For years, Nepal’s aviation sector has functioned under a system widely criticized for its inherent conflicts of interest. The Civil Aviation Authority of Nepal (CAAN) has served as both regulator and service provider—a dual role that international aviation bodies have long argued undermines safety oversight and efficiency. Now, after more than a decade of discussions, legislative delays and bureaucratic roadblocks, the government has taken a definitive step toward reform.

The introduction of two crucial bills—the Air Service Authority of Nepal Bill, 2024, and the Civil Aviation Authority of Nepal Bill, 2024—into the House of Representatives signals a turning point in the aviation sector. Once passed, these bills will restructure Nepal’s aviation sector by separating regulatory and service functions, aligning the country’s civil aviation framework with international standards. “To align Nepal’s civil aviation with international standards and enhance efficiency, we must establish modern, well-equipped airports and streamline aviation services,” Minister for Culture, Tourism and Civil Aviation Badri Prasad Pandey, while tabling the bills in the lower house. Pandey is confident that the bills will gain parliamentary approval before his departure for the International Civil Aviation Organization (ICAO) Asia-Pacific Ministerial Conference next month. This approval will finally enable Nepal to take a decisive step toward safer, more efficient aviation governance—potentially attracting greater international investment and the eventual lifting of the EU’s ban.

The restructuring of CAAN into two separate entities will mark a turning point for Nepal’s aviation industry. Former CAAN Director General Sanjiv Gautam said this restructuring will enhance the efficiency of the regulatory body, enabling it to operate more effectively. “Strengthened oversight will undoubtedly improve safety standards, making Nepal’s skies safer—a priority for all of us. Likewise, I believe that separating the service provider will lead to greater operational efficiency, ultimately improving service delivery across the aviation sector,” he added.

A Long-Awaited Reform

The push for restructuring Nepal’s aviation sector first gained momentum in 2009 following an audit by the ICAO. The audit recommended that Nepal separate its aviation regulatory and operational functions to improve oversight and eliminate conflicts of interest. The urgency of reform was further reinforced during ICAO President Roberto Kobeh Gonzalez’s visit to Nepal in 2012.

Despite repeated commitments by successive governments, actual reform has been elusive. The European Union (EU) has been particularly vocal about Nepal’s regulatory shortcomings, citing them as a primary reason for banning Nepali airlines from its airspace in 2013—a restriction that remains in place to this day. The new bills aim to rectify these longstanding issues by creating two distinct entities, Civil Aviation Authority of Nepal (CAAN) which will be responsible for regulatory oversight, licensing and enforcement of safety protocols, and Air Service Authority of Nepal (ASAN) which will look after airport operations, air traffic management and aeronautical service delivery.

This separation is expected to improve regulatory oversight, strengthen Nepal’s efforts for removal from the European Union's air safety list, and attract foreign investment. Additionally, by streamlining airport services and improving passenger experiences, the move could provide a significant boost to Nepal’s tourism industry. The restructuring is also expected to enhance efficiency and encourage greater private-sector involvement. “Investors are reluctant to engage in a system where regulatory and service functions are intertwined,” said an aviation business analyst. “This reform is a crucial step toward transparency and improved governance.”

Delays and Roadblocks

The reform process has been plagued with delays. The first legislative effort to separate CAAN’s functions was made in 2020 when a bill was registered in the National Assembly. Although the bill was approved on August 2, 2021, it faced strong opposition from CAAN employee trade unions and stalled in the House of Representatives. Political instability and shifting government priorities further impeded its progress.

In May 2022, the government attempted to reintroduce the bill. However, legal complexities and resistance from vested interest groups resulted in further delays. Former Minister for Culture, Tourism and Civil Aviation Sudan Kirati championed the separation in a 2022 Cabinet meeting. However, his efforts encountered bureaucratic hurdles.

Challenges Ahead

While the introduction of these bills marks significant progress, challenges still remain. Resistance from CAAN’s employee trade unions, whose members fear job losses or reduced benefits under the new structure, is one of the main challenges. Additionally, bureaucratic inertia and political negotiations could slow the process.

Experts also warn of potential policy obstacles. Historically, aviation sector reforms in Nepal have been derailed by vested interest groups and political maneuvering. While the bill has received cabinet approval, ensuring its smooth passage through Parliament will require strong political will and proactive stakeholder engagement. Gautam, however, is optimistic, pointing out that the bills have already cleared the cabinet stage. “Considering Parliament’s track record in implementing aviation amendments, I believe it will be passed successfully,” he stated.

Safety concerns have long affected Nepal’s aviation sector which make these reforms urgent. In the past two years alone, Nepal has recorded eight aviation accidents—six of them fatal—resulting in over 100 deaths. The Yeti Airlines crash in January 2023, which claimed 72 lives, was Nepal’s deadliest aviation disaster since 1992. Investigations have repeatedly cited regulatory lapses and inadequate enforcement of safety protocols as contributing factors.

Given these tragedies, aviation experts say that Nepal cannot afford further delays in implementing these reforms. “The restructuring of CAAN is not just a regulatory issue—it’s a matter of public safety,” an aviation safety specialist stated. “Without independent oversight, the risks remain high.”

Next Steps

Nepal’s aviation stakeholders—from policymakers to airline operators—will now be watching closely as the bills move through Parliament. The passage of these bills would not only signal a commitment to international aviation safety standards but also lay the foundation for a more transparent and efficient aviation industry capable of supporting Nepal’s aspirations as a growing tourism hub.

Nepal’s long-overdue aviation reform is finally coming true. These reforms will enable the country to modernize its aviation governance, improve safety oversight and attract foreign investment. As the legislation moves through Parliament, all eyes will be on Nepal’s lawmakers to ensure this landmark reform takes flight.

(This news report was originally published in    March 2025    issue of New Business Age Magazine.)