‘Without promoting infrastructure, no one will go there’Sudhir Mittal, chairman of Shree Airlines, says the government should not operate the Gautam Buddha International Airport and let the private sector do that instead.
Sudhir Mittal is chairman of Shree Airlines, one of the pioneers among Nepal’s private airlines. The firm diversified into fixed-wing aircraft in 2016 and had set an ambitious plan to connect Southeast Asian markets in the second phase, but Covid came as a spoiler. Shree Airlines has revived the plan now that the pandemic is gone. The Post’s Sangam Prasain talked to Mittal about the company’s plans and the industry’s current scenario. Excerpts:
The airline industry saw the fastest growth in terms of passenger traffic. Last year, there were 4.46 million domestic passengers, up from 1.75 million in 2016. Is there room for more growth?
Yes, I concur. Passenger numbers are growing at a fast rate, but the important point is whether this growth matches airline incomes. The airline industry has recovered but it’s still struggling to generate revenue. Nepal’s domestic airlines were among the most affected during the Covid pandemic, but the monetary policy did not include the airline industry for refinancing and rescheduling schemes. This shows the discriminatory policy towards us.
We were forced to keep our machines, costing millions of rupees, idle for months. It’s a huge loss. After Covid-19, we again became a victim of fuel prices. Oil prices increased sharply following the Russia-Ukraine war. They almost doubled in early 2022 as compared to the 2019 level. The prices are at low levels now. But still, we pay double. Fuel expenses are a major component of any airline. And if fuel prices are not coming down, airlines will not be able to make a profit and survive. Amid fuel prices and Covid came the civil aviation regulator tariff policy.
The civil aviation body more than doubled the passenger service charge, and landing and parking charges, too, have been raised. The combined effects show that despite rising passenger numbers, airlines are incurring losses because there is competition.
The minimum fare even on the shortest route is Rs5,000 despite the fierce competition. If tickets are so expensive, why are passenger numbers growing?
In the airline business, you never know when you will go bankrupt. We have seen many examples in recent years. In Nepal, nowadays, it is a compulsion to travel via air because of the poor road infrastructure. Today, it takes 12 hours to reach Pokhara from Kathmandu as roads are being upgraded. It takes only 20 minutes to reach Pokhara via air. So, logically, passengers will pay for 20 minutes.
Roads are being upgraded in the eastern and western regions too. There are too many hassles to travel by surface route. Once you start travelling by air, it becomes a habit. Nowadays, people consider time, not money. And this is the factor behind why the number of passengers is increasing despite high airfares.
Why is air travel, both domestic and international, not affordable in Nepal?
In Nepal, air transport is not a luxury. We don’t have robust infrastructure, either in the Tarai or the mountains, to make travel hassle-free. The government has not prioritised the airline industry. Today, Nepal Oil Corporation makes a large profit on the fuel sold to airlines. The profit earned from aviation fuel is used to cross-subsidise other fuels like cooking gas. The government has no policy to subsidise electricity and reduce liquefied petroleum gas consumption. Nepal Oil Corporation today makes profits in the millions by selling oil to airlines. But in reality, its transaction is in billions. So by making a small profit on fuel sold to airlines, it is making travel expensive. Today, Nepal’s airport is one of the most expensive airports in the world because of the subsidy policy which is neither good for promoting domestic industry or attracting tourists. The burden of high fuel costs is passed on to the flyers.
We already have two international airports. But why are there no flights?
How can we call them international airports if there are no routes to fly into them? India has not given route clearance, mainly to enter through their airspace and connect these new airports. Who is responsible? The airports also depend on how we market them. We have Gautam Buddha International Airport in a perfect location to attract tourists. But foreign airlines will not consider that fact. They will see the business and its returns. It’s true the government will not conduct promotional activities for the airport, and without promoting the new infrastructure, no one will go there. I mean to say that the government should not operate the airport and let the private sector onboard.
There is a book…that defines the differences between government and privately run infrastructures in India. Two decades ago, the Indian government took total control of the energy sector—power generation, distribution and production—saying that it was an essential sector. It considered the mobile phone industry a luxury sector and allowed the private sector to deal with it. Look at the mobile phone markets and their contribution to India’s economy, and look at the energy sector. Today, India has both the cheapest and the most luxurious mobile phone sets and services. India’s energy, today, controlled by the government, is one of the worst-performing sectors. This shows that the government should not do business. This example perfectly suits Gautam Buddha International Airport. Delays mean more losses.
Nepalis nowadays travel to bordering airports and fly to third countries because of the cost factors. This is a very serious issue and the government should consider these facts seriously before it is too late.
Nepal's then largest helicopter operator Shree Airline diversified into fixed-wing operations by acquiring three small jets in 2016. It had plans to operate internationally as well, mainly connecting Indian cities. Where is the plan now?
We are on track. We have planned to go international by the last quarter of 2024 or the first quarter of 2025. We have planned to acquire two 150-seater Airbus A220s. We have a plan to connect Southeast Asia in the first phase and all Indian cities. Our main objective is to bring pilgrims from Indian cities.
Is the government policy too rigid for investors?
The policy, whether for foreign or domestic investors, is too rigid in Nepal. Why should we obtain a licence if we need an air operator certificate, which is very difficult to obtain? If an investor wants to open an airline business in Nepal, it has to face multiple hassles right from the beginning. Why should we put Rs1 billion as paid-up capital in the bank to run the airline? If an investor says that he wants to open an airline business, the government has no provision to assist them. Investors who wish to open international airlines have to wait for the government to invite bids. They have to compete in the bidding process to obtain a licence. And after the licence is obtained, which takes months or years, another hectic process begins at the Civil Aviation Authority of Nepal to obtain an air operator certificate. The Civil Aviation Ministry’s role is to assist investors, but the existing policy discourages potential investors. It’s the aviation regulator’s job to monitor and assess whether the airline project is feasible or not. Why do we need a licence when we have to complete five phases to obtain the air operator certificate?