Nepal’s Airlines and Helicopter Companies Face Pressure to Consider Mergers

Dragon Media Correspondent
Kathmandu

Nepal’s airline and helicopter companies are facing growing financial pressure due to rising operating costs, a small domestic market, unhealthy competition and declining profitability, prompting calls for possible mergers among aviation companies.

Government officials, airline operators and aviation experts raised the need for mergers, policy facilitation and structural reforms during a discussion on “Economic Sustainability and Safety of Nepal’s Aviation Industry” organized by the Ministry of Tourism at Singha Durbar on Monday.

During the discussion, Joint Secretary at the ministry Indu Ghimire raised the question of whether Nepal’s helicopter and airline companies had reached a stage where mergers had become necessary. Representatives including Airlines Operators Association President Pratap Jung Pandey, Acting General Manager of Nepal Airlines Corporation Janak Raj Kalakheti, Director General of the Civil Aviation Authority of Nepal Mukesh Dangol and aviation expert engineer Ram Prasad Koirala participated in the discussion.

Pandey said mergers could be an appropriate option for companies currently operating at a loss. According to him, if the government provides policy incentives, tax relief and structural support similar to those offered to the banking and insurance sectors, Nepal’s aviation industry could move toward larger and more sustainable business structures.

He said aviation is a highly capital intensive industry, and the presence of many companies in Nepal’s small market has increased costs while reducing income. “There is nothing wrong with moving toward mergers and working with larger capital,” Pandey said. “If the government provides tax and other facilities for a certain period, the aviation industry can also move toward mergers.”

Pandey said the helicopter business in particular has entered a serious crisis. According to him, the shortage of engineers, technical personnel and skilled human resources has further increased operating costs. He said airline companies normally make only around five percent profit, but after fuel prices rose by nearly 15 percent, some flights have been operating at losses of up to 10 percent.

He also said landing fees, parking fees and other regulatory charges collected by the Civil Aviation Authority of Nepal have increased significantly in recent years. Insurance premiums in Nepal are also said to be almost twice as expensive as in countries such as India because Nepal is considered a higher risk aviation market.

Pandey added that helicopter companies face difficulties in maintenance because they do not have their own hangars. The need to park aircraft in open spaces at airports and carry out maintenance under inadequate conditions has added challenges not only to operating costs but also to safety.

Other experts participating in the discussion also said financially weak companies may find it difficult to maintain proper flight safety standards. Nepal Airlines Corporation Acting General Manager Janak Raj Kalakheti said lack of financial stability reduces investment in training, maintenance, equipment and skilled manpower, ultimately affecting flight safety.

Civil Aviation Authority of Nepal Director General Mukesh Dangol said that while aviation regulation has so far focused mainly on safety, the financial health of companies should now also become an important part of regulation.

According to Dangol, under the new legal structure, economic regulation should be institutionalized through regular assessment of companies’ financial condition, corporate governance, professional boards, capital capacity and long-term operational strength.

Speakers emphasized that the government must play an active role in ensuring the long-term sustainability of Nepal’s aviation industry amid a small market, limited passengers, rising costs and intense competition. They suggested that mergers, tax incentives, infrastructure support, human resource development and economic regulation should be advanced in an integrated manner.

Nepal’s aviation industry is directly linked to tourism, access to remote areas, rescue services, domestic mobility and the national economy. However, experts warned that if companies continue to face financial pressure, service continuity, flight safety and the long-term future of the industry could come under serious strain.

The discussion indicated that simply increasing the number of aviation companies is not enough. Building financially capable, technically safe, well-governed and sustainable company structures has now become a central policy issue for Nepal’s aviation sector, with mergers emerging as one possible solution.