Deregulation is opening up Nepal to start-up airline operations.
Paul Lewis/KATHMANDU
FOR ADVOCATES OF A more-liberalised Asian aviation scene, the mountain kingdom of Nepal presents an encouraging picture. This impoverished nation of fewer than 21 million inhabitants supports seven domestic fixed-wing and helicopter operators, and is now pushing to broaden its horizons by opening up access to the region.
Wedged between neighbouring giants India to the south and China to the north, Nepal remained isolated from the rest of the world for many years. With the post-war popular discovery of the Himalayas, however, Nepal has become a trekking and mountaineering mecca for more than 330,000 tourists a year.
Against a backdrop of considerable political and economic upheaval, Kathmandu scrapped Royal Nepal Airlines' (RNAC) 33-year preserve in 1992 and opened up the country's domestic-airline market to competition.
In four years, start-up turboprop operators Everest Air, Necon Air and Nepal Airways have cut RNAC's home market share to around 30%. At the same time, Asian Airlines, Dynasty Aviation and Himalayan Helicopters, along with Everest and Nepal, have opened up the rotary-wing industry with a mix of Mil Mi-8/17 and Eurocopter AS350 Ecureuil machines.
The state-run carrier says that, while privately owned newcomers have been quick to cash in on Kathmandu's lucrative scenic mountain flights and trunk routes to Bhadrapur, Bhairawa, Biratnagar and Pokhara, Nepal's loss-making "social-service" routes have proved less popular.
For many of Nepal's 32 more remote grass-strip destinations, such as Lukla at 9,350ft (2,850m), RNAC's fleet of de Havilland Twin Otters represents the difference between a 40min ride to Kathmandu and a week's walking.
In an effort to try to spread the load more evenly, Nepal's carriers have been instructed by the Government to adhere to a 60:40 ratio of local passengers to tourists. "The problem is, they are not following this," complains RNAC corporate director T P Gauchan.
While some carriers admit privately to having fallen short of this target, they counter that RNAC has the advantage of being able to use its international services to cross-subsidise uneconomical domestic operations.
FARES DIFFERENCES
Domestic air fares for Nepali nationals typically range between 30% and 40% of those paid by foreigners. On Necon's main Kathmandu-Biratnagar route, which accounts for almost 43% of the airline's revenue, foreigners are charged $70, compared to $29 for a local passenger.
"It's not that foreigners are paying more, it's that Nepalis are paying less," states Necon chairman and former RNAC managing director Anoop Rana. He estimates that, on one of Necon's 15min sectors, each fare averages out at around $5-7 an hour, compared to $40-50 an hour in Europe.
"You can't even get a cab in New York for that," argues Rana. "If [the Government] forces us to keep fares down, we'll only fly once a week and no-one will benefit."
The only other real solution, say Nepal's private carriers, is to extend the liberalisation process begun in 1992 and open up the country's international services. Nearby India, with its population of nearly 1 billion and an increasingly affluent middle class, is viewed in particular with strong interest.
"Domestic services do not make much money. We must go across the border," says Everest chief executive R P Pradhan. "India is the main market for us and, if given permission, we would like to go there."
Nepali Prime Minister Sher Bahadur Deuba suggested during a recent visit to New Delhi that it was time to review the 1972 bilateral air-services agreement with India. Proposals include multiple-carrier designation, raising each side's weekly capacity from 4,000 to 12,000 seats and adding new destinations.
None of Nepal's would-be regional fliers yet has the capital or experience to challenge directly RNAC's Boeing 757 and Airbus A310 services to Bombay, Calcutta and New Delhi. The airlines are instead offering to improve frequency with smaller, high-speed, turboprops, such as the Saab 2000, and to open up new secondary points in northern India.
"We're not going to compete with RNAC, we're going to complement it," claims Pradhan. Suggested new cross-border city pairs include Biratnagar-Calcutta, Bhairawa-Varanasi, Pokhara-New Delhi or Gaya, Kathmandu-Patna, Nepalganj-Lucknow.
RNAC, however, remains strongly opposed to any revision of the treaty, which grants new concessions to Nepal's domestic carriers. "A bilateral should be in the interests of the national carrier," states Gauchan. "Delhi is our bread and butter. If they start operating there, it definitely won't be a level playing field."
While it is clear that RNAC's principal money-earning routes to Hong Kong, Osaka and Frankfurt are in no way threatened, there is suspicion that revision of the Indian bilateral represents only the thin edge of a wedge.
Source: Flight International
