Study Committee Recommends Splitting Nepal Airlines into Three Separate Entities

A high-level study committee formed by the government has recommended restructuring Nepal Airlines Corporation (NAC) into three separate entities to improve its financial condition, enhance service delivery, and ensure debt repayment capacity.

The committee, formed by the government to reform the civil aviation sector, suggested dividing NAC’s operations into independent companies for international flights, domestic flights, and ground handling services. The report argues that this restructuring would allow for better management, attract investment partnerships with experienced international airlines, and revive the organization’s commercial viability.

The study highlights NAC’s alarming financial condition and advises converting the nearly Rs 50 billion debt into government equity. The report notes that although the government has invested in the airline for years, it has not provided capital investments through the national budget under state ownership. This, it says, has weakened government control and accountability.

The committee stressed that allowing such a large debt to accumulate without clear accountability is unacceptable from a governance perspective.

Flaws in Aviation Accident Investigation

The report also revealed fundamental flaws in Nepal’s aviation accident investigation system. It stated that the Safety Management Department (SMD) of the Civil Aviation Authority of Nepal (CAAN), responsible for the State Safety Program (SSP), has not been involved in accident investigations. This exclusion makes the entire investigation process structurally and theoretically flawed.

Since 1960, Nepal has recorded 94 air accidents involving fixed-wing aircraft and helicopters. The Ministry of Culture, Tourism, and Civil Aviation reported 30 accidents between 2012 and 2024, of which just 15 investigation reports have been made public.

The committee was formed by a Cabinet decision on October 18, 2024 and is chaired by former Supreme Court justice Anil Kumar Sinha, currently serving as the Minister for Industry, Commerce and Supplies. The report was made public by the ministry on Monday.

Findings on Airport Infrastructure

The committee conducted field visits to over ten airports, including Tribhuvan International Airport, Gautam Buddha International Airport, and Pokhara Regional International Airport. It concluded that most airports are commercially unsustainable and technically incomplete. Security, operational efficiency, and management mechanisms were found weak at Pokhara, Gautam Buddha (Bhairahawa), and Tenzing-Hillary (Lukla) airports.

Additional Observations and Recommendations by the committee

The committee observed that the Civil Aviation Authority of Nepal (CAAN) has not invested sufficiently in aviation safety compared to its revenue generation. It also noted that operational costs in the aviation sector remain excessively high, with elevated airport taxes, service charges, and aviation fuel prices collectively increasing passenger costs by nearly 40 percent.

Air navigation services, the report pointed out, are functioning without an internal safety monitoring system—posing potential risks to operational integrity.

To address these challenges, the committee proposed enacting separate laws to clearly distinguish between service providers and regulatory bodies, ensuring effective safety oversight and independent accident investigation mechanisms. It emphasized the need for a new Civil Aviation Act to eliminate existing legal ambiguities and streamline institutional roles.

The committee further recommended the creation of an independent body dedicated to investigating aviation accidents, with stronger implementation of its recommendations. Enhancing transparency and cooperation between service providers and regulators was also underscored as essential to improving governance and accountability within Nepal’s aviation sector.