Flying in Nepal just got a little cheaper. The Airlines Operators Association of Nepal (AOAN) on Wednesday slashed the fuel surcharge following a steep drop in oil prices.

The extra charge added onto flight costs has been slashed in the range of

Rs720 to Rs2,135 depending on the distance, and the new rates will come into effect from Thursday, airline officials said.

On Tuesday, Nepal Oil Corporation (NOC) reduced the price of aviation fuel sold to domestic airlines to Rs109 per litre, the lowest in three and a half years.

On November 9 last year, the corporation had doubled the price to Rs232.78 per litre from Rs118 due to the extra costs of flying it in after the trade embargo by India virtually cut off shipments by surface transport.

Carriers immediately jacked up the fuel surcharge by Rs1,725 to Rs4,455, putting air travel out of reach of a vast section of the population.

“Tuesday’s fuel price cut has been a big relief for airlines, but it is still expensive compared to the steep fall in global oil prices,” said Prajwol Thapa, senior marketing manager of Simrik Airlines. “We had expected the price to drop to Rs80 per litre.”

The state-owned oil monopoly has been adopting a cross-subsidy mechanism under which aviation fuel prices are raised to keep prices of other petroleum products low.

According to Thapa, the AOAN has also asked NOC to adopt an auto-price mechanism in aviation fuel.

Airlines are required to decrease the fuel surcharge when fuel prices drop by Rs4 per litre as per an agreement made between the Civil Aviation Authority of Nepal (Caan) and the AOAN.

Some airline officials said that the surcharge would be progressively reduced as the price of aviation fuel could fall further.

Bhim Raj Rai, media manager of Yeti Airlines, said that airlines were expecting occupancy to improve with the drop in the fuel surcharge after recording poor occupancy in the last three months due to expensive tickets.

“We expect to see better business during the upcoming March-May tourist season as fuel prices are expected to drop further,” said Rai.

According to Thapa, airlines had seen a sharp drop in traveller numbers immediately after the fuel surcharge was hiked in November.

“While tourist numbers flying on domestic airlines dropped to record lows, domestic passenger traffic was down 30-40 percent in the last three months,” said Thapa, adding that airlines suffered huge losses as a result.

Due to expensive air tickets, Nepal’s domestic air passenger movement continued to shrink for three straight years. Passenger traffic fell 4.25 percent to 1.14 million in the first 10 months of 2015.

As per the revised airfare, a normal ticket from Kathmandu to Dhangadhi will cost Rs10,790. The normal fare is the highest price that airlines can charge for a flight ticket.