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Dogfight In The Sky
Nepal’s private sector airlines are in a war of fight to finish as they rush to reduce their fares
By A CORRESPONDENT
If the present trend of price war continues for another few more months, Nepal’s almost all existing private airlines will declare bankruptcy affecting Nepal’s financial sector and tourism industry.
While the aviation fuel, employees' salary, maintenance cost, rental charges of aircrafts have gone up by more than one hundred percent within a year; Nepal’s private airlines are now carrying passengers in country’s four main airports in vastly reduced airfare - their current airfare is equal to what it was five years ago.
Economists say there is no justification for such reduction in fare but nobody is there to listen to the plain economics as the airlines continue to cut the fare to Biratnagar, Nepalgunj, Bhairahawa and Pokhara. In Biratnagar, the fare has come down to less than Rs.1500 (US$ 20).
From Fokker 100 Jet Aircraft of Cosmic Air to SAAB 340 of Yeti Airlines and Beach Aircraft of Buddha Air, the present fare is not sufficient to pay the lease charge of these aircrafts. “In the name of competition, the airlines are in a business to finish each other. For the short term, it will be beneficial for the passengers but it will have negative effect on the overall national economy," said an aviation analyst.
With the inception of jet aircrafts in the domestic sector by Cosmic Air, the domestic fare was drastically reduced. Fares of most of the domestic sectors with facilities to operate the jet services have fallen sharply in the last few months.
“We cannot do anything to intervene in the fare war as it is up to the airlines to decide what is suitable to them,” said a senior official at the Ministry of Culture, Tourism and Civil Aviation.
As Nepal’s tourism arrival continues to decline, the survival of other smaller airlines, which are dependent upon foreigners, is already in doubt. This year the number of tourists visiting the Khumbu area was drastically reduced and the situation is similar in places like Jomsom and Pokhara.
In a price war, country’s three main airlines Cosmic Air, Yeti Airlines and Buddha Air are competing fiercely. Although they were in not good terms for the last many years, Buddha Air and Yeti Airlines have started to share code in Biratnagar to counter Cosmic Airlines.
Nepal’s domestic passengers flow has increased sharply in the last few years. With the intensification of Maoist insurgency and uncertainty of vehicle mobility in the highway, many passengers have opted to travel by air.
According to annual report of Civil Aviation Authority of Nepal 2004, the domestic air passengers increased from mere 700,000 in 2002 to more than 924,217 in the year 2004. As the passengers grew, the number of aircrafts, too, increased in the domestic sector.
Following the suspension of operation by Necon Air and Mountain Air, the air seat demand went higher. Buddha Air had virtually monopolized the domestic sector for about a year.
Seeing huge demands of passengers, Yeti Airlines jumped to the market with three new turbo prop pressurize aircrafts. Despite the entry of new aircrafts, domestic sector was relatively competitive.
Thanks to the operation of Cosmic Air’s jet engine, the prices of Nepal’s three main routes like Biratnagar, Nepalgunj and Bhairahawa came further down. With the capacity of over 100 passengers, Cosmic Airlines jet helped increase the seats availability by many folds.
Nepal’s domestic aviation sectors – which were dominated by turbo prop aircrafts - has now witnessed the jet service. Although there are still certain technical matters that is yet unresolved regarding the air capacity of jet airlines, the passengers have found a new respite.
However, from the standpoint of economics, the current race to reduce airfare might ultimately harm country’s financial sector.
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