Higher costs lead to drop in private airlines profits

KATHMANDU, MAR 16 -

Nepal’s private airlines are seeing their profits drop due to higher fuel prices, hefty insurance premiums and fewer passengers.

According to the Civil Aviation Authority of Nepal (CAAN), the net profit of domestic carriers fell 17.28 percent to Rs 200 million in 2011-12. Among the nine fixed-wing airlines , four enjoyed a net profit of Rs 162 million while the rest suffered a net loss of Rs 108.8 million in the last fiscal year.

CAAN said that three of these airlines fly single-engine planes, and all of them are in the red. Although CAAN did not divulge their individual profit and loss figures, it said that only big companies are making a profit.

Meanwhile, the report shows that helicopter services are doing good business. The net profit of the six helicopter companies in the country stood at Rs 30.2 million in 2011-12, up from Rs 27.6 million in the fiscal. According to CAAN, airlines operating on remote sectors are incurring losses while only a few flying trunk routes are earning profits.

CAAN director general Tri Ratna Manandhar said that an increase in insurance premiums had also become a big headache for airlines . According to him, around Rs 1 billion goes out of the country as insurance premiums. “Although airlines have a capital investment of Rs 11 billion, the amount of insurance premiums paid abroad is huge.”

Nepal saw a significant growth in air transport after the aviation policy was liberalized in 1992. Aircraft movement jumped four-fold from 24,600 in 1992 to 95,000 in 2012. Manandhar said that Nepal’s domestic airlines can be described as exemplary companies as there are many airlines and a majority of them are doing well. However, the domestic aviation market suffers from unbalanced growth, he added.

Liberalization in Nepal’s aviation scene opened the door for private operators, and a swarm of airlines , among them Nepal Airways, Necon Air, Everest Air, Cosmic Air, Lumbini Air, Asian Airlines, Shangri La Air, Dragon Air, Manang Air and Impro Airways, took to the skies in the initial years. However, they didn’t last very long. Moreover, a series of air crashes in Nepal has raised safety concerns.

“As frequent crashes have dented the image of Nepal’s aviation industry, CAAN is committed to improving the situation,” Manandhar said. A number of safety programmes have been launched to make Nepali skies safer, he added.   There are 55 fixed-wing aircraft and 26 helicopters in Nepal at present. CAAN has issued 70 air operator certificates (AOC) among which 40 are still valid. In 2012, domestic airlines flew 1.57 million travellers, a drop of 0.5 percent. Domestic airlines witnessed significant growths in traveller movement for three consecutive years from 2008 to 2010.

Air traveller movement reached 1.03 million in 2008, 1.37 million in 2009 and 1.55 million in 2010. However, the growth rate slipped 2 percent to 1.58 million in 2011. In 2012, passenger movement fell 0.55 percent to 1.575 million.

Source: The Kathmandu Post