Aviation Sector Leaders Urge Political Parties to Prioritize Tourism and Policy Reforms in Manifestos

As political parties rush to finalize their manifestos and commitment letters ahead of the House of Representatives elections, there is an intense debate on how issues concerning tourism and aviation, considered vital pillars of the nation's economy, should be prioritized.

In this context, we spoke with Pratap Jung Pandey, Chairman of the Airlines Association of Nepal. Below is the edited excerpt of our conversation focusing on the problems in the aviation sector, policy reforms, and the issues that should be included in the manifestos:

• What are your expectations for the tourism and aviation sectors as political parties prepare their manifestos? How do you view the current overall economic situation, and what policies should parties adopt to increase this sector's contribution to the Gross Domestic Product (GDP)?

Speaking of the overall economy, the tourism sector currently contributes only 3 percent to our GDP. The contribution of the manufacturing sector is also declining. Our economy is currently heavily dependent on remittances. The question we must consider is: How can we increase the tourism sector's contribution from 3 percent to 10 percent to earn dollars and strengthen the economy?

We cannot move forward without prioritizing tourism development and having a clear plan for it. It is not enough for political parties or the government to just write it in the manifesto; they must implement it in practice. Our expectation is that the national flag carrier and private sector airlines should be able to bring in as many tourists as possible. Only when tourists arrive do hotels operate, transportation run, and overall economic activity increase.

Tourists do not just spend on hotels; they also spend on travel, food, transportation, and souvenir purchases. Therefore, our main focus must be centered on bringing in the maximum number of tourists by any means necessary.

• How capable are our aviation sector and airport infrastructure in bringing in tourists? What improvements do you see as necessary in this area?

To attract tourists, the first necessity is to increase the capacity and efficiency of the airports. We need to work on how to increase the 'efficiency' of Tribhuvan International Airport and how to operate other regional airports at full capacity.

Our main challenge right now is that Nepali airlines are on the European Union's air safety blacklist. Because of this, we are unable to attract the quality of tourists we desire. The government and regulatory bodies must take policy initiatives to get off this list. There are many issues that the government, rather than the private sector, needs to address at the policy level. So many years have passed; we must now resolve the identified shortcomings and establish Nepal as a safe destination.

• The government must be investing or facilitating the aviation sector, right? What is the status of investment and return?

Investment has been made by the government, but the return on investment has not been realized. There is a lack of coordination among the relevant bodies for this. We must maximize the utilization of the resources we possess.

Purchasing aircraft is not a trivial matter. It is a very expensive investment, but even when bringing capital goods like aircraft to Nepal, VAT and other taxes increase the cost by more than 13 percent. This discourages entrepreneurs. Another important point is the Cape Town Convention. Because we have not fully committed to this treaty or there is doubt about its implementation, international companies are reluctant to 'lease' aircraft to Nepal.

If the ministry takes the initiative to implement this convention, we will be in a position to bring in aircraft at concessional rates and operate them. Currently, international 'lessors' have doubts about the security of Nepali law and the ability to repossess aircraft. Therefore, it is essential to resolve such policy bottlenecks.

• What can be done to operate the newly commissioned international airports like Pokhara and Bhairahawa at full capacity and enhance regional connectivity?

We must be able to develop the currently operational airports as regional hubs. For instance, direct flights can be operated from Pokhara or Bhairahawa to short-haul international destinations. For example, Buddhist tourists from Vietnam, Thailand, or Myanmar can be brought directly to Lumbini (Bhairahawa).

Many foreign aircraft are currently flying to Nepal because they see a market here. However, we must also encourage our national flag carrier and private sector airlines (such as Buddha, Himalayan, etc.) to fly regionally. Kathmandu's airport is extremely congested. Therefore, there is no alternative but to quickly operationalize the new airports through policy reforms.

• Many domestic airlines seem to have collapsed. Is the failure of all but one or two to perform well due to policy weaknesses or managerial issues?

There are both policy and practical aspects to this. The practice of issuing licenses without considering market capacity is not correct. It is wiser to have fewer children and raise them well than to give birth to many and let them languish. Similarly, promoting a few capable companies rather than issuing licenses to many companies and creating unhealthy competition in the market is better.

Another point is aircraft productivity. An aircraft needs to fly 6-7 hours a day to be profitable. But here, due to infrastructure shortages, air traffic, and various other reasons, if it can only fly for 3 hours, it will naturally incur losses. Companies have failed because expenses remain the same while revenue decreases.

• There are complaints that airfares in Nepal are expensive compared to neighboring countries. Is this due to the EU blacklist or are there other reasons?

The main rule governing expensive airfares is supply and demand. As long as we have to depend on foreign airlines, the fares will remain in their hands. If our domestic airlines and the national flag carrier become capable and can increase flight frequency, the fares will decrease on their own.

Besides this, our tax system is another reason. The VAT imposed on aviation fuel and tickets also increases costs, which is not the case in many other countries. Therefore, high fares are caused not only by the blacklist but also by the tax structure and the low availability of aircraft.

• What potential do you see for the future of this sector and job creation?

Tourism and hydropower are the basis of Nepal's prosperity. In a situation where the manufacturing sector is shrinking, tourism is the sector that can create employment for a large number of people. If we can manage this sector properly, Nepali youth will not have to go abroad.

Even now, we lack skilled manpower. We need to produce skilled manpower through training. Tourism must be advanced according to the concept of environmentally friendly and sustainable development. Work must be done to produce results from the initiatives taken to get off the EU blacklist. Overall, if infrastructure is improved and policy facilitation is provided, the aviation and tourism sectors can transform the economy.