Free falling oil prices have led to a sharp drop in airfares worldwide, but travellers in Nepal have not been able to enjoy this pleasant turn of events.

Local travel agencies said that ticket prices had not decreased as expected because fuel shortages have kept them on the high side, hurting tourist arrivals to the country. Aviation fuel costs five times more in Nepal than in New Delhi, India.

Media reports said that airfares in India had plunged to a three-year low with global oil prices hitting rock bottom. The cost of jet fuel has dropped 25 percent in the past one year.

Aviation officials say that fuel accounts for about a third of an airline’s operating costs. With jet fuel prices down two-thirds from last year, carriers have been able to reduce their costs by about 20 percent.

The International Air Transport Association (Iata) said in its industry outlook that a sharp drop in oil prices would lead a robust demand for travel. But questions have been raised whether Nepal’s tourism industry will benefit from it.

According to Osho World Nepal, one of the leading travel agencies in the country, airfares to and from Nepal have dropped to some extent, but the decrease has fallen short of worldwide trends.

Most airlines serving Kathmandu’s Tribhuvan International Airport (TIA) have been flying with 30-40 fewer passengers than their full capacity as they need to refuel outside Nepal, which results in additional landing and parking charges. This has kept ticket prices from being decreased as expected, travel agencies said.

On September 29, 2015, TIA announced that it would not be able to provide refuelling facilities to foreign carriers due to a jet fuel crisis caused by the unofficial trade embargo by India.  The first casualty of the decision was China Southern Airlines which totally suspended its Nepal service, and it remains closed till today. Many airlines have slashed their frequency.

Since TIA stopped refuelling foreign carriers, eastbound flights have been stopping in Dhaka, Bangladesh or Kolkata, India to refuel on their return trip. Westbound flights have been stopping for fuel in Lucknow.

Airline officials said that changing the refuelling point results in an extra financial burden of at least $8,000 per flight.

“Airfares have dropped on the Kathmandu-Delhi and Kathmandu-Mumbai sectors, but this is more due to low travel demand than a fall in oil prices,” said Shyam Raj Thapaliya, managing director of Osho World Nepal.

A two-way ticket on the Kathmandu-Delhi sector now costs Rs16,000 compared to Rs24,000 during the same period last year. “Except the Indian sector, airfares on other sectors have not seen a drastic change although they have dropped marginally.”  

Flights to Guangzhou, Doha, Bangkok, Kunming and Kuala Lumpur have not become cheaper in line with plummeting jet fuel prices. For example, a two-way ticket on the Kathmandu-Guangzhou sector costs Rs59,000, almost the same as last year.

Thapaliya said that if jet fuel was available at TIA at the international market rate, ticket prices would have dropped significantly.

Pradip Kumar Yadav, in-charge of the aviation fuel depot at TIA, said that Nepal Oil Corporation (NOC) would be revising its jet fuel prices on February 16 after receiving the new tariff from its sole supplier Indian Oil Corporation (IOC). “We have jet fuel in stock, but international airlines don’t want to buy it due to the high cost.”

NOC charges international carriers $1,530 per kilolitre for aviation fuel while it costs $391.60 per kilolitre in Delhi. In Kolkata, jet fuel costs $436.94 per kilolitre.

As the parliamentary International Relations and Labour Committee has recently directed the Ministry of Supplies to set prices of aviation fuel as per the market rate, Yadav said that NOC would be studying the issue.

He added that aviation fuel reserves at TIA had improved. “However, we will be able to fulfil only half of the requirement of foreign airlines.”