Why Have Airfare Prices Risen by 50% in Nepal and How Are They Determined?
Photo Credit, Ram Bahadur Rawal
The fuel price hike triggered by the crisis in the Middle East has significantly reduced both domestic and international air passenger numbers in Nepal, according to officials.
The Civil Aviation Authority’s information officer, Gyanendra Bhul, states that domestic air passenger numbers in Nepal have dropped from 12,000 daily to just 8,000.
“According to Tribhuvan International Airport and overall statistics, passenger numbers have decreased by 30 to 35 percent,” he explained. He added, “Along with the drop in passengers, flight numbers have also been reduced by nearly 30 percent,” with airlines cutting certain flights to adjust operations.
Data from the authority shows that from April 1 to 9, 72,000 passengers traveled via domestic flights, averaging about 8,000 passengers daily.
Airlines have also reduced flight frequencies due to increased fuel prices and fewer passengers.
For example, Buddha Air, which used to operate 14 daily flights from Kathmandu to Pokhara, now only runs 10. Similarly, Yeti Air has reduced from 10 flights to about 5 or 6 daily.
The authority reports that Middle Eastern destinations have been affected, causing challenges for international flights as well.
“Since international tickets are booked two to three months in advance, there is no immediate issue. However, tensions in the Middle East have affected flights to Doha and Dubai,” Bhul explained.
“Previously, passenger numbers were around 15,000, now reduced to 14,000, which is not a significant drop.” Despite over 90 percent of past flights running regularly, flights to Kuwait have yet to resume, the authority added.
Experts say the 15 to 20 percent increase in international airfare has started impacting passenger numbers within a few months.
According to Nepal Airlines Corporation, Nepal’s national carrier, more than 70 percent of flights are currently operational.
The corporation’s spokesperson, Devendra Pun, said, flights to Doha operated five times a week but are now limited to one per week with prior approval. In Dubai, flights are operating almost normally.
“The rise in fuel prices directly adds to passenger tickets, making fares more expensive,” Pun emphasized.
Reductions in Domestic Flights
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Private airlines in Nepal have had to reduce domestic flights by up to 30 percent due to rising fuel and dollar prices.
Rupesh Joshi, Buddha Air’s marketing director, said operators are facing a double burden from fuel and dollar price hikes.
“We’ve been hit in two ways — first by the rising cost of fuel, and second because spare parts and maintenance costs are in dollars, so when the dollar value increases, it also impacts us,” Joshi explained.
According to Yeti Air spokesperson Sudarshan Bartoula, airlines must pay fees to the authority in dollars as per regulation.
“Most of our expenses are in dollars — from aircraft, spare parts, pilot training, to payments made to the authority. These are all calculated in dollars but paid in Nepalese rupees,” he added.
Due to runway expansion at Tribhuvan Airport, planes are required to hold for extended periods while waiting to land in Kathmandu.
Airlines have also expressed dissatisfaction with the government’s removal of provisions allowing foreign nationals to pay fares in dollars for flights to the Far-Western and Karnali regions.
How Are Airfares Determined?
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According to the authority, airfare is determined based on four key factors.
The first is the cost rate set by the authority for the airline company. The last review of the cost rate was done in 2016 (2073 BS).
This cost rate should be reviewed every two years and includes expenses such as aircraft purchase, employee and crew salaries, and operational costs.
The second factor is fuel prices, known in the aviation industry as fuel surcharge.
“For example, the fuel consumption and cost per liter when flying from Kathmandu to Dhangadhi or Biratnagar is used to calculate this charge,” stated Bhul.
The third factor is the Passenger Service Charge (PSC), a tax imposed by airports on airlines. “This is a service charge passengers pay as part of their ticket for using the airport,” Bhul explained.
The fourth component is government revenue, which includes a 13 percent value-added tax.
The authority does not regulate international airfare, which is determined by supply and demand.
“However, we regulate domestic airfare,” Bhul said.
The regulatory body sets minimum and maximum fare limits within which airlines determine their ticket prices.
Airfare Variations by Aircraft Type
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In Nepal, fares for aircraft with fewer than 19 seats generally do not differ significantly from those of larger planes.
“Twin Otter planes flying from Kathmandu to Lukla or Nepalgunj to Simikot follow a ‘single fare’ system, meaning uniform fares across all seats. Larger aircraft apply a multi-fare system,” Bhul explained.
Planes with various fare categories offer tickets ranging from minimum to maximum fares for sale.
Typically, companies running domestic flights sell tickets up to five years in advance, but on aircraft with fewer than 19 seats, all tickets have the same price.
For example, tickets from Kathmandu to Dhangadhi are priced from a minimum of NPR 11,600 to a maximum of NPR 22,335.
Depending on the ticket category, passengers may or may not have the flexibility to modify their flight schedule.
For the cheapest tickets priced at NPR 11,600, passengers pay just NPR 10,000 as base fare, with the rest covering airport taxes and VAT.
Fuel costs account for 35 to 40 percent of airfares, according to the authority’s information officer Bhul.
Since early April, aviation fuel prices have surged from NPR 127 per liter to nearly NPR 257 per liter. This nearly 100 percent increase in fuel cost has driven airfare increases of around 50 percent.