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🇳🇵 Nepal /Economy & Trade

Nepali airlines in a scramble as fuel costs spike, passengers vanish

From Kathmandu Post · (2d ago) English Critical tone

Summarized and contextualized by DistantNews.

TLDR

  • Nepali domestic airlines are experiencing a significant drop in passengers following a sharp increase in airfares due to soaring aviation fuel costs.
  • Airlines like Buddha Air have reduced flights by 25 percent, with fuel costs now comprising 50 percent of their total expenses, up from 25-30 percent.
  • The Nepal Oil Corporation's historic hike in aviation fuel prices, attributed to global energy costs and conflict, has severely impacted the tourism industry and airline profitability.

The Nepali aviation sector is grappling with an unprecedented crisis as a dramatic surge in aviation fuel prices forces domestic airlines to slash flights and confront a vanishing passenger base.

We have cut at least 25 percent of flights per day due to low occupancy.

— Birendra Bahadur BasnetManaging Director of Buddha Air, explaining the impact of declining passenger numbers on flight operations.

Buddha Air, Nepal's largest private carrier, reports a daily loss of 1,500 passengers, leading to a 25 percent reduction in flights. The airline's managing director, Birendra Bahadur Basnet, highlighted the dire financial strain, stating that fuel costs have ballooned to 50 percent of total expenses, a stark increase from the previous 25-30 percent. This, coupled with the rising cost of spare parts due to the appreciating US dollar, paints a grim picture for the industry's operational viability.

Fuel alone used to account for 25-30 percent of the airline's total costs. Now, it’s 50 percent.

— Birendra Bahadur BasnetBuddha Air's Managing Director details the dramatic increase in fuel cost proportion.

The Nepal Oil Corporation's decision to implement historic price hikes for aviation turbine fuel, citing global energy market volatility exacerbated by conflict in West Asia, has directly translated into significantly higher ticket prices for consumers. For domestic carriers, prices have nearly doubled, pushing airfares to record highs and deterring travelers. This situation not only affects the airlines but also casts a long shadow over Nepal's vital tourism industry, with companies like Shree Airlines reporting a 30-40 percent decline in passenger numbers during peak season. The ripple effect threatens the broader economy if the trend persists.

This is the biggest hike in aviation fuel prices in history.

— Manoj Kumar ThakurSpokesperson for Nepal Oil Corporation, emphasizing the unprecedented nature of the fuel price increase.
DistantNews Editorial

Originally published by Kathmandu Post. Summarized and contextualized by our editorial team with added local perspective. Read our editorial standards.

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