Nepal and Australia signed an air service agreement in Montreal, Canada on Monday opening the way for the operation of commercial air services between the two countries.

The Australian government has permitted seven weekly flights from Nepal to key cities like Sydney, Melbourne, Canberra and Perth, and unlimited flights to other destinations in Australia, Tourism Under-Secretary Pramod Nepal told the Post over the phone from Canada.

The agreement allows Australian carriers to operate seven flights weekly to Kathmandu's Tribhuvan International Airport, and another 28 weekly services to Bhairahawa and Pokhara.

The pact permits unrestricted cargo movement between the two countries besides third country code share with a provision for domestic code share.

Under the domestic code-share agreement, Australian carriers will be free to enter into code-share agreements with Nepali domestic carriers to any point in Nepal.

Nepal and Australia have also agreed on a third-country code-share deal which allows carriers of the two countries to share marketing services with airlines from third countries.

A code-share agreement is an arrangement under which two or more airlines share the same flight. A seat can be purchased from one airline on a flight that is actually operated by another airline under a different flight number or code.

It provides travelers coordinated customer service—a single ticket and through check-in of bags to their final destinations. The agreement is a low-risk way for airlines to expand their network without added cost.

The agreement has also allowed fifth freedom traffic rights. Under this arrangement, the designated airlines of Nepal may exercise fifth freedom traffic rights at any two intermediate points in Southeast Asia, South Asia and the Middle East; and beyond Australia to any two points in New Zealand.

Similarly, the designated airlines of Australia may exercise fifth freedom traffic rights at any two intermediate points in Southeast Asia, South Asia and the Middle East; and any two points beyond Nepal except New Delhi in India.

According to Under-Secretary Nepal, one of the most important features of the agreement is the ‘principal place of business’ that normally facilitates foreign direct investment instead of the traditional ‘principle of airline substantial ownership’ that is currently in practice.

In many countries, a flight operation permit is granted only if a majority of the shareholders in an airline company are from the country where the firm is based.

For example, Nepal-based airlines in which Nepali investors have a 51 percent or higher stake are allowed to operate flights to India. But if Nepali investors own less than 51 percent of the shares, such airlines will be automatically barred from flying to India.

Nepal’s foreign direct investment policy, however, allows foreign investors to hold up to 80 percent of the shares in an airline.

The government had requested the Australian government to sign an air service agreement as Nepal Airlines wished to link Australia after acquiring two long-range Airbus A330-200s. Nepal Airlines officials said that the A330-200s would not be able to fly non-stop to Australia. But Nepal Airlines can fly to Australia through a third party code-share agreement.

Last year, Sydney Airport chief executive Geoff Culbert said that Nepal was the third largest source of foreign students to Australia after China and India.

According to Culbert, Kathmandu was currently Sydney’s largest unserved market globally, with 93,000 people travelling between Nepal’s capital and Australia's largest city annually.

“But they are flying via somewhere else,” Culbert said. “This means we could fill a five-day-a-week service straight away. With the stimulatory effect of a direct flight, we would expect a daily service between Kathmandu and Sydney to be no problem.” Sydney-Kathmandu is 5,253 nautical miles or 9,728 kilometres.

Australian arrivals to Nepal have also been growing. According to government statistics, Nepal received 38,429 Australian visitors last year, up from 33,371 in 2017. In 2014 before the earthquake, 24,516 Australian tourists visited Nepal.

The air service agreement with Australia was signed by Suresh Acharya, joint secretary at the Tourism Ministry, and Jim Wolfe, executive director of the Department of Infrastructure, Transport, Cities and Regional Development. Nepal has concluded air accords with 40 countries since 1963.