Money

Government plans subsidies for airlines

- Sangam Prasain, Kathmandu

Sep 12, 2015-

The Tourism Ministry is preparing to revive the Remote Area Air Service Fund in a bid to encourage domestic airlines to fly to remote destinations by dangling subsidies to offset the high cost of operating such services.

The ministry has started formal discussions with industry stakeholders and a new policy will be formulated soon, said Pramod Nepal, assistant spokesperson of the ministry. “The service fund will be used to subsidize operations in remote areas as most carriers are reluctant to fly to out-of-the-way places as it is not profitable.”

The Human Rights Commission and parliamentary committees have, on different occasions, directed the government to provide easy and affordable flight services to people in remote areas to fulfil its social obligation.

The ministry has put forth three modalities—provide subsidised fuel, pay compensation for empty seats and raise funds from ticket sales.

“The money collected in the service fund from airlines not flying to remote areas will be used to pay compensation to those who do,” said Nepal. He added that an appropriate subsidy policy would be adopted after holding extensive discussions with private operators and other concerned stakeholders.

As per government policy, private airlines are required to schedule at least 40 percent of their services in the rural sector. If they don’t fly to remote destinations, they have to deposit money in the service fund that is used to compensate other airlines. However, these measures have not been accomplished or even implemented.

The service fund was set up under Civil Aviation Regulations 2002 of the Civil Aviation Authority of Nepal (Caan), but it was cancelled after six months. Ministry officials said that more than Rs4 million had been collected in the fund.

Caan regulations require airlines carrying foreign tourists to contribute at least $4 per passenger for mountain flights and at least $2 per passenger for other sectors. Charter airlines and helicopter services have to deposit 2 percent of the fare in the fund. Caan can suspend the air service operation permit of any airline not depositing the money by the stipulated date.

Most remote areas suffer from lack of air services as private carriers don’t want to fly there due to economic reasons. Airline officials said that aircraft insurers and reinsurers had described Nepal as a danger zone for aviation and jacked up premiums accordingly.

Besides, procuring new aircraft that cost millions and flying them on remote sectors is not viable as operation costs are so high, they said. Due to these reasons, airlines are hesitant to serve remote airfields. Nepal has a large air network consisting of 48 airports. Among them, 29 are short take-off and landing airstrips. More than 18 airports in the hills and mountain regions have been classified as social airports, meaning that they do not generate revenue but are a lifeline to people living in remote regions. Caan makes operating profits from only seven airports.

 

Published: 12-09-2015 08:57

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