The government has presented two bills in Parliament aimed at splitting the Civil Aviation Authority of Nepal (CAAN) into separate regulatory and service-providing entities.

Minister for Culture, Tourism and Civil Aviation, Badri Pandey, introduced the ‘Bill to Establish and Manage the Air Service Authority of Nepal, 2081’ and the ‘Bill to Amend and Integrate Laws Related to the Civil Aviation Authority of Nepal, 2081’ in the House of Representatives on Tuesday, February 25.

“I present these bills to align Nepal’s civil aviation services with international standards and enhance their reliability,” Pandey stated during the session.

Long-Awaited Reform Amid Safety Concerns

The move follows years of criticism over Nepal’s aviation safety standards, with CAAN’s dual role as both regulator and service provider being cited as a key issue. Aviation experts argue that this structure creates conflicts of interest and weakens regulatory oversight. Currently, CAAN handles both regulatory oversight and commercial operations, including airline supervision and airport management, leading to potential conflicts.

In 2013, the European Union (EU) banned Nepali airlines from flying to its member states due to poor safety standards, a ban that remains in place despite repeated commitments to reform. 

Since 1955, Nepal has recorded over 100 air crashes, resulting in more than 900 fatalities, according to CAAN. In the past decade alone, nearly a dozen air accidents have claimed over 200 lives.

The urgency of aviation reforms was highlighted by two fatal crashes within two weeks last year. On July 24, a Saurya Airlines Bombardier CRJ 200 (registration 9N-AME) crashed during takeoff at Tribhuvan International Airport, killing 18 of the 19 people on board. The aircraft was on a ferry flight to Pokhara for maintenance. On August 7, an Air Dynasty helicopter crash in Nuwakot claimed five lives. Preliminary investigations into the Saurya Airlines crash pointed to failures in both regulatory oversight and operational practices.

International Pressure and Previous Attempts

The International Civil Aviation Organization (ICAO) and the EU have long urged Nepal to separate CAAN’s regulatory and service functions, emphasizing that the reform is a prerequisite for lifting the EU’s ban.

Despite these recommendations, progress has been slow. The National Assembly endorsed the Civil Aviation Authority of Nepal Bill and the Air Service Authority of Nepal Bill in 2021, but successive governments failed to get them endorsed from the Lower House.

In June 2022, the government attempted to table the bills in the House of Representatives, but strong opposition from CAAN’s trade unions led to delays, the Tourism Ministry said on Tuesday. As a result, the bills became inactive when the Lower House’s tenure ended in September 2022.

Former Culture, Tourism, and Civil Aviation Minister Sudan Kirati also pushed to present the bills, but they stalled at the Ministry of Law. Despite repeated government commitments to split CAAN, little progress was made.

(Minister for Culture, Tourism and Civil Aviation, Badri Pandey, introduces the bills in the Lower House on Tuesday, February 25, 2025. Courtesy of Tourism Ministry)

Conflict of Interest and Calls for Structural Change

The Office of the Auditor General, in its 59th report, emphasized that CAAN’s dual role compromised regulatory effectiveness. It noted that the same entity making regulatory decisions and overseeing service operations created inherent conflicts of interest.

If implemented, the reform would see CAAN led by two separate directors general—one overseeing regulatory functions and the other managing service provision, according to the ministry. 

Global Precedents and Nepal’s Path Forward
ICAO first raised concerns about CAAN’s dual responsibilities in its 2009 Universal Safety Oversight Audit report. It recommended separating regulatory and service functions to prevent conflicts of interest. ICAO reiterated this in its 2013 and 2017 audit reports.

In 2012, ICAO President Roberto Kobeh González visited Nepal and stressed the need for regulatory and service-provider separation. Similarly, an EU aviation safety mission warned that CAAN’s structure compromised safety oversight.

Although ICAO removed Nepal from its safety blacklist seven years ago, the EU’s ban remains. The EU has consistently cited Nepal’s failure to split CAAN as a key reason for maintaining its restrictions.

Unfulfilled Commitments in Development Plans

Nepal’s National Planning Commission (NPC) has acknowledged the need for structural aviation reforms in multiple development plans. The 13th Plan (2013–2016) and the 14th Plan (2016–2019) both outlined commitments to separate regulatory and service provider roles in line with ICAO guidelines, but neither plan saw implementation.

The 15th Development Plan (2019–2024) also proposed legal provisions to restructure CAAN, yet progress has been limited.

In 2018, a parliamentary committee led by former Prime Minister Madhav Kumar Nepal directed the government to establish an autonomous agency for air traffic management and airport operations. Following this directive, the government had registered the Nepal Aviation Service Bill in the National Assembly in February 2020. 

Lessons from Pakistan and Future Prospects

Recent international examples suggest that structural aviation reforms can lead to regulatory credibility. Last year, the European Union Aviation Safety Agency (EASA) lifted a four-year ban on Pakistan International Airlines (PIA) after Pakistan restructured its Civil Aviation Authority (PCAA), splitting it into three entities: the PCAA, the Bureau of Aircraft Safety Investigation (BASI), and the Pakistan Airports Authority (PAA).

Nepal’s proposed reforms are expected to follow a similar trajectory, addressing international concerns and potentially paving the way for Nepali airlines to regain access to EU airspace.