Skyrocketing fuel costs drive sharp decline in Nepali air travel

Nepal's domestic aviation sector is grappling with a severe downturn, with passenger numbers plummeting by over 540,000 in the fiscal year 2025-26. This sharp decline, representing a 12% drop from the previous year, is directly linked to a substantial hike in airfares, which have increased by up to 40 percent. The primary driver behind these increased costs is the skyrocketing price of jet fuel, exacerbated by escalating geopolitical tensions.

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The direct shock of the international energy crisis hit our domestic sector squarely during this period. While flight numbers in the first six months remained steady, the sudden spike in fuel costs made air travel unaffordable for ordinary citizens and domestic tourists.

The impact of the global energy crisis hit Nepal's domestic carriers particularly hard during the latter half of the fiscal year. While the first six months saw steady passenger volumes, the sudden surge in fuel costs rendered air travel unaffordable for many ordinary citizens and domestic tourists. Buddha Air, a major domestic carrier, experienced the most significant numerical loss, shedding 394,000 passengers, which constituted nearly 73% of the industry's total decline. Despite this, it maintained its market leadership with a 58.3% share.

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This is the second major crisis facing Nepali aviation since the Covid-19 pandemic. Balance sheets across several airlines have turned negative, and many operators are finding it difficult simply to survive.

Industry leaders are sounding the alarm about the financial precariousness of the situation. Pratap Jung Pandey, president of the Airlines Operators Association of Nepal (AOAN), described the current crisis as the second major blow to Nepali aviation since the COVID-19 pandemic. He highlighted that many airlines' balance sheets have turned negative, making survival a challenge. Further compounding the issue are currency depreciation and the fact that operational costs, including fees paid to the Civil Aviation Authority of Nepal (CAAN) and the cost of spare parts, are denominated in U.S. dollars, while airline revenues are in Nepali rupees.

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Fuel prices remain high and volatile. Crucially, fees paid by airlines to CAAN are denominated in US dollars, as are spare parts, yet our income is entirely in Nepali rupees.