has come after more than 6 years of exercise to draft the legislations to replace the existing aviation laws, this is being seen as an important step to reform the country’s aviation body. Once the bills are endorsed by the lower house and after receiving the presidential stamp, the process to split the Civil Aviation Authority of Nepal (CAAN) into two separate autonomous entities, as aviation sector regulator and as a service provider, will start.

After the separation, CAAN as the regulatory body will be responsible for 29 tasks including issuance and scrapping of airlines licences, monitoring of the aviation sector and penalising airline operators who are found violating the rules. The body will also issue certificates for recreational activities such as ultralight flights, microlight, hot-air balloons and paragliding. Similarly, it will also provide security supervision to the organisations providing air security, airport operators, airline operators and other service providers.

Meanwhile, ASAN as a service provider entity will look after construction, the up-gradation and operation of the airports, other aviation infrastructure such as helipads and air navigation services. Likewise, it will be responsible for providing ground handling services, determining visual and instrument flight rules, preparing and implementing aeronautical charters and approving flight schedules and permits for flights.

According to Raj Kumar Chhetri, deputy director general and spokesperson of CAAN, removing Nepal's airlines sector from the European Union Aviation Safety Agency (EASA) blacklist was the main reason for the restructuring of CAAN. “We have been putting all our efforts into this. The restructuring of CAAN is the bottom line for Nepali aircraft to enter European airspace,” he says, adding, “We have expectations that the separation of the aviation authority will enhance our air safety and ensure the EASA about our safety standards.”

However, groups of employees oppose the split of the aviation body. Five employee unions of CAAN have called for a strike, and on August 12 they locked the office of the director general while demanding that the bills be withdrawn. Union leaders say that employees fear that splitting CAAN will weaken the regulatory body, and the proposed service provider would be privatized in the future. But officials from the body say that such fears are unfounded, and the split will not only strengthen CAAN but also the entire aviation sector will benefit from it.   

After the organisational restructuring, the regulatory body and the aviation service entity will have their own staff. At present, CAAN has 1,225 employees.

Shrawan Yadav, president of Nepal National Employee Association and former president of CAAN Trade Union says that the authority was established in 1998 BS under the Civil Aviation Authority of Nepal Act, 1996 as a result of years of rigorous exercise and brainstorming by government officials and aviation experts. He thinks that the government should follow the mechanism of the Civil Aviation Authority of Singapore, which is a single entity and has been regulating and managing the southeast Asian country’s large aviation sector. “We acknowledge that CAAN indeed needs improvements and that can be done internally. But we also believe that splitting the aviation authority into two entities can result in huge damage to the aviation industry in the future,” he says.

According to him, at a time when 85 percent of CAAN's revenue has declined due to the impact of Covid-19 on air travel, sustaining two separate entities with similar responsibilities will be a risky proposition. “CAAN is a relatively new institution which was established just 23 years ago. We suspect that the split is a pretext to the privatization of the body which will not bode well for the country’s aviation sector," he says, adding, “We have been opposing the idea of splitting it up since 2013 and will continue to oppose it until the bills are withdrawn.”

He claims the bill was introduced in an unplanned manner and it will make air services costlier for general travellers and airline companies by handing over the management of Tribhuvan International Airport to the private sector. “Last year, employee unions made an understanding with the CAAN management that the regulatory body will be made strong and independent, and we were expecting the bill to come accordingly,” says Yadav.   

Since 2013, EASA has banned all Nepali airlines from flying into European space citing air safety concerns. The blacklisting came after the International Civil Aviation Organization (ICAO), a specialised UN agency, listed Nepal in its Significant Safety Concern list. The Himalayan country was removed from the ICAO list in 2017, but EASA has still kept its restrictions on Nepali airlines.

The two bills to split CAAN were drafted as a result of the urges made by ICAO and EASA to reform CAAN in order to address their safety concerns. ICAO has been suggesting that the regulatory body be split into two separate entities since 2009.

However, CAAN officials say that there is no guarantee EU will remove the ban on Nepali airlines even after splitting the aviation authority. “The proposed organisational restructuring will benefit the Nepali aviation sector. Nonetheless, this step alone cannot guarantee the removal from the EU blacklist,” says Chhetri.

According to Yadav, certain areas can be improved in terms of air safety to reform CAAN rather than splitting the body. “The Effective Implementation (EI) Rate of safety standards of the Nepali aviation sector is below average set by ICAO. Likewise, the work of the Aircraft Accident Investigation Commission has not been efficient. We will achieve a good level of air safety by improving these two areas,” he says.  

In the meantime, professionals working in the Nepali aviation sector stress on the necessity for all stakeholders to work in collaboration in one concentrated effort to end the EU ban. “The ban on Nepali airlines is likely to be lifted if the aviation body after the organisational restructuring works effectively and meets the air safety benchmark set by EASA,” says Vijaya Lama, a captain with the Nepal Airlines Corporation (NAC). According to him, the Nepali aviation sector has improved a lot in recent years and airlines have been following ICAO’s air safety standards strictly. “However, the aviation authority has a huge role to play in this regard. If the body works effectively, we can hope both NAC and Himalaya Airlines will be flying over European airspace in the foreseeable future,” he says.

In 2020, EASA said that it was aware of the progress Nepal had made in air safety and the introduction of the new aviation bill in the Federal Parliament. "The reforms will be helpful to end the restrictions placed on Nepal’s airlines to enter the European airspace,” EASA noted in a statement.

Lama suggests that the aviation authority should do its homework to find out what the benefits are in the proposed split of CAAN. “A team of experts should be appointed to figure out whether the steps taken for restructuring of the authority are risky or beneficial for the aviation industry,” he says, adding, “The decision has to be made based on findings, and the regulatory body has to formulate rules and regulations based on international standards to increase its institutional efficiency.”

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