Nepal's airports have been hit hard by heavy taxes

 

Nepal: Whenever Jhapa-resident Bhim Kharel needs to fly to Madrid, he hops across the border to India and catches a flight from Bagdogra, West Bengal. By doing this instead of flying from Kathmandu, he saves a cool $400.

 “Before the pandemic, it used to cost $1,000 to fly to Madrid from Kathmandu during the October-November period. But you can get a one-way ticket for $600 if you fly from Bagdogra, which is an hour's drive from Nepal's eastern border,” Kharel, who is a non-resident Nepali, told the Post recently.

Many international airline representatives say that Kathmandu airport is among the most expensive in the world. This is because of the government’s mindset that everything that can be taxed should be taxed to the limit.

Now, the government has outdone itself by doubling and tripling the airport passenger service charge.

On Wednesday, the Civil Aviation Authority of Nepal implemented the new Airport Service Charge Regulation 2022 which was approved by the Cabinet on April 13, doubling the service charge for domestic passengers and increasing it threefold for international passengers. The new rates go into effect after 35 days.

According to the new regulation posted on the authority’s website, international travellers will have to shell out Rs3,000 each for passing through the airport, up from Rs1,000 previously.

The tax discount provided to passengers flying within South Asia has been tossed out. Earlier, travellers flying out of Kathmandu to destinations in South Asia were charged only Rs700 in the spirit of regional solidarity.

The fee hike will hit the tourism industry just when it is beginning to make a slow recovery from the Covid-19 debacle.

An international airline official described the decision as “insane” at a time when Nepal’s hospitality industry is struggling to get on its feet. On top of that, the country is facing a liquidity crisis and foreign exchange reserves are going down.

“At this time, the country should be creating an environment to attract tourists. But the government is thinking in another way. Nepal’s aviation regulator is handing out bonuses to its staff by squeezing travellers and making the airport one of the world’s most expensive. That’s truly insane,” the official told the Post on condition of anonymity.

The two newly finished international airports in Bhairahawa and Pokhara will also start charging the increased rates as an inauguration gift. Gautam Buddha International Airport and Pokhara International Airport will be joining the list of expensive airports even before the first international flights touch down, insiders say.

The government has planned to throw open the doors of the Bhairhawa airport on May 16, the birthday of Gautam Buddha, which is a holiday in Nepal.

“That’s a counterproductive move. It will impact the tourism industry as a whole,” said Birendra Bahadur Basnet, managing director of Buddha Air, the country’s largest private airline operator. “This will squeeze carriers which are already suffering from high fuel costs. It may not be a big increase for passengers flying on long-haul routes like the US, but for a regional market like India, it’s a massive hike.”

According to Basnet, a huge number of Nepalis these days fly out from Bagdogra Airport in West Bengal, Darbhanga Airport in Bihar, and Lucknow in Uttar Pradesh due to the cost factor.

“If this trend continues, it will deal a severe blow to Nepali aviation. Even tourists will land at Indian airports and then enter Nepal,” Basnet told the Post.

An unnamed international airline official said that after the increment, the total taxes or service fees on an airplane ticket to New Delhi, India on an Airbus A320 would reach Rs8,000 for the flight lasting 1 hour and 15 minutes.

The airport ground handling charge, which is added to the price of the ticket, comes to Rs3,600. The Nepal Tourism Board charges Rs1,130 as tourism service fee from each departing tourist. With the addition of the new airport service charge, the minimum price of an air ticket will reach Rs8,000 excluding fuel and fare surcharges.

“The hike will largely hurt operators like us aspiring for an all-India operation. If the service charge increases from Rs700 to Rs3,000 per passenger travelling to India, it becomes financially unfeasible for us,” said Basnet. “Many people will start travelling to the Indian border to board flights to Delhi.”

Buddha Air pays over Rs40 million in taxes monthly.

In the domestic sector, if passengers are flying from the international airport, they will be charged Rs500 each. The current fee is Rs200 per passenger.

Passengers flying from Chandragadhi, Biratnagar, Rajbiraj, Janakpur, Simara, Bharatpur, Pokhara, Lukla, Gautam Buddha, Jomsom, Nepalgunj, Surkhet and Dhangadhi airports will be charged Rs400 each.

The current airport service charge at these airports is Rs200 per passenger. For other airports, particularly remote airfields, the service charge has been increased to Rs200 from the current fee which ranges from Rs10 to Rs100 per passenger.

Basnet said there would be no reason to complain about the increased fees if the facilities at the domestic airports are improved.

Many airlines were expecting the government to announce discount offers at Gautam Buddha International Airport to encourage them to add it to their route network.

According to airline officials, starting a new route can be expensive for any carrier, especially if they are flying to a new airport for the first time. Many new airports provide subsidies to attract airlines, especially if they are previously unserved cities, they say.

“With these new changes, the new airport would be too expensive for airlines to fly from,” said an international airline representative. “We were thinking that the government would be coming up with a tourism revival plan and incentives package, but the hike has surprised us.”

While many countries are making pandemic recovery plans to attract tourists, Nepal is going in the opposite direction.

“The revised service charge will affect everyone,” said Abdullah Tuncer Kececi, general manager of Turkish Airlines for Nepal. “We respect the government’s decision, but we should improve the service as well. This is the service charge paid by passengers, and therefore, the quality should be enhanced.”

Last week, the Immigration Office had advised travellers to Nepal to carry $200 in cash to pay for their on-arrival visa at the Tribhuvan International Airport in case the ATM there is kaput, attracting public criticism while officials scrambled to sort things out. Following mounting criticism, the airport moved to install an additional ATMs at the arrival section of the airport.

According to Kececi, fuel in Nepal was expensive and now it has become super expensive. The high fuel price and high service charges at Kathmandu airport are keeping international airlines away, and preventing new ones from coming, he said.

“We are looking for reports of Gautam Buddha International Airport. We are assessing whether it is financially feasible to fly to the new airport. If it is feasible, we will definitely connect to Lumbini.”

In December 2019, a government panel headed by former government secretary Suresh Man Shrestha said in a report that the steep cost of fuel was keeping international carriers away, and urged the government to cut prices to put them on par with the global rates to boost market confidence.

Rajan Pokhrel, former director general of the Civil Aviation Authority of Nepal, said that the draft of the new airport service charge regulation was prepared when he was leading the organisation.

“But we had not proposed increasing the service charge at this critical time,” he said. “The regulation was drafted to authorise the civil aviation body to fix the airport fee because it was a hassle going to the Finance Ministry to make small amendments all the time.”

“This is definitely not a good time to raise the fee,” he added.

Officials at the Civil Aviation Authority of Nepal said they were worried about its ballooning debts and becoming the next Nepal Airlines Corporation, the state-owned carrier that is burdened under heavy losses and seeking a bailout.

“Thus, increasing the passenger service charge was necessary,” said a civil aviation official, who wished to remain unnamed.

The civil aviation body has debts totalling a staggering Rs55 billion. The biggest loan of Rs22 billion was taken from China to finance the construction of the international airport in Pokhara.

The Pokhara airport agreement says that the loan will be repaid by the airport itself and not with funds from other airports. Officials say it will take decades to repay the loan taken for Pokhara airport, which has a payback period of 20 years including a grace period of seven years.

In 2018-19, the civil aviation body's income had reached Rs9 billion due to an increased number of tourists and Nepali travellers. Revenues shrank to Rs6 billion in 2019-20 when the world was hit by the Covid-19 pandemic. The income further slipped to Rs3 billion in 2020-21.

According to Tribhuvan International Airport statistics, 1.44 million international travellers passed through it last year, a 65.11 percent plunge from the 2019 figures. This translates into a loss of 2.69 million passengers.

Aircraft movements also dropped to a 15-year low of 11,760 takeoffs and landings, representing a steep 63.74 percent fall from 2019 figures.

But domestic air passenger numbers were up a sharp 11.08 percent to 3.54 million last year from pre-Covid 2019 levels, as airlines dangled cheap tickets to attract travellers.

There are 20 airline companies in Nepal, including 10 fixed-wing operators.

“We have not paid the interest and the instalments to the government for the last two years. These come to around Rs450 million annually,” said the official at the civil aviation body. “With the revision in the passenger service charge, the civil aviation regulator will be in a position to collect Rs14 billion.”

 sangam prasain