national air transport plan-current situation

8/13/2019 National Air Transport Plan-Current Situation

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Capacity Development of

Civil Aviation Authori ty of Nepal

NATIONAL AIR TRANSPORT PLAN

Current Situation and Diagnostic.

FEBRUARY 2013


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Capacity Development o f Civil Aviation Authorit y of Nepal

NATIONAL AIR TRANSPORT PLAN Current Situation and Diagnostic.

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PAGE INTENTIONALLY IN BLANK


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The present document is embedded into the Project Capacity Development of Civil

Aviation Authority of Nepal, more specifically into the part 2A- National Plan for CivilAviation Development.

The main aim of this document is to analyze the current situation of air transport inNepal, including the existing:

a) International Agreements

b) Legal Framework and Regulations

c) Air Transport Network

a. Airlines

b. Air routes

c. Traffic Characteristics

This first diagnostic of the current state of operation will be used to perform a SWOTanalysis which can help the experts to design a 20-years strategic plan for CivilAviation Development.


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INDEX

INDEX ........................................................................................................................ 5

INDEX TABLES .............................................................................................................. 6

INDEX FIGURES ............................................................................................................ 7

1. Introduction ...................................................................................................... 8

2. Nepal economics ............................................................................................... 8

3. Stage of development ..................................................................................... 11

4. Tourism in Nepal ............................................................................................. 13

5. Regulations ..................................................................................................... 14A. Chicago convention ................................................................................................................. 14

B. Air transport policy issues (Civil Aviation Policy 2006) ............................................................ 22C. Licensing and juridical background ......................................................... ................................ 22

6. Air Service Agreements ................................................................................... 25A. Multilateral agreements of Nepal ........................................................... ................................ 25B. Bilateral agreements ............................................................................................................... 28

7. Competition and tariff policy ........................................................................... 32A. Ticket prices ............................................................................................................................. 32B. Charges to flights operators ......................................................... ........................................... 34

8. Nepali Airports Net ......................................................................................... 41

9. Nepali Air Network Characteristics .................................................................. 43A. Cross sector flights .................................................................................................................. 43B. Cross border flights ................................................................................................................. 44C. Mountain flights ...................................................................................................................... 44D. Adventure flights ..................................................................................................................... 44E. Cargo ....................................................................................................................................... 44

10. Air network in Nepal. .................................................................................. 45A. Airlines classification ............................................................................................................... 45B. Domestic traffic ....................................................................................................................... 45C. Domestic airlines data .................................................................. ........................................... 46D. International traffic ................................................................................................................. 64E. International airlines data ............................................................ ........................................... 68

11. Rural areas flights. Social destinations ......................................................... 75

12. Conclusions. Issues in the Nepali Air Network .............................................. 78A. Airlines license distribution Domestic market overwhelmed .............................................. 79B. Limited number of international agreements ............................................................... .......... 79C. High value of taxes .................................................................................................................. 79D. Lack of aircrafts ....................................................................................................................... 80E. Nepali air network weakly integrated ................................................................. .................... 80F. Necessary enhancement of safety in the air transport ........................................................... 81G. Bad situation of airport facilities ............................................................. ................................ 81H. Need of skilled staff ................................................................................................................. 81I. Other issues ............................................................................................................................. 81


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INDEX TABLES

Table 1.- Nepal Economics. April 2010. (Source: WTO) ................................................ 9

Table 2.- Status of Nepal with regard to international air law instruments (*: Not in force).................................................................................................................................... 17

Table 3.- Entry Fees for Airline Licensing in Nepal ....................................................... 24

Table 4.- Air Traffic Rights in Nepal ............................................................................. 28

Table 5.- Airfares for domestic routes (private companies), adding fuel surcharge.(Source: Nelpa) ............................................................................................................ 33

Table 6. Aeronautical charges in Nepal (Source: AIP) ................................................. 34

Table 7.- Exchange rates between different currencies and Nepalese Rupee ............. 36

Table 8.- Operational airports in Nepal with scheduled flights ...................................... 41

Table 9.- Charter airports in Nepal ............................................................................... 42

Table 10.- Passengers in major domestic airports ....................................................... 42

Table 11.- Domestic Airlines in Nepal .......................................................................... 47

Table 12.- Domestic airlines passenger traffic (January-June data) ............................. 47

Table 13.- Domestic fleet characteristics in Nepal ........................................................ 48

Table 14.- Domestic airlines in TIA, historical data (2011) ............................................ 49

Table 15.- Tourist origin (2011) .................................................................................... 64

Table 16.- Tourist arrivals per month (2010-2011) ....................................................... 64

Table 17.- Historical data of international traffic in Nepal, 2010 .................................... 65

Table 18.- International Airlines operating in Nepal ...................................................... 68

Table 19.- International Air Network in Nepal ............................................................... 69

Table 20.- International airlines in TIA, historical data (2011) ....................................... 70

Table 21.- International airlines passenger market share (%) ...................................... 72

Table 22.- Global passenger transport volume per airline, 2011. (Source: Flight Global).................................................................................................................................... 73

Table 23.- Domestic flight seats by region (Seat % in weekly schedule) ...................... 76


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INDEX FIGURES

Figure 1.- GDP per country worldwide, 2011. (Source: IMF) ........................................ 10

Figure 2.- Comparison of the state of development of Nepal. (Source: World EconomicForum, WEF) ............................................................................................................... 11

Figure 3.- GDP (PPP) per capita, 1985-2010. (Source: WEF) ...................................... 11

Figure 4.- Distribution of population and type of activities by region, 2004. (Source:Government of Nepal) .................................................................................................. 12

Figure 5.- Natural reserves and tourist destinations in Nepal ....................................... 13

Figure 6.- The nine air freedom rights .......................................................................... 15

Figure 7.- Signatory countries of SAARC agreement ................................................... 26

Figure 8.- COSCAP Member States ............................................................................ 27

Figure 9.- Bilateral international air transport agreements in Nepal, per country .......... 29

Figure 10.- List of bilateral trade agreements in Asia, 2012. (Sources: World TradeOrganization, Asian Development Bank and Heritage Foundation, 2012) .................... 31

Figure 11.- Historical data of domestic passenger traffic in Nepal ................................ 46

Figure 12.- Growth rates of domestic traffic within Nepal ............................................. 46

Figure 13.- Domestic passenger traffic market share (January-June 2012). (Norecorded data from the charter flights of Goma Air) ..................................................... 48

Figure 14.- Maximum range, with average load conditions, of a single engine CessnaCaravan 208 aircraft .................................................................................................... 49

Figure 15.- Domestic traffic in TIA in 2011, per company ............................................. 50

Figure 16.- Tourist arrivals to Nepal in 2010 and 2011 ................................................. 65

Figure 17.- International traffic in Nepal, 2010 ............................................................. 66

Figure 18.- Historical international air passenger growth data ...................................... 67

Figure 19.- International air passenger growth data during last twenty years ............... 67

Figure 20.- International traffic in TIA in 2011, per air company ................................... 71

Figure 21.- International airlines passenger market share, 2011 (%) ........................... 72

Figure 22.- Pax movements of the international airlines operating in Nepal, 2011 ....... 74

Figure 23.- Declining of seats to remote areas (in percentages) .................................. 75


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1. INTRODUCTION

Extensive and efficient infrastructure is critical for ensuring the effective functioning ofthe economy, as it is an important factor determining the location of economic activity

and the kinds of activities or sectors that can develop in a particular instance. Well-developed infrastructure reduces the effect of distance between regions, integrating thenational market and connecting it at low cost to markets in other countries and regions.In addition, the quality and extensiveness of infrastructure networks significantly impacteconomic growth and reduce income inequalities and poverty in a variety of ways. Awell-developed transport and communications infrastructure network is a prerequisitefor the access of less-developed communities to core economic activities and services.

Due to the geographic location and topography of Nepal, air transport seems to be themost reliable mean of communication within and outside the country. Air transport inNepal aspires to contribute to the promotion of tourism and trade through safe,economical, market-oriented, reliable and cost effective means, while ensuring flight

safety and aviation security in par with international standards.

Keeping this aspiration in mind, the aim of the Civil Aviation Authority of Nepal (CAAN)is to develop the Nepali air transport system, with private participation, based on opensky policy, for safe, reliable, standard, easily available, sustainable and effective airtransportation.

2. NEPAL ECONOMICS

Nepal was the first Least Developed Country (LDP) to join the World TradeOrganization (WTO) through the full accession process, becoming the 147thmember ofthis organization on April 23rd, 2004. But, still, economic performance has not resultedin the strong development Nepal needs, with real GDP growth rate averaging about 4%per year. According to WTO, there are some supply-side constraints that impede higherGDP growth rates, like notably energy shortages, poor infrastructure, and labor strikes,that Nepals Government shall address. Being a landlocked country, trading costs arealso particularly high in Nepal and this is an issue that will merit consideration.

Trade policy is an integral part of Nepals efforts to establish the conditions to reducepoverty and improve the living standards of the people. However, it appears to be aworsening balance of trade, due to falling participation of exports in its GDP and areliance on a few export products and markets.

The country adopted the Customs Act and Regulation in 2007, simplifying customs

procedures in Nepal, while progress made in trade facilitation has also improvedcustoms clearance. There is still significant work to do in order to help exportersbecome more competitive.

According to the WTO Committee, Nepalese authorities may consider introducingfurther action or improvements in certain sectors, even when action is already beingtaken in several areas:

Investment and business framework: Because of the high cost of doingbusiness and the fact that certain sectors are still reserved for national investors,Nepal should further liberalize its investment framework and address issues ofweak institutional capacity.


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Export taxes: The imposition of export taxes discourages export of productsand may not be the best way to achieve the Governments objectives.

Government procurement: There is a law on government procurementadopted in 2007, but still Nepal should elaborate its plans to further improve theimplementation and monitoring of its public procurement legislation.

Competition: A competition law was adopted in 2007, which established theCompetition Promotion and Market Protection Board. However, it does notapply, for example, to exportation and businesses relating to cottage and smallindustries.

Privatization: Nepal should promote the participation of the private sector in thedevelopment process so as to increase productivity and reduce the fiscalburden, following PPP formulas.

Services: Further liberalization of services should improve the efficiency of the

economy as a whole and the competitiveness of Nepalese exports, especially byreducing costs related to telecoms and transport. Tourism, a very promisingsector given Nepals vast cultural and biological wealth, should also benefit fromincreased liberalization. But it still faces challenges posed by weakinfrastructure, shortage of good quality accommodation and skilled manpower.

Energy: Addressing energy shortages is crucial for Nepal to achieve rapid andsustained economic growth. Nepal should use its abundant hydropowerresources to meet its increasing demand for electricity.

Table 1.- Nepal Economics. April 2010. (Source: WTO)

BASIC INDICATORSPopulation (thousands, 2010) 29 959 Rank in world trade, 2010 Exports

GDP (million current US$, 2009)

Imports

12 897 Merchandise 151 116

GDP (million current PPP US$, 2010) 35 917 excluding intra-EU trade 125 90

Current account balance (million US$, 2010) - 128 Commercial services 130 132

Trade per capita (US$, 2008-2010) 223 excluding intra-EU trade 104 106

Trade to GDP ratio (2007-2009) 48.4

Annual percentage change

2010 2005-2010 2009 2010

Real GDP (2005=100) 124 4 4 5

TRADE POLICY

WTO accession 23 April 2004 Contribution to WTO budget (%, 2012) 0.016

Trade Policy Review 13, 15 March 2012 Import duties collected (%, 2008-2010)GPA accession - in total tax revenue 22.1

Tariffs and duty free imports to total imports 7.1

Tariff binding coverage (%) 99.4 Number of notifications to WTO and measures in force

MFN tariffs Final bound

Applied

2010 Outstanding notifications in WTO Central Registry 21

Simple average of import duties Goods RTAs - services EIAs notified to WTO 3 - 0

All goods 26.0 12.3 Anti-dumping (30 June 2011) ...

Agricultural goods (AOA) 41.4 14.1 Countervailing duties (30 June 2011) ...

Non-agricultural goods 23.7 12.0 Safeguards (26 October 2011) 0

Non ad-valoremduties (% total tariff

lines) 0.0 0.5 Number of disputes(complainant - defendant)

MFN duty free imports (%, 2009) Requests for consultation 0 - 0

in agricultural goods (AOA) 0.0 Original panel / Appellate Body (AB) reports 0 - 0in non-agricultural goods 6.5 Compliance panel / AB reports (Article 21.5 DSU) 0 - 0

Services sectors with GATS commitments 77 Arbitration awards (Article 22.6 DSU) 0 - 0


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MERCHANDISE TRADEValue Annual percentage change

2010 2005-2010 2009 2010

Merchandiseexports, f.o.b. (million US$) 856 0 -12 4

Merchandiseimports, c.i.f. (million US$) 5 133 18 22 17

2010 2010

Share in world total exports 0.01 Share in world total imports 0.03

Breakdown in economy's total exports Breakdown in economy's total imports

By main commodity group (ITS) By main commodity group (ITS)

Agricultural products 22.3 Agricultural products 13.0

Fuels and mining products 4.6 Fuels and mining products 18.3

Manufactures 70.0 Manufactures 54.9

By main destination By main origin

1. India 65.5 1. India 57.0

2. European Union (27) 11.1 2. China 10.5

3. United States 6.3 3. United Arab Emirates 8.9

4. Bangladesh 5.5 4. European Union (27) 4.15. Bhutan 2.6 5. Indonesia 2.2

COMMERCIAL SERVICES TRADEValue Annual percentage change

2010 2005-2010 2009 2010

Commercial servicesexports(million US$) 584 17 22 -3

Commercial servicesimports(million US$) 846 15 -1 2

2010 2010

Share in world total exports 0.02 Share in world total imports 0.02

Breakdown in economy's total exports Breakdown in economy's total imports

By principal services item By principal services item

Transportation 6.8 Transportation 33.2

Travel 59.0 Travel 47.5

Other commercial services 34.2 Other commercial services 19.2

According to World Bank reports World Development Indicators database, Nepalwas ranked in the year 2010 in the 107thposition among a list of 193 countries aroundthe world, in terms of Gross Domestic Product (GDP). The annual percentage growth ofits real GDP in 2011 was 3.5%, a slight decrease compared to that index in theprevious year (4.6%).

Figure 1.- GDP per country worldwide, 2011. (Source: IMF)


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3.STAGE OF DEVELOPMENT

The World Economic Forum (WEF) periodically performs evaluations of the globaleconomics state of 142 countries around the World, comparing and ranking them by

many different factors. These factors (or pillars) vary from basic requirements asinstitutions framework, infrastructures state, or health and primary education situation,to more innovative and sophisticate business areas.

The infrastructure factor has been divided into different aspects (quality of roads, qualityof railroad infrastructure, etc.), and each factor has been scored on a 17 scale, with 7being the most desirable outcome. As quality of air transport infrastructure regards, ithas achieved a 3.4 mark, while the overall quality of infrastructures factor has beenawarded with a 1.7 mark1

Figure 2.- Comparison of the state of development of Nepal. (Source: World Economic Forum, WEF)

.

Figure below displays the evolution of GDP per capita at purchasing power parity (PPP)from 1985 through 2010 for the economy of Nepal (blue line). The black line plots theGDP-weighted average of GDP per capita of the group of economies to which Nepalbelongs (Developing Asia, following IMF classification).

Figure 3.- GDP (PPP) per capita, 1985-2010. (Source: WEF)

In the next figure it is shown the distribution of population within Nepal, together with themain businesses in each district. It can be observed that the most inhabited areas arethe Kathmandu Valley and those in the Terai zone.

1All the detailed data can be studied in The Global Competitiveness Report 2011-2012 (World Economic Forum).


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Figure 4.- Distribution of population and type of activities by region, 2004. (Source: Government of Nepal)


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4. TOURISM IN NEPAL

Tourism in Nepal is the largest industry and one of the key sources of foreign exchangein Nepal. Tourism can be divided into four major business areas: cultural tourism,

national parks and reserves, pilgrim places and adventure sports.

There are four UNESCO World Heritage Sites in Nepal, two of them cultural (Lumbini,and seven monuments of Kathmandu valley) and the other two natural (Chitwan andSagarmatha National Parks). The most visited natural areas are Chitwan, Sagarmatha,Shivapuri and Langtang National Parks.

Cultural and natural touri sm:

Figure 5.- Natural reserves and tourist destinations in Nepal

Nepal has several ancient pilgrimage sites: Baraha Chhetra, Halesi Mahadev,Janakpur, Pathibhara, Tengboche in East Nepal; Manakamana, Gorkha, Lumbini,Muktinath, Gosainkunda, Tansen, Kathmandu Valley in Central Nepal; andSwargadwari, Khaptad Ashram in West Nepal

Pilgrimage and religious destinations:

Pashupatinath, dedicated to Lord Shiva, is the holiest Hindu destination in Nepal.Lumbini, associated with the birth of Lord Buddha, is of immense archeological andreligious importance and also a UNESCO Cultural Heritage Site.

Nepal is a unique destination for mountaineering, trekking, rafting, kayaking, canyoningand other adventure sports. It possesses eight out of ten highest mountains in theworld. Trekking varies from high altitude treks to simple easy paced walks. There is anumber of interesting options: the Annapurna and the Everest Region, the areas nearDhaulagiri, Lamjung, Jomsom and Mustang, in Western region, and the areassurrounding Jumla and Rara Lake, in Midwestern administrative division.

Adventure sports:

There are mountain flights which fly around Mt. Everest and other peaks, providing aclose-up view of the top of the world. Pokhara, the lake city of Nepal, provides endlessopportunities for fishing, swimming, canoeing and boating along Phewa Lake. Air sportoptions like paragliding and flying in ultra-light planes are also available in Pokhara andother cities.


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5. REGULATIONS

The international character of air transport also requires international framework, whichdefines a minimum set of regulations, common to all countries. Likewise, the defense of

trade interests leads to the realization of private agreements between two or morenations, on the most important aspects of transport, not covered by the general rules.

The regulation of international air transport services comprises both multilateral andbilateral agreements involving Governments and airline companies.

A.

The civil aviation legislation in Nepal is derived from the Convention on InternationalCivil Aviation, held in Chicago on 7th December 1944, when the International CivilAviation Organization (hereinafter called ICAO) was constituted.

Chicago convention

The Chicago Convention arose with the main goal of facilitating the international civil

aviation to be developed in a safe and orderly manner, allowing that the international airtransport services may be established on the basis of equality of opportunity andoperated efficiently and economically. As it can be observed in the preamble of itsfoundation text,

WHEREAS the future development of international civil aviation can greatly help tocreate and preserve friendship and understanding among the nations and peoples ofthe world, yet its abuse can become a threat to the general security; andWHEREAS it is desirable to avoid friction and to promote that cooperation betweennations and peoples upon which the peace of the world depends;THEREFORE, the undersigned governments having agreed on certain principles andarrangements in order that international civil aviation may be developed in a safe and

orderly manner and that international air transport services may be established on thebasis of equality of opportunity and operated soundly and economically;have accordingly concluded this Convention to that end.

The basic principle of international aviation, as ICAO and therefore the ContractingStates to the Convention assume, is that every State has complete and exclusivesovereignty over the airspace above its territory.

By joining ICAO (that is, by accepting the Chicago Convention) governments undertaketo collaborate in securing the highest practicable degree of uniformity in regulations,standards, procedures, and organization in all matters in which such uniformity willfacilitate and improve air navigation. Hence, one of ICAO's main tasks is to adopt such

international standards and recommendations and to keep them up-to-date throughmodifications and amendments.

A standard, as defined by the first ICAO Assembly, is "any specification for physicalcharacteristics, configuration, material, performance, personnel, or procedures, theuniform application of which is recognized as necessary for the safety or regularity ofinternational air navigation and to which member states will conform". Standards maythus include specifications for such matters as the length of runways, the materials tobe used in aircraft construction, and the qualifications to be required of a pilot flying aninternational route.

A recommendation is any such specification, the uniform application of which is

recognized as "desirable in the interest of safety, regularity, or efficiency of internationalair navigation and to which member states will endeavor to conform.


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While recommendations are not binding, standards automatically become binding on allmember states, except for those who find it impossible to comply, as it prays the Article38 of the Convention (Any State which finds it impracticable to comply in all respectswith any such international standard or procedure, or to bring its own regulations orpractices into full accord with any international standard or procedure () shall giveimmediate notification to the ICAO of the differences () the Council shall makeimmediate notification to all other states of the difference which exists between one ormore features of an international standard and the corresponding national practice ofthat State).

Together with the Chicago Convention, in that date two other treaties were drafted,specifically dealing with scheduled air services:

- The International Air Services Transit Agreement

- The

, the first agreement,states that parties grant each other the privileges (also known as freedomsof the air) to fly across their territory without landing and to land for non-traffic purposes. This treaty has attracted support from 118 states, a large

majority of the states participating in air transport.

International Air Transport Agreement

o The privilege to put down passengers, mail and cargo taken on in theterritory of the State whose nationality the aircraft possesses

, the second agreement, statesthat parties exchange, in addition to the above mentioned transit rights, threecommercial air traffic rights:

o The privilege to take on passengers, mail and cargo destined for theterritory of the State whose nationality the aircraft possesses

o The privilege to take on passengers, mail and cargo destined for theterritory of any other contracting State and the privilege to put downpassengers, mail and cargo coming from any such territory

Figure 6.- The nine air freedom rights


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Freedoms are not automatically granted to an airline as a right; they are privileges thathave to be negotiated and can be the object of political pressures. All other freedomshave to be negotiated by bilateral agreements, such as the 1946 agreement betweenthe United States and the UK, which permitted limited "fifth freedom" rights.

The 1944 Convention has been extended since then, and there are currently ninedifferent freedoms (see picture in previous page):

- Sixth Freedom. The privilege to carry traffic between two foreign countries viathe carrier's home country by combining third and fourth freedoms. It refers tothe right to carry passengers between two countries through an airport in thehome country (hub).

- Seventh Freedom. The privilege to base an aircraft in a foreign country for useon international services, establishing a de facto foreign hub. Covers the right tooperate a passenger services between two countries outside the home country.

- Eighth Freedom. The privilege to carry traffic between two domestic points in aforeign country on a flight that either originated in or is destined for the carrier'shome country. Also referred to as "cabotage" privileges. It involves the right tomove passengers on a route from a home country to a destination country thatuses more than one stop along which passengers may be loaded and unloaded.

- Ninth Freedom. The privilege to carry traffic between two domestic points in aforeign country. Also referred to as full cabotage or "open-skies" privileges. Itinvolves the right of a home country to move passengers within another country.

Instead of a multilateral agreement, most of the countries prefer to conclude bilateral airservices treaties based on reciprocity. These countries can thus remain in full control

over the choice of their aviation partners and can attune the provisions of each treaty (inparticular the level of market access) to the specific market situation and trade relationsbetween the two countries. This strategy has led to a patchwork of some 4,000 bilateraltreaties worldwide, which vary from very restrictive to moderately liberal.

Since the early 1990s a trend towards liberalization can be discerned. The UnitedStates, for example, has now concluded 56 bilateral open skies treaties, while theliberalization of air traffic has also been realized through regional agreements inter aliawithin the European Union and between Australia and New Zealand.

It has to be commented that air freedoms are independent from trade agreements.Therefore, a free trade agreement could exist between two nations, implying a

liberalization of commercial transactions and the opportunity for respective corporationsto invest. However, their respective air carriers could still operate under the samecommercial restrictions than before the trade agreement.

Nepal deposited the instrument of ratification, or notification of adherence, to theChicago Convention, and thus began to take part on ICAO organization, on 29th June1960. Until the present it has ratified 14 of the 46 main agreements, articles orconventions in relation with ICAO and other multilateral international instruments. Someof them are the basic agreements necessary to take part on this Civil AviationOrganization, such as the signature of the Convention of International Aviation and theInternational Air Services Transit Agreement, both established in Chicago on the 7thDecember 1944. Others regulate liability for international carriage by air transport, such

as the Warsaw Convention (1929) and the Warsaw Convention amended in The Hague(1955). And others are related to main safety and security issues, like the conventionsin Tokyo (1963), The Hague (1970) and Montreal (1971).


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But, still, there are some other main international air law instruments which have notbeen ratified by Nepal. For example, Montreal Convention of 1999, which amendedimportant provisions of the Warsaw Convention's regime concerning compensation forthe victims of air disasters and re-established needed uniformity and predictability ofrules relating to the international carriage of passengers, baggage and cargo, has notyet been recognized by the Nepali Authority. Also, it has neither been approved byNepal the Protocol on the Authentic Quadrilingual Text of the Convention (Montreal,1977), through which it is established as official languages of ICAO the English, French,Spanish and Russian languages.

In the table on next pages the list of all the regulatory instruments related tointernational air transport can be observed, together with the accession dates when theNepali state signed some of the agreements or treaties, and a brief description of themain purpose of every law instrument.

Table 2.- Status of Nepal with regard to international air law instruments (*: Not in force)

Name of the treaty /

convention

Date of

Signature

Date of

Ratification

or

Accession

Effective

DateMain Objective

1

Convention on

International Civil

Aviation, Chicago,

7/12/44

- 29/6/60 29/7/60

Constitution of ICAO. This paper

discusses the role of ICAO in the

promotion of aviation safety,

particularly its audit activities

and their legal basis.

2International Air ServicesTransit Agreement,

Chicago, 7/12/44

- 23/11/65 23/11/65

Two freedoms granted by the

signatories: 1) to fly acrossanother's territory without

landing; 2) to land for non-traffic

purposes (such as to re-fuel).

3

International Air

Transport Agreement,

Chicago, 7/12/44

- - -

Five freedoms granted by the

signatories: 1) and 2) as above;

3) to put down passengers and

cargo taken on in the territory of

the aircraft's nationality; 4) to

take passengers and cargo

destined for the territory of the

aircraft's nationality; 5) to take

on passengers and cargo, and todrop-off passengers and cargo

destined for, or coming from the

territory of any state signatory

to the Chicago Convention.

4

Protocol on the

Authentic Trilingual Text

of the Convention on

International Civil

Aviation, Buenos Aires,

24/9/68

- - -

The text of any amendment

made to the Convention in the

English, French and Spanish

languages shall be equally valid

and authentic in the three

languages.


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5

Protocol on the

Authentic Quadrilingual

Text of the Convention

on International Civil

Aviation, Montreal,

30/9/77

- - -



English, French, Spanish and

Russian languages shall be

equally valid and authentic in

the four languages.

*6

Protocol on the

Authentic

Quinquelingual Text of

the Convention on

International Civil

Aviation, Montreal,

29/9/95

- - -



English, French, Spanish, Russian

and Arabic languages shall be

equally valid and authentic in

the five languages.

*7

Protocol on the

Authentic Six-Language

Text of the Convention

on International CivilAviation, Montreal,

1/10/98

- - -



English, French, Spanish,

Russian, Arabic and Chinese

languages shall be equally validand authentic in the six

languages.

8Article 93bis, Montreal,

27/5/47- -

Conditions to cease a State of

being a member of the ICAO,

according to its relationship with

the General Assembly of the

United Nations.

9Article 45, Montreal,

14/6/54- -

The number of votes necessary

to take the decision of moving

the permanent seat of the

Organization.

10 Articles 48(a), 49(e) and61, Montreal, 14/6/54

9/6/97 9/6/97 Budget, meetings, powers andduties of the Assembly.

11Article 50(a), Montreal,

21/6/61- -

Composition and election of the

Council.

12Article 48(a), Rome,

15/9/62- -

Meetings of the Assembly and

voting.

13Article 50(a), New York,

12/3/71- -

Provides for the increase of the

ICAO Council to 30 members.

14Article 56, Vienna,

7/7/71- -


Air Navigation Commission to 15

members.

15

Article 50(a), Montreal,

16/10/74 9/6/97 9/6/97



16

Protocol of Amendment

(Final paragraph, Russian

Text), Montreal, 30/9/77

9/6/97 17/8/99

Amendment to the

Organization, including Russian

language.


6/10/809/6/97 20/6/97

Transfer of certain safety-

related functions and duties

from the States of Registry to

the State of the Operator in case

of lease, charter or interchange

of aircraft.


10/5/8426/10/87 1/10/98

Non-use of weapons against civil

aircraft in flight.


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19Article 56, Montreal,

6/10/899/6/97 18/4/05


Air Navigation Commission to 19

members.

20Article 50(a), Montreal,

26/10/90- -



*21


(Final paragraph, Arabic

Text), Montreal, 29/9/95

- -

Amendment to the

Organization, including Arabic

language.

*22


(Final paragraph,

Chinese Text), Montreal,

1/10/98

- -

Amendment to the

Organization, including Chinese

language.

23

Convention on the

International

Recognition of Rights in

Aircraft, Geneva,

19/6/48

- - -

Recognition and definition of

rights of property, acquisition,

possession and leasing of

aircrafts.

24

Convention on Damage

Caused by Foreign

Aircraft to Third Parties

on the Surface, Rome,

7/10/52

- - -

Compensation for persons who

suffer damage caused on the

surface by foreign aircraft,

limiting the extent of the

liabilities incurred for such

damage.

25

Protocol to Amend the

Rome Convention of

1952, Montreal, 23/9/78

- - -

Increased limits of liability in the

Convention and the Protocol,

jurisdictional clauses, and

provisions relating to financial

security.

26

Convention for the

Unification of CertainRules relating to

International Carriage by

Air, Warsaw, 12/10/29

- 12/2/66 13/5/66

Regulates liability for

international carriage ofpersons, luggage or goods

performed by aircraft for

reward.

27


Warsaw Convention of

1929, The Hague,

28/9/55

- 12/2/66 13/5/66

Change in the maximum

compensation that an airline

could be forced to pay in the

event of an international

accident.

28

Convention,

Supplementary to the

Warsaw Convention, for

the Unification ofCertain Rules relating to

International Carriage by

Air Performed by a

Person Other than the

Contracting Carrier,

Guadalajara, 18/9/61

- - -

Particular rules to add to the

Warsaw Convention relating tointernational carriage by air

performed by a person who is

not a party to the agreement for

carriage.

*29


Warsaw Convention of

1929 as Amended by The

Hague Protocol of 1955,

Guatemala City, 8/3/71

- - -

Additional changes in the

compensations and liabilities in

the event of an international

accident.


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30Additional Protocol No.

1, Montreal, 25/9/75- - -

Based on the Warsaw

Convention amended in The

Hague, establishes the legal

framework for carriage of

passengers, luggage, and goods.

It covers conditions of carriage

that define liability of the carrier

in case of loss, damage, injury or

death due to accident on

international flights, and spell

out procedures for claims and

restitution.

31Additional Protocol No.

2, Montreal, 25/9/75- - -

As above, including additional

clauses.

*32Additional Protocol No.

3, Montreal, 25/9/75- - -


clauses.

33

Montreal Protocol No. 4,

Montreal, 25/9/75 - - -


clauses.

34

Convention for the

Unification of Certain

Rules for International

Carriage by Air,

Montreal, 28 May 1999

- - -

Rules for all international

carriage of persons, baggage or

cargo performed by aircraft for

reward. It applies equally to

gratuitous carriage by aircraft

performed by an air transport

undertaking.

35

Convention on Offences

and Certain Other Acts

Committed on BoardAircraft, Tokyo, 14/9/63

- 15/1/79 15/4/79

Applicable to offences against

penal law and to any acts

jeopardizing the safety of

persons or property on board

civilian aircraft while in-flightand engaged in international air

navigation.

36

Convention for the

Suppression of Unlawful

Seizure of Aircraft, The

Hague, 16/12/70

- 11/1/79 10/2/79

Reaction to an international

wrongful act as in the case of

hijacking of aircraft.

37

Convention for the


Acts against the Safety

of Civil Aviation,

Montreal, 23/9/71

- 11/1/79 10/2/79

Applies to acts of aviation

sabotage such as bombings

aboard aircraft in flight.

38

Protocol for theSuppression of Unlawful

Acts of Violence at

Airports Serving

International Civil

Aviation, Supplementary

to the Convention for

the Suppression of

Unlawful Acts against

the Safety of Civil

Aviation, done at

Montreal on 23/9/71,

Montreal, 24/2/88

- - -

Supplementary provisions to

those of the Convention for the

Suppression of Unlawful Acts

against the Safety of Civil

Aviation, to deal with such

unlawful acts of violence at

airports serving international

civil aviation.


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39

Convention on the

Marking of Plastic

Explosives for the

Purpose of Detection,

Montreal, 1/3/91

- - -

Resolutions to avoid the use of

plastic explosives in terrorist

acts in international flights.

*40

Convention on the


Acts Relating to

International Civil

Aviation, Beijing,

10/9/10

10/9/10 - -

It replaces the Montreal

Convention and updates the

existing conventions in light of

the September 11, 2001 terrorist

attacks and developments in

counter-terrorism law over

recent decades. Provides for key

new offenses of using an aircraft

as a weapon, using weapons of

mass destruction or dangerous

substances against, on, or from

an aircraft, and transporting

dangerous materials.

*41

Protocol Supplementary

to the Convention for

the Suppression of

Unlawful Seizure of

Aircraft, Beijing, 10/9/10

10/9/10 - -

Supplements the Convention for

the Suppression of Unlawful

Seizure of Aircraft, signed at The

Hague on 16 December 1970, to

better address new types of

threats against civil aviation.

42

Convention on

International Interests in

Mobile Equipment, Cape

Town, 16/11/01

- - -Standardizes transactions

involving movable property.

43

Protocol to theConvention on

International Interests in

Mobile Equipment on

Matters specific to

Aircraft Equipment, Cape

Town, 16/11/01

- - -

It creates standards for

registration of ownership,security interests, leases and

conditional sales contracts, and

various legal remedies for

default in financing agreements,

including repossession and the

effect of particular states'

bankruptcy laws.

*44

Convention on

Compensation for

Damage Caused by

Aircraft to Third Parties,

Montreal, 2/5/09

- - -

Compensation rules for for

damage caused by aircraft to

third parties arising from general

risks.

*45

Convention on

Compensation for

Damage to Third Parties,

Resulting from Acts of

Unlawful Interference

Involving Aircraft,

Montreal, 2/5/09

- - -

Establishes international rules

for compensation for damage

caused by aircraft to third

parties arising from acts of

unlawful interference.

46

Convention on the

Privileges and

Immunities of the

Specialized Agencies,

21/11/47 applicationto ICAO Annex III

28/9/65 28/9/65

Contemplates the unification as

far as possible of the privileges

and immunities enjoyed by the

United Nations and by the

various specialized agencies.


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B.

Nepal adopted a liberal sky policy in 1992, and since then it is gradually pursuing atotally open sky policy. The Government of Nepal, through the Ministry of Culture,Tourism and Civil Aviation (MoCTCA), has adopted Civil Aviation Policy 2006 aiming toachieve some important improvements in the Nepali air transport system. This AviationPolicy has established the following main goals:

Air transport pol icy issues (Civil Aviation Pol icy 2006)

Objectives of CAAN:

To develop national aviation industry on a par with the worldwide industry

To maintain the highest standards of flight safety and aviation security

To offer healthy and competitive air services by attracting local and foreignprivate investors to:

o airlines operations management

o airports construction, operation, and managemento air transport services and facilities development, expansion and

operation

To improve international and domestic airports with state-of-art facilities to fulfillair service requirements

To strengthen training related to civil aviation, fulfilling the necessity of humanresources

To evolve Nepali civil aviation as a reliable service industry and as anappropriate mean of air recreation and adventure travel

To continue with the current liberal sky policy, pursuing open sky policy

gradually

To initiate bilateral and multilateral air services agreements with countries withtourism prospects based on equality and reciprocity

To simplify the process of approval for Nepalese airlines to ally or to share codewith other international airlines groups

C.

The Government of Nepal, through the Ministry of Culture, Tourism and Civil Aviation,

adopted Aviation Policy 2006 to regulate the licensing, operation and control of airlineoperations and other aviation related activities in Nepal. Likewise, it is being approvedthe Civil Aviation Rules 2058 (2012) to regulate, among other issues, the processes toobtain permission for operating air services in Nepali airspace. The Aviation Policy2006, regarding airline licensing, has made the following provisions.

Licensing and juridical background

Licensing Procedures:

No Nepalese operator shall operate an aircraft for the purpose of commercial airtransportation within and outside Nepal unless it holds an Air Operator Certificate(hereinafter called AOC) issued by CAAN. Accordingly, the Authority has laid down the

requirements to the applicants for the issuance of an AOC for every specific type of airtransportation.

Air Operator Certificate (AOC)


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The issuance of the AOC for commercial operation shall be dependent upon theapplicants demonstrating an adequate organization, financial soundness, technicalcapabilities consistent with the nature and extent of the operations specified. Oncompliance of the requirements, an AOC shall be issued to the applicant, setting for theoperational authorization and limitations to carry out the specified commercial airtransport and special operations.

The applicant shall submit the application at least six months before the plannedcommencement date of operation, taking into consideration the time required on thecompleteness of the information submitted and the progress the applicant makes indemonstrating an adequate organization, method of control and supervision of flightoperations, training program, procurement of aircraft(s) and associated maintenancearrangements consistent with the nature and extent of operations specified. Theprocess of issuance of an AOC should be accomplished within the targeted date.

ASOC (Air Sports Operator Certificate) is issued for any other recreational type ofoperation such as Aviation Sports and other flying activities like Micro Light, HangGliding, Para Gliding, Heli-Skiing, Skydiving, Hot Air Ballooning, etc.

Air Sports Operator Certificate (ASOC)

The ASOC can be granted subject to the applicant showing satisfactory capability toundertake these types of operations.

According to the Air Operator Certificate Requirement, AOCR draft (approved by CAANBoard on November 2nd, 2012), an Air Operation License (hereinafter AOL) would bedemanded to an international operator which holds an AOC from its country of origin to

operate commercial flights.

Proposed Air Operator License:

Government of Nepal would determine by regulation the requirements to be met inorder to obtain an AOL, regarding:

a) Prior Air Operator Certificate

b) Financial guarantees

c) Adequate infrastructure, facilities, staff and organization

d) Liability insurance

e) Compliance with the National Aviation Security Program

f) Any other requirements considered applicable

AOCR draft also proposes that any person engaging in aerial work in Nepal shouldobtain previously an Aerial Work License, apart from the AOC. An Aerial Work Licensemight be granted to holder of Air Operator Certificate who meets such requirements asprescribed by Government of Nepal.

Proposed Aerial Work Licence

Although it exists currently, according to the AOCR draft, it would be demanded for anyother works (not commercial or aerial works) in addition to the corresponding AOC.

Flight permit


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Foreign private investment is permitted to hold up to 80% of an international airline, upto 49% of domestic airlines and up to 95% of flight schools and repair and maintenancecompanies. Foreigners investing over US$ 5 million in an airline are provided with

resident visa for people involved in the project and their dependent families.

Foreign Private Investment:

It is restricted the importation of non-pressurized aircrafts older than 20 years,pressurized aircrafts older than 15 years and those having completed 75% of economicdesign life or 45,000 pressurization cycles, whichever comes first. Flight permission foraircraft having completed over half of economic design life can be given only for thepreparation of structural integrity program. The Government encourages purchasing orleasing aircrafts newer than 5 years old.

Flight Safety & Aircraft Age

Minimum paid up capital requirements for establishing airlines in Nepal have been fixedat Rs 500 million for international airlines, Rs 150 million for domestic airline, Rs 100million for flying schools, Rs 50 million for maintenance and repair companies and Rs10 million for aviation sports providers.

Minimum required capital:

The table on next page shows the different fees existing in Nepal for the establishmentof new air companies. On that table, paid up capital refers to the amount of thecompany's capital funded by its shareholders; deposit amount is the security depositrequired for every company beginning in the business; and the license fees areassociated to every new planned route.

Table 3.- Entry Fees for Airline Licensing in Nepal

Airline Types Paid up Capital Deposit amount License Fees

International Airlines Rs 500 million Rs 5 millionRs 50,000 per route

Rs 25,000 per route Charter

Domestic Airlines Rs 150 million Rs 2 millionRs 30,000 per route Others

Rs 20,000 per route Remote

Flight Schools Rs 100 million Rs 1 million Rs 0.5 million

Aircraft Maintenance Rs 50 million Rs 1 million Rs 0.5 million

Air Sports Rs 10 million Rs 0.5 million Rs 50,000


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6.AIRSERVICEAGREEMENTS

Due to the shape and size of the air transport industry, the systems can be affected bygovernmental decisions, notably those determining the type and extent of economic

regulation of airlines.As air transport is concerned, like as in many other areas, two main kinds ofagreements can be told apart, regarding the number of countries taking part of them.The first type refers to multilateral agreements, on which, generally speaking, a group ofcountries accords to some specific points related to different matters (economic, trade,transport, human rights, labor market, communications, etc.). The other type makesreference to bilateral accords, when two countries reach an agreement on somespecific points concerning only the mutual relations between them.

A.

Currently, the country of Nepal takes part in four multilateral agreements mainly relatedto trade and economic matters, together with other issues as technological, social andcultural cooperation. These multilateral agreements are SAFTA, SAARC, COSCAP andBIMSTEC, and their main objectives are as it is presented below.

Multilateral agreements of Nepal

The South Asian Free Trade Area, SAFTA, is a multilateral agreement reached onJanuary 6th, 2004, which created a free trade area in Bangladesh, Bhutan, India,Maldives, Nepal, Pakistan and Sri Lanka. The seven governments signed a frameworkagreement to promote and sustain mutual trade and economic cooperation within the

SAFTA region through the exchange of concessions, reducing customs duties of alltraded goods to zero by the year 2016.

SAFTA (South Asian Free Trade Area):

Its main objective is to promote and sustain mutual trade and economic cooperation theSAFTA region through the exchange of concessions, reducing customs duties of alltraded goods to zero by the year 2016.

The South Asian Association for Regional Cooperation, SAARC, is an organization ofSouth Asian nations, founded in December 1985, dedicated to economic, technological,social, and cultural development, emphasizing collective self-reliance. Its eight

members are Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan andSri Lanka.

SAARC (South Asian Association for Regional Cooperation):

Its main objectives are:

to promote the welfare of the people of South Asia and to improve their quality oflife

to accelerate economic growth, social progress and cultural development in theregion and to provide all individuals the opportunity to live in dignity and torealize their full potential

to promote and strengthen selective self-reliance among the countries of SouthAsia


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to contribute to mutual trust, understanding and appreciation of one another'sproblems

to promote active collaboration and mutual assistance in the economic, social,cultural, technical and scientific fields

to strengthen cooperation with other developing countries

to strengthen cooperation among themselves in international forums on mattersof common interest

to cooperate with international and regional organizations with similar aims andpurposes

Figure 7.- Signatory countries of SAARC agreement

The Programme , which commenced in February 1998, is resultant of a cooperativeagreement signed between the Civil Aviation Administrations of South Asian States ofBangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.

COSCAP-SA (Co-operative Development of Operational Safety and Continuing Airworthiness

Programme South Asia)

In order to enhance safety, regularity and efficiency in civil aviation, the objectives ofCOSCAP-SA are:

to strengthen the regional institutional framework for aviation safety and assist inthe development of a harmonized regulatory framework amongst MemberStates

to promote a comprehensive system approach to the conduct of safety oversightactivities, focusing on the effective implementation of Standards andRecommended Practices (SARPs), the efficient oversight capability of MemberStates and assist the Member States in the effective implementation of thecritical elements of safety oversight as identified by ICAO

to develop a regional information sharing system in order to improve access to

safety-related information


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to assist the civil aviation administrations of the Member States in their efforts tocomply with international and national civil aviation safety standards

to support the human resource development requirements of the civil aviationadministrations of the Member States in the field of civil aviation

Figure 8.- COSCAP Member States

It is an international organization involving a group of countries in

BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation)

South Asia andSouthEast Asia.These are: Bangladesh, India,Myanmar, Sri Lanka,Thailand,Bhutan andNepal.

The members cover 13 Priority Sectors (trade & investment; technology; energy,transport & communication; tourism; fisheries; agriculture; cultural cooperation;environment and disaster management; public health; people-to-people contract;poverty alleviation and counter-terrorism and transnational crimes), and aim to achievetheir own free trade area by 2017. The aims and purposes of BIMSTEC are

to create an enabling environment for rapid economic development

to accelerate social progress in the sub-region

to promote active collaboration and mutual assistance on matters of commoninterest

to provide assistance to each other in the form of training and research facilities

to cooperate more effectively in joint efforts that are supportive of, andcomplementary to national development plans of member states

to maintain close and beneficial cooperation with existing international andregional organizations

to cooperate in projects that can be dealt with most productively on a sub-regional basis and which make best use of available synergies
http://en.wikipedia.org/wiki/South_Asiahttp://en.wikipedia.org/wiki/South_Asiahttp://en.wikipedia.org/wiki/South_East_Asiahttp://en.wikipedia.org/wiki/South_East_Asiahttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Myanmarhttp://en.wikipedia.org/wiki/Sri_Lankahttp://en.wikipedia.org/wiki/Thailandhttp://en.wikipedia.org/wiki/Bhutanhttp://en.wikipedia.org/wiki/Nepalhttp://en.wikipedia.org/wiki/Nepalhttp://en.wikipedia.org/wiki/Bhutanhttp://en.wikipedia.org/wiki/Thailandhttp://en.wikipedia.org/wiki/Sri_Lankahttp://en.wikipedia.org/wiki/Myanmarhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/South_East_Asiahttp://en.wikipedia.org/wiki/South_East_Asiahttp://en.wikipedia.org/wiki/South_Asia


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B.

The International Air Transport Agreement, included in the Chicago Convention of1944, was planned to be the pillar of all the international air transport policy. It definesthe five first freedoms of the air. The fifth freedom faculty an aircraft from a contractingState to transport people, freight and mail between two points of two different States,being none of them the country from where such aircraft has its nationality.

Bilateral agreements

However, this Treaty was not widely accepted and finally did not enter into force. Sincethen, the air traffic rights between nations have to be negotiated bilaterally betweenStates through Bilateral Air Service Agreements. Within them, the permits for aircraftoperations are included, together with tariffs, frequencies of flights, established routes...

Generally speaking, a route is determined by the points (cities) served by an airline andtherefore effectively represents the market of that airline. Typically, Governments agreebilaterally on the routes on which traffic will be carried, often involving one or morespecific gateways in the home and in the foreign country. Depending on the type of

ASA, the number of routes or points can be limited or unlimited, and the type of airfreedom rights can vary, including or not the fifth freedom right or beyond rights.

The Government of Nepal has signed Bilateral Air Service Agreements andMemorandums of Understanding with 36 different countries since 1963 (see tablebelow), despite the fact that until now 22 of them have still no direct flights to or fromNepal. That is because currently not all of the countries with an air service agreementhave possibilities of tourism promotion to or from Nepal.

Provisions of the air service agreements provide for over 5.25 million seats per annumto and from Nepal. However, nowadays not even 45% of this capacity is being utilizedby the operating airlines to Nepal (only 2.36 million seats per annum in total).

Winter schedule program of 28 airlines from 14 countries during October March 2012settled 47,057 seats per week. Summer schedule prepared from March to September2012 by 27 airlines produced 43,710 passenger seats, 890 cargo tons and an overallprogram of 255 flights per week.

Table 4.- Air Traffic Rights in Nepal

Bilateral Air Services Agreements with Foreign Countries

India Singapore Bhutan

Pakistan Maldives Russian Federation

Thailand Brunei JapanBangladesh Germany United Kingdom

Sri Lanka Republic of Korea Qatar

China Hong Kong Malaysia

Memorandums of Understanding

Myanmar Bahrain Kuwait

France Oman UAE

Italy Macau Croatia

Egypt Netherlands Israel

Luxembourg Saudi Arabia Philippines

Austria Jordan Turkey


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Figure 9 presents all the agreements related to international air transport in Nepal,including the country taking part of each bilateral ASA (as it was shown before), andsome characteristics of these agreements (the points of the route, the air freedomsoffered, and some other remarks).

Figure 9.- Bilateral international air transport agreements in Nepal, per country


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Until now only 14 of the 36 countries with ratified Bilateral ASAs and Memorandums ofUnderstanding have direct flights to Nepal. The air carriers operating the agreed trafficrights, together with their cities of origin/destination, are shown inTable 19 in followingpages. It is necessary to say that all of these flights operate to and from Tribhuvan

International Airport in Kathmandu.


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Taking a look to the trade liberalization agreements of Nepal and those of thesurrounding Asian nations, the past decade has seen a proliferation of bilateral freetrade agreements in that area. There are now some 40 completed intraregional

agreements and over 100 agreements with outside countries. Dozens more tradeagreements are in negotiation or under consideration. Figure in next page lists brieflythis boom in bilateral trade liberalization agreements in Asia.

Trade agreements:

Figure 10.- List of bilateral trade agreements in Asia, 2012. (Sources: World Trade Organization, Asian

Development Bank and Heritage Foundation, 2012)


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7. COMPETITION AND TARIFF POLICY

A.

The Aviation Policy, following CAANs recommendations, fixes the airfares for everyflight sector, specifying the upper and lower limits thereof. The Authority can interveneand take legal action against those airlines which, instead of operating the services atthe rate fixed by the Government, collect excess charges to the passengers.

Ticket prices

Air tariffs in trunk routes have decreased during the last years due to marketcompetition. In those routes the prices are competitive, since this market segment hasbusiness possibilities and it is shared by many different companies. On the contrary, inthe rural areas the domestic aviation prices are being sustained by CAANs control, bypreventing airfare hike.

The Government monitors the prices of air tickets fixed by the airlines to controlunhealthy competition. The companies submit their price list to CAAN while approvingtheir flight schedules, in order to establish a common database and to improvetransparency in the business.

The table in next page includes that published list of air fares, per schedule flight, bytype of passenger flying with a private air company. In the table, resident paxreferences to foreign travelers currently living in Nepal. The cells where there is not anynumber mean that no discount is applicable for foreign passengers in those routes.


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Table 5.- Airfares for domestic routes (private companies), adding fuel surcharge. (Source: Nelpa)

SectorInternational

Pax (US$)

National

Pax (Rs)

Resident

Pax (Rs)Airlines Remarks

Bir / Tumlingtar 69+11 1595+1140 - AG

Kep / Dolpa 129+15 2425+1730 - TA Effective from 05/09/12

Kep / Jumla 98+16 2490+1775 - TA

Kep / Rara 145+16 2680+1915 - TA AG : Agni Air

BA : Buddha AirKep / Simikot 145+21 3315+2370 - TA

Ktm / Bhadrapur 137+27 3235+3300 5660+3300 BA/YT/AG GA : Guna Airlines

Ktm / Bhairahawa 101+20 2540+2475 4445+2475 BA/YT/GA/AG ST : Sita Air

Ktm / Bharatpur 78+14 1435+1575 2510+1575 BA/YT TA : Tara Air

Ktm / Biratnagar 108+23 2930+2775 5125+2775 BA/YT/GA/AG YT : Yeti Airlines

Ktm / Dhangadi 158+39 5155+4650 9020+4650 BA/YT

Ktm / Janakpur 86+15 1655+1800 2895+1800 BA/YT/AG Bir: BiratnagarKtm /

Kangeldanda118+15 2230+1590 - TA Kep: Nepalgunj

Ktm / Nepalgunj 137+29 3635+3525 6360+3525 BA/YT/AG Ktm: Kathmandu (TIA)

Ktm / Lamidanda 102+13 1915+1365 - TA Pkr: Pokhara

Ktm / Lukla 125+15 2295+1640 - TA/AG/ST Skh: Surkhet

Ktm / Manang 167+20 2810+2280 - TA

Ktm / Meghauly 114+13 1850+1320 - TA

Ktm / Mountain 140+42 4490+4500 4490+4500 BA/YT/GA/AG

Ktm / Phaplu 118+13 2045+1460 - TA/AG

Ktm / Pokhara 86+16 2010+2025 3535+2025 BA/YT/AG/GAKtm / Rajbiraj 101+19 2935+2095 - TA

Ktm / Ramechhap 81+8 1400+1000 - TA

Ktm / Rumjatar 87+11 1720+1230 - TA

Ktm / Simara 72+12 1340+1350 2345+1350 BA/YT/GA

Ktm / Surkhet 153+34 2810+3830 - YT/ST

Ktm / Taplejung 222+21 3445+2460 - TA

Ktm / Tumlingtar 100+17 2745+1960 - TA/AG

Pkr / Bharatpur 79+7 1340+955 - YT

Pkr / Jomsom 87+8 1340+955 - AG/TA/ST

Pkr / Manang 116+8 3300+1000 - TA

Skh / Dolpa 109+14 2055+1595 - TA

Skh / Jumla 133+12 1785+1275 - TA

Skh / Rara 100+13 1980+1415 - TA

Skh / Simikot 133+16 2515+1825 - TA

67 % adult fare will be applicable for child (Below 12 Yrs)

10 % adult fare will be applicable for infants (Below 02 Yrs)

20 % Service Charge and Fuel Surcharge will be applicable for all FOC tickets.


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B.

The next table presents a summary of the charges for aerodromes and air navigationservices in Nepal, in Nepalese Rupees (NPR). All the charges have been obtained fromthe official sources of CAAN, and they are included in the Aeronautical InformationPublication (AIP) of the country.

Charges to f lights operators

Table 6. Aeronautical charges in Nepal (Source: AIP)

INTERNATIONAL FLIGHTS DOMESTIC FLIGHTS

LANDINGAir craft' s Weig ht MTOW Charg e (NPR) Tribhuvan International, PokharaUp to: 10,000 Kgs Per 1,000 Kgs. 107.11 Air craft' s Weig ht MTOW Charg e (NPR)10,000 - 25,000 Kgs First 10,000 Kgs. 1049.70 Up to: 10,000 Kgs Per 1,000 Kgs. 55

After 10,000 Per 1,000 214.23 10,000 - 25,000 Kgs First 10,000 Kgs. 55025,000 - 50,000 Kgs First 25,000 Kgs. 4198.81 After 10,000 Per 1,000 110

After 25,000 Per 1,000 321.34 25,000 - 50,000 Kgs First 25,000 Kgs. 220050,000 - 75,000 Kgs First 50,000 Kgs. 12039.45 After 25,000 Per 1,000 165

After 50,000 Per 1,000 514.14 Above 50,000 Kgs First 50,000 Kgs. 632575,000 - 100,000 Kgs First 75,000 Kgs. 25128.59 After 50,000 Per 1,000 220

After 75,000 Per 1,000 629.82 Bhadrapur, Biratnagar, Simara, Bhairahawa, Lukla, Jomsom, MeghauliAbove 100,000 Kgs First 100,000 Kgs. 40702.75 Air craft' s Weig ht MTOW Charg e (NPR)

After 100,000 Per 1,000 732.65 Up to: 10,000 Kgs Per 1,000 Kgs. 4010,000 - 20,000 Kgs First 10,000 Kgs. 400

After 10,000 Per 1,000 80Above 20,000 Kgs First 20,000 Kgs. 1200

After 20,000 Per 1,000 120Janakpur, Bharatpur, Surkhet, Dhangadhi, Mahendranagar

Air craft' s Weig ht MTOW Charg e (NPR)

Up to: 10,000 Kgs Per 1,000 Kgs. 3010,000 - 20,000 Kgs First 10,000 Kgs. 300


After 20,000 Per 1,000 90Taplejung, Lamidanda, Tumlingtar, Dolpa, Jumla, Simikot


Up to: 10,000 Kgs Per 1,000 Kgs. 25

10,000 - 20,000 Kgs First 10,000 Kgs. 250After 10,000 Per 1,000 50Above 20,000 Kgs First 20,000 Kgs. 750

After 20,000 Per 1,000 75Other airports




After 20,000 Per 1,000 60

PARKINGAir craft' s Weig ht MTOW Charg e (NPR) Air craft' s Weig ht MTOW Charg e (NPR)

Up to: 50,000 Kgs Per 1,000 Kgs. 85.69 Up to: 40,000 Kgs Per 1,000 Kgs. 37.5050,000 - 100,000 Kgs First 50,000 Kgs. 4198.81 40,001 - 100,000 Kgs First 40,000 Kgs. 1500

After 50,000 Per 1,000 89.97 After 40,000 Per 1,000 54Above 100,000 Kgs First 100,000 Kgs. 10475.60 Above 100,000 Kgs First 1,00,000 Kgs. 4740

After 100,000 Per 1,000 167.10 After 100,000 Per1,000 75

HANGARAGE / HOUSINGAir craft' s Weig ht MTOW Charg e (NPR) Air craft' s Weig ht MTOW Charg e (NPR)

Up to: 50,000 Kgs Per 1,000 Kgs. 192.80 Up to: 50,000 Kgs Per 1,000 Kgs. 15050,000 - 100,000 Kgs First 50,000 Kgs. 9640.13 50,000 - 100,000 Kgs First 50,000 Kgs. 5940

After 50,000 Per 1,000 291.35 After 50,000 Per 1,000 216Above 100,000 Kgs First 100,000 Kgs. 24207.43 Above 100,000 Kgs First 1,00,000 Kgs. 18900

After 100,000 Per 1,000 381.32After 100,000 Per1,000

297

AIR NAVIGATION SERVICETribhuvan International Tribhuvan International

Air craft' s Weig ht MTOW Charg e (NPR) Air craft' s Weig ht MTOW Charg e (NPR)

Up to: 25,000 Kgs - 3933.17 Up to: 10,000 Kgs Per 1,000 Kgs. 2225,001 - 50,000 Kgs - 6555.29 10,000 - 25,000 Kgs First 10,000 Kgs. 22050,001 - 75,000 Kgs - 13089.15 After 10,000 Per 1,000 44

Above 75,000 Kgs - 26178.30 25,000 - 50,000 Kgs First 25,000 Kgs. 880After 25,000 Per 1,000 66Above 50,000 Kgs First 50,000 Kgs. 2530

After 50,000 Per 1,000 88


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PokharaAir craft' s Weig ht MTOW Charg e (NPR)

Up to: 10,000 Kgs Per 1,000 Kgs. 13.7510,000 - 25,000 Kgs First 10,000 Kgs. 137.50

After 10,000 Per 1,000 27.50

25,000 - 50,000 Kgs First 25,000 Kgs. 550After 25,000 Per 1,000 41.25

Above 50,000 Kgs First 50,000 Kgs. 1581.25After 50,000 Per 1,000 55

Bhadrapur, Biratnagar, Simara, BhairahawaAir craft' s Weig ht MTOW Charg e (NPR)



After 20,000 Per 1,000 30Janakpur, Bharatpur


Up to: 10,000 Kgs Per 1,000 Kgs. 7.5010,000 - 20,000 Kgs First 10,000 Kgs. 75


After 20,000 Per 1,000 22.50Lukla, Jomsom, Meghauli




After 20,000 Per 1,000 30Surkhet, Dhangadhi, Mahendranagar


Up to: 10,000 Kgs Per 1,000 Kgs. 7.5010,000 - 20,000 Kgs First 10,000 Kgs. 75


After 20,000 Per 1,000 22.50Taplejung, Lamidanda, Tumlingtar, Dolpa, Jumla, Simikot



After 10,000 Per 1,000 7.50Above 20,000 Kgs First 20,000 Kgs. 112.50

After 20,000 Per 1,000 11.25Other airports




After 20,000 Per 1,000 9

PASSENGER SERVICE FEETribhuvan International Charge (NPR)

Destinati on Charge (NPR)TIA, Pokhara, Bhadrapur, Biratnagar, Simara,Bhairahawa, Nepalgunj, Lukla, Jomsom, Meghauli

150

SAARC countries - 700Rajbiraj, Janakpur, Bharatpur, Tikapur, Dang, Surkhet,Dhangadhi, Mahendranagar

125

Other countries - 1000 Other airpots 50Other airportsDestinati on Charge (NPR)

SAARC countries - 500Other countries - 750

In relation with those air taxes, some private airlines see these fees so high thatrepresent a constraint for the companies to obtain enough profits. There are charges inrelation with handling and other services provided by CAAN, and not only with landing,take-off and flight rights. High air taxes imply higher operation costs, and that usuallymeans more expensive tickets. Since the average Nepali population has not a buoyantpurchasing capacity, expensive fares could drive to a lower demand of domestic airtransportation. If airfares drop off, that could signify a sharp in the number of domesticair passengers, and a quickly rise of the size market of domestic air traffic business.


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However, Governments point is that landing and take-off costs in Nepal are not soexpensive. To put forward some examples, landing charge in Kathmandu is Rs 330 fora Twin Otter, Rs 440 for a Beechcraft and Rs 165 for a helicopter, while in Simikot it isRs 150 for a Twin Otter and Rs 75 for a helicopter.

This opinion is shared by some other companies. These companies think that, with thecurrent airfares system, it can be possible to obtain benefits if the airlines have athriving position and they are ready to adapt their structures and routes plans topassenger necessities and market demands.

In the next pages it is presented a summary of the charges for aerodromes and airnavigation services in several countries near Nepal, concretely, India Pakistan,Bangladesh, Bhutan and Sri Lanka. Due to the variety of the criteria for applying the

fees and the differences in the consideration of aircrafts, not all of the air services taxesof all the considered nations have been introduced in this document. Moreover,because of the diversity of currencies in each country, and keeping in mind a futurecomparison between them, the charges are all presented in the same currency, theNepalese Rupee (NPR).

Aeronaut ical charges in neighbor nations

All the presented charges have been obtained from the official data of theGovernments authorities in charge of the civil aviation of each of those countries (AAIIndia, DCA Bhutan, CAAB Bangladesh, CAA Pakistan and CAA Sri Lanka).

The exchange rates of the different currencies to NPR in the date of the study, October2012, used to express each countrys charges in Nepalese Rupees, are:

Table 7.- Exchange rates between different currencies and Nepalese Rupee

Amount Currency Count ry Amount Currency Name

1 USD USA

85.69 NPR Nepalese Rupee53.55 INR Indian Rupee53.55 BTN Bhutanese Ngultrum81.33 BDT Bangladeshi Taka95.78 PKR Pakistan Rupee

1 NPR Nepal

0.012 USD United States Dollar

0.625 INR Indian Rupee

0.625 BTN Bhutanese Ngultrum0.950 BDT Bangladeshi Taka

1.118 PKR Pakistan Rupee

Note: Sri Lankas currency is the same than Indias currency, the Indian Rupee.


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INDIA


LANDINGInternational Airports International Airports

Air craft' s Weig ht MTOW Charg e (NPR) Air craft' s Weig ht MTOW Charge (NPR)Up to 100,000 Kgs Per 1,000 Kgs. 400.80 Up to 100,000 Kgs Per 1,000 Kgs. 300.64

Above 100,000 Kgs First 100,000 Kgs. 40080 Above 100,000 Kgs First 100,000 Kgs. 30064After 100,000 Per 1,000 538.56 After 100,000 Per 1,000 404

Minimum landing fee - 1760Small domestic aircrafts up to21,000 Kgs

Per 1,000 Kgs. 181.28

International airports in some remote areasAir craft' s Weig ht MTOW Charg e (NPR)

Up to 100,000 Kgs Per 1,000 Kgs. 300.60Above 100,000 Kgs First 100,000 Kgs. 30060

After 100,000 Per 1,000 403.92Domestic Airports Domestic Airports

Air craft' s Weig ht MTOW Charg e (NPR) Air craft' s Weig ht MTOW Charge (NPR)

Up to: 10,000 Kgs Per 1,000 Kgs. 195.36 Up to: 10,000 Kgs Per 1,000 Kgs. 107.3610,001 - 20,000 Kgs First 10,000 Kgs. 1953.60 10,000 - 20,000 Kgs First 10,000 Kgs. 1073.60

After 10,000 Per 1,000 286.88 After 10,000 Per 1,000 188.3220,001 - 50,000 Kgs First 20,000 Kgs. 4822.40 Above 20,000 Kgs First 20,000 Kgs. 2956.80

After 20,000 Per 1,000 566.72After 20,000 Per 1,000

369.6050,001 - 100,000 Kgs First 50,000 Kgs. 21824

Small domestic aircrafts up to21,000 Kgs

Per 1,000 Kgs. 103.84

After 50,000 Per 1,000 661.76Above 100,000 Kgs First 100,000 Kgs. 54912

After 100,000 Per 1,000 755.04Domestic airports in some remote areas



After 10,000 Per 1,000 215.1620,001 - 50,000 Kgs First 20,000 Kgs. 3616.80

After 20,000 Per 1,000 425.0450,001 - 100,000 Kgs First 50,000 Kgs. 16368

After 50,000 Per 1,000 496.32Above 100,000 Kgs First 100,000 Kgs. 41184

After 100,000 Per 1,000 566.28

national air transport plan-current situation

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