High cost lays aviation low in Nepal

Ever wondered why the cost of air tickets from Kathmandu is more expensive than from other cities in Asia to the same destinations? How come more European airlines do not serve Kathmandu? Why aren’t there any direct flights to Australia?

Answer: expensive jet fuel and high service charges at Kathmandu airport are keeping international airlines away, and preventing ones that fly here from adding flights to meet demand.

High fuel costs mostly pinch airlines that fly widebody aircraft on long flights. Korean Airlines, China Southern, Turkish Airlines, Qatar Airways and Nepal Airlines use widebodies on long haul routes. Congestion often forces their planes to circle for hours, and the cost of all this is passed on to passengers.

Read also: Nepal Airlines has new planes, but no new plans, Sharad Ojha

A Nepali Times survey shows the price of ATF JetA1 at Kathmandu airport this week was US$1,050 per kilolitre (kL), almost double the cost in New Delhi and Bangkok ($525/kL) and considerably higher than Beijing ($750/kL). (See chart.)

“The cost of fuel is the main expense for an airline, and the feasibility of a route is determined by the fuel cost at the destination,” says Abdullah Tuncer Kecici, Nepal Manager of Turkish Airlines, which operates daily flight using the Airbus 330 from its Istanbul hub.

The carrier plans to continue daily operations for Visit Nepal 2020, but says that plan will depend on lower fuel price.

After long flights, widebody jets need to top up their tanks with at least 40 tons of fuel in Kathmandu for their return journeys. Qatar Airways, Cathay Dragon, Turkish and China Southern all operate A330s and need refuelling in Kathmandu, as does Korean Air’s Boeing 777s. Thai International’s 777s usually do not refuel in Kathmandu unless they burn their reserve while waiting to land. Even Nepal Airlines flies into Kathmandu on a full tank so its planes do not need to take on too much fuel here for their next flights.

Read also: Keeping Nepal Airlines airworthy, Sharad Ojha

After a request from the Board of Airline Representatives new Minister of Tourism and Civil Aviation Yogesh Bhattarai assured carriers he would “give the matter serious consideration”. Nepal Oil Corporation (NOC) says it will soon reduce costs by $75/kL, but carriers say that is not enough.

“The reason fuel cost is high is because of taxes, and the need to subsidise fuel for domestic airlines, and LPG cylinders for the public,” NOC Spokesperson Birendra Goit told Nepali Times.  Indeed, NOC’s homepage shows it makes a clean profit of more than Rs50 per litre of JetA1 fuel sold to foreign airlines.

Aviation fuel in Kathmandu used to cost as much as $1,800/kL before 2015, but fell after the global price declined in 2016, to $750/kL. Since then, there have been steady unexplained increases every few months to a peak of $1,125 in August last year. The price hikes took place after the Nepal Communist Party government assumed office in early 2018. (See graph, above.)

Read also: Does Nepal need a 4th international airport?, Om Astha Rai

Aviation experts say high taxes on aviation fuel dissuade international airlines, which magnify downstream benefits to Nepal’s economy through tourism promotion, cheaper travel for Nepali migrant workers, and by making air cargo competitive.

“The way to make money from airlines is to encourage cheaper flights so there are more tourists. It is counterproductive to squeeze carriers through higher fuel costs and airport fees,” says the representative of an Asian airline.

Besides fuel costs, charges for ground handling, parking and landing fees are also costlier in Kathmandu than in other South Asian airports. A widebody operator with 290 passengers pays $6,000 for ticketing and ground handling per flight at Kathmandu airport, which is twice the cost in New Delhi or Bangkok. Landing and parking charges in Kathmandu are $2,800 for heavies like the A330 or B777, which is 20-30% higher than other airports in the region.

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“Kathmandu has the highest cost among all the airports in our network, but in return we get poor quality of service and bad infrastructure,” said an airline source, who did not want to be named because he was not cleared by headquarters to speak to the media.

He added: “The automatic doors on ramp buses don’t work, the airport is overcrowded and inefficient, but we take that as given. We just wish there is better communication and ample notice from CAAN and the airport management about disruptions.”

Nepal Airlines Deputy Managing Director Ganesh B Chand maintains ground handling charges for widebodies are the same in Kansai as in Kathmandu, adding: “Our costs are high because the taxes for ramp buses and other equipment make them five times costlier than in Delhi.”

Conclusion: operating costs for airlines at Kathmandu airport is the highest in the world because of abnormally high taxes needed to subsidise domestic air travel and the public’s use of LPG cylinders.

Read also: Economy & ecology of Nijgad airport, Om Astha Rai

Not so CUTE

A serious oversight by the Civil Aviation Authority of Nepal (CAAN) and Kathmandu airport management has led to the expiration of a contract with the global airline communication company SITA (Société Internationale de Télécommunications Aéronautiques) for ticketing of airline passengers flying from Kathmandu. The contract lapsed on 14 September, apparently because no one in Nepal bothered to renew it.

SITA employs an application called Common Use Terminal Equipment (CUTE)  to speed up passenger processing by sharing check-in desks, providing a software platform to generate boarding passes and baggage tags, as well as integrating the data with the global airline network.

CAAN and the airport passed the buck to each other last week, but managed to get a two-week extension till 28 September. SITA is demanding a three-year extension of the contract, but Nepali officials reportedly only want to do one year.

Airlines serving Kathmandu are prepared to do manual check-ins with handwritten boarding passes and baggage tags, which may mean delays at the beginning of the tourist season. Said one airline representative: “We hope it will not come to that next week.”

Read also: Kathmandu Airport is Nepal in a microcosm, Anil Chitrakar 

UPDATE: On 21 September Nepal Oil Corporation announced that it was reducing the cost of aviation fuel Jet A1 by $50 to $1000/kL.