National 5 (Spotlight Weekly)

Fighting To Fly

Fee increases by the Civil Aviation Authority Nepal batter private airlines, already hard hit by insurance premium hikes

By A CORRESSPONDENT

If private airlines are disallowed to continue with their latest increase in minimum air fares, most carriers would be forced to declare bankruptcy. The Civil Aviation Authority Nepal (CAAN), which has increased registration fees by up to 400 percent, seems to be in no mood to allow private airlines to keep the air-fare hike.

"The decision of airlines operators to increase their fares is illegal and we will not allow them to implement it," said Medini Prasad Sharma, director-general of CAAN.

After revising their fares by more than 20 percent just a few weeks ago, private airlines have decided to go in for another hike. According to the operators, the new fares match the increase in overall operation costs they are experiencing.

Government intervention has always created problems in Nepal's industrial sector. When officials try to impose their own decisions without understanding the realities of the industry, they only create confusion and panic. In a free-market economy, moreover, the role of the government is to regulate the fares, not to impose its own ideas arbitrarily.

Contrary to its own liberal policy of not intervening in the sector, the CAAN has sent a wrong message to investors. Reeling from declining tourist arrivals in the aftermath of the September 11 terrorist attacks in New York City and Washington DC and an upsurge in Maoist violence at home, the restructuring of aviation taxes has added to the burdens of private airlines.

The CAAN increases aviation fees such as licensing on a dollar basis. Just a few months back, the authority had increased landing, housing and parking charges by four times. Whenever the CAAN increases its fees and other taxes, it just tries to justify its decision in a way that undermines the economic burden private airlines have to face. Interestingly, the CAAN tends to intervene in one way or the other whenever private airlines try to change the fares.

The Civil Aviation Authority Act and regulation permit private airlines to increase their fares. According to the regulation, the airlines can increase fares not exceeding the upper and lower sides of the specified basis.

"In other countries, governments have introduced many package to save the airlines industry following the slump in tourism. But our policy makers have increased airport taxes by several folds," said Birendra Bahadur Basnet, vice-president of Private Airlines Operators Association.

Although the CAAN has asked the private airline operator to withdraw their decision to raise air fares by 7-12 percent, the carriers refuse to budge. "If the CAAN does not agree to our demand, we will be compelled to suspend our flights," a senior executive of association said. "Why are airline operators required to justify their fares when the CAAN increases its fees by 400 percent?" asked one operator.

As the CAAN and private airlines are in no mood to compromise, it seems that flight suspension is inevitable. "Our only option is to go for indefinite suspension of flight." Confrontation at this moment will not benefit anyone, especially when the wider tourism industry is in the midst of a deep slump. Both sides need to come out with a solution that would rescue the private airlines, averting another collision on a trail already strewn with enough debris.