Last weekend, the 6th Aviation Insurance Summit took place in Kathmandu, bringing to the Capital some of the world’s thought leaders in fields ranging from aviation trends, data analytics, safety, underwriting and claims to insurance brokers and companies. It is always rare to attend an event in Nepal that is free from time consuming inaugurals with sycophants spending hours on garlanding and speeches, not to mention cartel mascots. It is rare to find different players in aviation and insurance gather under one roof to learn, ideate and engage in meaningful discourse.

Next big connector

Nepal’s aviation industry has developed quite a bit in the past two and half decades since private airlines were allowed to operate. While many have either folded or are on the verge of folding up, Nepal has also produced some of the best regional players who have mastered the art of operating short haul flights in a profitable manner. As regional connectivity opens up, there will be opportunities for Nepali airlines to take on regional connectivity positions in India, Bangladesh or Myanmar, connecting many destinations in the region with the knowledge gained from the past two decades of operations. China’s Belt and Road Initiative (BRI) and India’s plan for an aggressive follow up to the Act East policy will see more movement in the region. Further, China with 150 million, and India with 50 million outbound travellers will see more intra-regional movements of tourists that will be enhanced by better airline connectivity. The potential is humongous. As one of the speakers at the summit said, the total number of aircrafts in South Asia is less than the fleet of a single airline like Delta in the United States. This speaks volumes about the potential in relation to the aviation sector. All major players have the opportunity to take on the world with a global mind-set.

Safety will be key

However, Nepal’s aviation track record has not been good. With accidents at regular intervals and blacklisting by the European Union (EU), the challenge of managing safety records has been an issue. The bad safety markings have made the cost of insurance one of the highest in the world as global players are reluctant to lower rates for a country that has bad safety records and no international credit rating. The regulator does not understand the concept of zero accidents. As regulators mentioned in their presentations, they are happy that the number of accidents has decreased in comparison to previous years. The concept of safety should be understood to mean zero accidents, not reducing mishaps. I still recall how one of the regulators at a session I was moderating said bluntly that they do not care for what the EU thinks about Nepali airline safety. It is important for Nepali operators to stay competitive to lower their insurance and capital costs that have a direct co-relation to safety. AJ Baker, CEO, Global Vectra Helicorp Limited, India that operates one of the largest fleet of helicopters had a very simple suggestion: It has to begin with work culture. For example, in South Asia, with hierarchy ruling the roost, a small foreign object on the runway is never picked up by the pilot, engineer or staff. They wait for the cleaning guy to do the job. That little object can be the reason for fatalities as many studies have shown. Therefore, the culture of safety has to be understood right from the top.

Money is not the constraint

The Civil Aviation Authority of Nepal (CAAN) in 2016-17 earned a revenue of $70 million and had a cost of $46 million, which results in a $26 million surplus. CAAN is currently sitting on surplus cash that is estimated to be close to $200 million or Rs2,000 crores. Therefore, they should not be batting an eyelid when it comes to spending $4 million dollars on top notch conveyor belts to replace the dated baggage delivery system in place at the domestic airport in Kathmandu. However, the systems and processes are designed to ensure that efficient global firms will never be interested to bid. And rent-seeking firms close to political forces, or who know the incentive structure, can only operate the services. With over 3.5 million passengers using the international airport and close to 2 million passengers using the domestic airport, we need to benchmark our operations and scale up to meet the level of other airports that handle similar traffic of 5 million people a year.

Global mind-set

Aviation is a business that has global benchmarks and speaks a global language. We need to ensure that international players form partnerships with local businesses that want to bring about change. This would be across all services, including safety. The Nepali mind-set has to change. Our tendency of designing airports to resemble bus stops have to go, the mind-set of rent seeking on an errant, hungry, frustrated passenger by charging him more for food and sending him to pathetically maintained toilets have to go. Treating tourists as ATM cards to fleece at every step has to go. We need to put the passenger at the centre of all efforts instead of the political leaders or their partners in crony capitalism. If there is one immediate thing the new government can do, it is to talk to the government of Singapore and get Changi Airport to lease and manage all of Nepal’s airports for the next 15 years. Nepalis could thus develop the know-how, and then go on to take on airport management of other airports around the world.

www.sujeevshaya.com