In fiscal year 2023/24, three major domestic carriers - Buddha Air, Yeti Airlines, and Shree Airlines - added seven aircraft to their fleets to meet the rising demand from air passengers. Shree Airlines added three, while Yeti and Buddha inducted two each to their fleet.

With major highways leading to key tourist cities either in poor condition or under upgrade, the fleet expansion by these airlines is a logical response to the increased passenger volume on major routes such as Pokhara, Chitwan, and Bhairahawa.

It has been five years since the construction of the Chitwan-Butwal road section of the East-West Highway began. This 115-kilometer stretch, which is crucial for connecting the eastern and western parts of Nepal, remains in poor condition even though the original completion deadline expired two years ago. The deadline has already been extended twice, while a third extension is likely very soon. This road section is vital as it links Kathmandu with major cities such as Butwal, Bhairahawa, Nepalgunj and Dhangadhi. Similarly, the upgrade of the Prithvi Highway, which connects the capital Kathmandu with the tourism hub Pokhara, is still ongoing. With these major highways yet to be completed, airlines have responded by increasing their flight frequencies from Kathmandu to Pokhara, Nepalgunj, Bhairahawa and Dhangadhi.

Recently, Buddha Air, the largest domestic carrier in Nepal, added an ATR-72 aircraft to its fleet. With this addition, the number of aircraft in Buddha’s fleet has increased to 18 - three ATR-42s and 15 ATR-72s. Similarly, Yeti Airlines, the second-largest carrier in Nepal, recently added two ATR-72s to its fleet, bringing its total to seven ATR-72s. The airline is planning to add three more aircraft this year to increase its market share. Shree Airlines has also expanded its fleet by adding three aircraft.

Sanjeev Gautam, former Director General of Civil Aviation Authority of Nepal (CAAN), attributed the rising demand for flights to poor conditions of major highways which have led more travelers to switch to air travel. This increased demand has, in turn, prompted airlines to expand their fleets, he added.

Nepal carriers served a record 4.4 million passengers in 2022 - the highest number ever. The significant uptick in air passenger numbers was not only driven by aggressive promotional efforts by flight operators but also the bad road conditions. It was a significant recovery compared to 2020 when domestic airlines saw only 1.45 million passengers - a 54.28% drop from 2019. The air passenger numbers increased to 3,576,942 in 2021. In 2023, however, the number fell to 4,150,326 passengers.

Buddha Air currently operates 73 flights a day including 17 in the Pokhara sector, 11 in Bhairahawa, nine in Biratnagar, six in Bhadrapur and five in Nepalgunj. Yeti has 33 scheduled daily flights including 10 in the Pokhara sector, six each in Bhairahawa and Biratnagar and two in Nepalgunj. Shree on the other hand operates 21 flights a day, including five in the Nepalgunj sector, four each in Dhangadhi, Nepalgunj and Biratnagar and two in Pokhara. These three major carriers are working to expand their flights to key sectors such as Pokhara, Bhairahawa and Biratnagar.

An official of CAAN told New Business Age that these airlines are in consultation with the regulatory body to increase flights to major destinations like Pokhara, Bhairahawa, Nepalgunj and Biratnagar.

Buddha Air operated the highest number of flights, totaling 46,262, in 2023. The airline also led in passenger movement, with 2,577,618 passengers traveling to various destinations. Similarly, Yeti Airlines had 13,614 flights, carrying 717,030 passengers. Shree Airlines moved 605,338 passengers through 10,380 flights.

Air passenger numbers fell in 2023 compared to 2022 due to various factors including slowdown in economic activities, high taxes, and several crashes. These factors led to a 7.07 percent drop in passenger numbers compared to 2022, equating to a loss of 315,826 passengers. Despite this, Nepal’s domestic airlines, comprising nine fixed-wing operators and 12 helicopter operators, served 4.15 million passengers during the year.

Several policy changes also impact air passenger numbers. The government imposed a 13% VAT on air tickets from mid-September 2023, making flights more expensive. Also, the Civil Aviation Authority of Nepal (CAAN) doubled the service charge for domestic passengers and tripled it for international passengers. As a result, domestic flights declined in 2023 by 10.36% compared to 2022, with an average of 266 daily flights, down from 297 in 2022.

Despite these challenges, there is optimism within the industry. Business insiders said that domestic airlines in 2024 have seen positive growth, with an almost 95 percent occupancy rate before the monsoon season.

However, airlines report that domestic passenger numbers have not seen a significant rise recently.

Airliners remain optimistic that demand for flights will increase from September when the new tourism season begins. The demand for air seats is expected to peak in October during the major festival season when Nepalis travel to their hometowns to reunite with their families.

Buddha Air aims to become the largest operator of ATR aircraft in South Asia. The airline's current fleet includes 15 ATR 72 and 3 ATR 42 aircraft, with recent additions of three ATR 72s. The airline has plans to expand its fleet further.

"We recently added an ATR 72-500 to our fleet and are always on the lookout for more," said Rupesh Joshi, Buddha Air's Director of Marketing, Sales, and Ground Handling. “However, second-hand ATR 72-500s are scarce and the ATR 72-600s, although available, are more expensive."

Buddha Air currently operates 75 daily flights and holds 60-65% of the domestic market share. The airline, which has a capacity of 10,500, flies 8,000-9,000 passengers daily. “We expect to reach around 10,000 daily passengers by September,” Joshi added.

However, operational constraints at TIA, which will be closed for 10 hours daily from November 8 for maintenance, will limit the availability of new slots for airline companies. This has impacted Buddha Air's plans to add more aircraft immediately.

Gautam, however, explained that this won’t impact domestic carriers much as that the airport will primarily close during nighttime hours. “The airport is closed from 10 pm to 6 am with the peak maintenance period expected to last up to 10 hours. I don't think it will have a major impact on domestic operations,” he added.

Meanwhile, Yeti Airlines, another major player on trunk routes, currently has a fleet of seven ATR 72-500 series aircraft. It recently inducted two ATR 72s to its fleet. Yeti flies to eight major trunk destinations, with 10 daily flights to Pokhara and six each to Bhairahawa and Biratnagar from Kathmandu. The airline holds about 20-25% share of the domestic market and aims to increase this share with its fleet expansion.

“We plan to add three ATR-72-600 series aircraft by December 2024,” said Sudarshan Bartaula, the spokesperson for the airlines. "We are currently carrying around 3,000 passengers daily, which is not our highest due to the off-season. The number will grow from the coming tourism season," he added.

Unlike Buddha and Yeti, Shree Airlines has no plans to expand its fleet in 2024. However, with the recent addition of two Bombardier Dash Q400 aircraft, Shree Airlines now has four Bombardier CRJ and six Bombardier Dash Q400 aircraft.

“We are operating the new aircraft on our normal routes which include Dhangadhi, Nepalgunj, Surkhet, Bhairahawa, Pokhara and Biratnagar,” Anil Manandhar, the corporate manager of Shree Airlines.

The airline plans to resume its flights on the Bhadrapur route which were halted for almost a year due to a lack of fleet. "As we have added new aircraft, we will soon resume flights on the Bhadrapur route,” Manandhar said. “We will also conduct test flights to Tumlingtar before starting scheduled ones."

Shree Airlines currently makes 22-25 take-offs a day, with six flights to Nepalgunj and four to Dhangadhi from Kathmandu being the highest numbers route-wise. "We have an average daily passenger flow of 1,500-1,600, sometimes reaching 1,800, but our maximum capacity is around 2,000 passengers,” Manandhar explained.

Meanwhile, with the peak business season approaching, which coincides with the tourism and festival season, some say the price war cannot be ruled out. Gautam is optimistic that ticket fares will decrease and benefit all the stakeholders. “Airlines are likely to focus on volume rather than substantial profits, potentially leading to reduced fares for passengers,” he said. “While airlines will not compromise on their minimum operational costs, the reduction in fares is expected to benefit passengers significantly and airlines in the long run.”

Pokahra has seen a surge in flight numbers after airlines started operating to the new international airport in the lake city. The three major carriers are operating a combined 27 flights daily to Pokhara - a significant increase from the previous 15 flights. This growth has been beneficial for domestic airlines, according to a CAAN official.

Manandhar, however, said that the weather in Pokhara, during evening hours, is unpredictable, often forcing carriers to reschedule their flights. “That is why we are planning to add late-night flights to Pokhara," he added.

During the peak of the forest fire season a few months ago, Pokhara experienced a significant decline in aircraft arrivals due to poor visibility. Airlines operated flights in the region on only three days over a two-week period. Similarly, with the onset of the monsoon season, the number of flights further decreased, leading to only 20 percent of daily flights being operational.

 

(The report was originally published on the August, 2024 issue of the  New Business Age magazine .)