Civil aviation body proposes extra levy to fund provincial air connectivity scheme

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Passengers on domestic flights may soon have to pay extra as the civil aviation body has proposed increasing the airport service charge to fund its ambitious regional air connectivity scheme that aims to connect unserved and under-served routes of all seven provinces with their respective capitals.

The Civil Aviation Authority of Nepal currently charges Rs200 per passenger as an airport service fee in the domestic sector, except in remote airports. The authority has recommended raising the service fee that is added on the air ticket to Rs300 per passenger.

“We have recommended the government to increase airport fee by Rs100 per person and this fund could be used to provide viability gap funding for airlines to offset the high cost of operating such services, particularly in the remote airfields,” said Rajan Pokhrel, director general of the Civil Aviation Authority of Nepal.

For flights operated from provincial headquarters that last up to 30 minutes, airfares will be capped by the government to make it affordable, said Pokhrel.

“We can raise Rs300 million annually by levying the extra fee and it’s sufficient to fund the domestic airlines in a bid to encourage them to fly to remote destinations by dangling subsidies to offset the high cost of operating such services,” he said. “The provinces will also contribute a certain amount.”

Pokhrel said that through the fund collected by the civil aviation body, the respective provincial governments would subsidize at least 40 percent of airlines seats, which is the break-even load factor of any domestic aircraft.

This means the airline will get financial compensation for 40 percent of their seats even if they fly empty.

“The proposal of the new modality has been sent to the Civil Aviation Ministry for its approval and further discussion,” said Pokhrel. The civil aviation body will recommend the capped airfare, which will be studied by the ministry before approval.”

Last week, a pilot project was launched in three airports—Bajhang, Baitadi and Doti—in Sudur Pashchim Province by resuming flights from its province capital Dhangadhi.

Pokhrel said that flights will soon resume from Sanfebagar airport in Achham.

In Province 1, flights could be operated from Biratnagar airport to Bhojpur, Taplejung, Ilam, Lukla, Phaplu and other airports.

Pokhrel said that almost all locations where airports are built have motorable roads but it takes 6 to 7 hours to reach there. Flights can cut that time to 30 minutes.

Nearly two decades ago, the government had set up the Remote Area Air Service Fund in a bid to encourage domestic airlines to fly to remote destinations by giving them subsidies to offset the high cost of operating such services.

The service fund was used to subsidize operations in remote areas as most carriers were reluctant to fly to out-of-the-way places as it is not profitable.

As per government policy, private airlines are required to schedule at least 40 percent of their services in the rural sector. If they don’t fly to remote destinations, they have to deposit money in the service fund that is used to compensate other airlines. However, these measures have not been accomplished or even implemented.

The service fund was set up under Civil Aviation Regulations 2002 of the Civil Aviation Authority of Nepal, but it was cancelled after six months. Ministry officials said that more than Rs4 million had been collected in the fund.

The civil aviation regulations require airlines carrying foreign tourists to contribute at least $4 per passenger for mountain flights and at least $2 per passenger for other sectors. Charter airlines and helicopter services have to deposit 2 percent of the fare in the fund.

The Human Rights Commission and parliamentary committees have, on different occasions, directed the government to provide easy and affordable flight services to people in remote areas to fulfil its social obligation.

Pokhrel said that they would adopt a different modality now. “We won’t raise funds from airlines not flying to remote areas in order to pay compensation to those who do.”

Most remote areas suffer from lack of air services as private carriers don’t want to fly there due to economic reasons. Airline officials said that aircraft insurers and reinsurers had described Nepal as a danger zone for aviation and jacked up premiums accordingly.

Besides, procuring new aircraft that cost millions and flying them on remote sectors is not viable as operation costs are so high, they said. Due to these reasons, airlines are hesitant to serve remote airfields.

Nepal has a large air network consisting of 49 airports but only seven airports make profits.

Among them, 29 are short take-off and landing airstrips. More than 18 airports in the hills and mountain regions have been classified as social airports, meaning that they do not generate revenue but are a lifeline to people living in remote regions.

According to Pokhrel, 26 airports have now been blacktopped.