Airlines oppose plan to scrap two-tier fare structureCurrent policy makes foreigners pay higher fares than locals for the same flight and Nepali carriers are not willing to change it and lose the extra revenue.
The Civil Aviation Ministry's move to end the two-tier fare structure for the domestic sector, under which locals and foreigners pay different prices for the same flight, has got private airlines worried.
The carriers say that they stand to lose more than 30 percent of their revenue as a result of this 'unilateral' step, and that it will also put a dent in the country’s foreign exchange earnings. If the government goes through with this plan, the price of air tickets could swell by 40 percent, they said.
An official of the Civil Aviation Authority of Nepal told the Post that a report on removing the two-tier fare structure had been sent to the ministry for its final decision. Popularly known as 'dollar fare', it was introduced by the then Royal Nepal Airlines Corporation five decades ago.
A government committee headed by deputy director general of the authority, Narendra Thapa, had recommended that the dollar fare be scrapped for all sectors and foreign tourists be charged the same rate as Nepali passengers.
But it has proposed retaining the dollar fare for five sectors—Pokhara, Lukla, Jomsom, Simikot and Mountain Flight.
“We have sent the report to the ministry which will make the policy decisions,” said Rajan Pokhrel, director general of the Civil Aviation Authority. He did not elaborate.
Civil Aviation Minister Yogesh Bhattarai has been relentlessly pushing to abolish the dual fare system since he assumed office.
Airline officials accused the ministry of bowing to pressure from the representatives of diplomatic missions and INGOs, and not thinking about the consequences of such a move.
Birendra Bahadur Basnet, managing director of Buddha Air, said that the decision had been made unilaterally. “It will shave a huge chunk of revenue coming from tourists. The losses are for both airlines and the country’s foreign exchange treasury.”
Industry insiders say that the two-tier fare structure was implemented based on purchasing power parity.
“We cannot charge the same fare to a Nepali and a foreigner because foreigners’ incomes are multiple times higher than the annual per capita income of Nepalis,” said airline representatives who wished to remain anonymous.
“If these kinds of decisions are made randomly, it will wipe out a huge income source from foreigners because there is a two- or three-tier fare structure in almost all sectors.”
The decision may be costly to the entire tourism industry, he said. “We don’t charge residential diplomatic representatives the dollar fare. The price is slightly higher than what we charge Nepalis, but the dollar fare is only for foreign tourists.”
The normal fare for a mountain view flight for a foreigner is $185 and for a Nepali it is Rs10,335.
A tourist flying to Bhairahawa from Kathmandu pays $108 while a Nepali pays Rs5,855. Tourists pay $119 for an air ticket to Pokhara and a Nepali pays Rs4,755 for the same flight.
There are different entrance charges for national parks and UNESCO World Heritage Sites, and fees for climbing and trekking permits for foreign tourists, SAARC nationals and Nepalis. The government collects all these charges.
Foreigners are charged $11,000 per climber for a climbing permit for Everest while Nepalis pay Rs75,000 per climber.
“Can the government enforce uniformity in fees in all sectors? It’s not possible. So what’s the rationale behind scrapping the dollar fare on some routes served by domestic airlines?” asked Basnet. “Why are the five sectors exceptional? Is there any logic?”
Basnet said that they were against the government plan as the repercussion of scrapping the dollar fare will be big on their revenue. “We may lose 30 percent of the total $15 million we earn from tourists.”
He said that scrapping the dollar fare would cost Nepalis dear as airlines have to adjust the losses. “It will force airlines to raise the price of air tickets by at least 40 percent for domestic flyers.”
According to an official at the Tourism Ministry, they have received a proposal to scrap the dollar fare; but at this time of crisis, it was not logical to create controversies by removing the two-tier fare structure.
“It’s not a priority for us as it can be studied when the situation becomes normal. But we don’t know how the minister, who has been pushing for this policy, will act. Indeed, it’s a controversial move.”
According to Basnet, they will go to court if the government forcefully implements the decision that could impact all sides. “The government has a two- or three-tier fee structure for tourists, so why are private airlines not allowed to follow the same policy?”