The Government of Nepal has introduced two bills in Parliament aimed at splitting the Civil Aviation Authority of Nepal (CAAN) into regulatory and service-providing bodies. Stakeholders believe this could help lift the European Union’s (EU) nearly 12-year ban on Nepali airlines.

The EU imposed the ban in 2013, citing Nepal’s failure to meet international air safety standards. One of its key concerns has been CAAN’s dual role as both regulator and service provider, which the EU and the International Civil Aviation Organization (ICAO) have flagged as a conflict of interest.

Repeated efforts to split CAAN have stalled due to opposition from employee unions and accusations that CAAN leadership is deliberately blocking the move. However, with Minister for Culture, Tourism, and Civil Aviation Badri Pandey registering the Bill to Amend and Unify the Law on the Civil Aviation Authority of Nepal, 2081 and the Bill to Establish and Manage the Nepal Air Services Authority, 2081, there is renewed optimism about addressing the concerns of the EU.

Minister Pandey stated that the new laws would ensure regulatory and service functions are handled separately, eliminating conflicts of interest. He also cited ICAO’s 2022 audit, which recommended prioritizing the separation of these roles.

Former CAAN Director General Rajkumar Chhetri echoed this view, recalling that three years ago, an EU delegation had indicated the ban could be lifted if Nepal made this institutional reform. He argued that splitting CAAN would enhance both regulation and service quality.

Nepal previously attempted this reform by introducing a bill to split CAAN into two bodies on February 23, 2020. The bill was passed by the National Assembly on August 2, 2021, but the legislation became inactive after the House of Representatives' term ended in September 2022. Calls for splitting CAAN resurfaced after two air crashes in July/August last year.

Pakistan’s recent experience has added to the pressure to split CAAN. In August 2024, Pakistan split its Civil Aviation Authority into three separate entities, and within three months, Pakistan International Airlines (PIA) was removed from the EU’s blacklist.

However, a senior CAAN official, speaking on condition of anonymity, questioned whether the EU would lift the ban even if CAAN were split. He argued that since Nepal’s government operates a limited number of airports, there is no competition requiring an independent regulator. He also warned that dividing CAAN could weaken an already functioning institution.