Costly jet fuel in Nepal has forced domestic carriers to hike airfares by up to 40 percent, causing passenger numbers to plunge.

Escalating geopolitical tensions—driven by joint US and Israeli military operations in Iran—have sent global aviation fuel prices skyrocketing.

According to data compiled by domestic airlines and Civil Aviation Authority of Nepal (CAAN), the number of domestic passengers plunged by over 540,000 in the fiscal year 2025-26, which ended on July 16, mainly due to fuel price hike.

The data shows that total internal passenger traffic dropped 12 percent compared to the fiscal year 2024-25. Numbers fell from 4,557,634 passengers in the 2024-25 fiscal year to 4,016,880 in 2025-26—a net loss of 540,754 travellers.

The slump was particularly severe during the final five months of the fiscal year, from February to July. Monthly figures show passenger volume shrank by 10 percent in the Nepali month of Falgun (mid-February to mid-March), 17 percent in mid-March to mid-April, 33 percent in mid-April to mid-May, 34 percent in mid-May to mid-June, and 29 percent in mid-June to mid-July.

“The direct shock of the international energy crisis hit our domestic sector squarely during this period,” said Yubaraj Bista, chief business officer at Yeti Airlines. “While flight numbers in the first six months remained steady, the sudden spike in fuel costs made air travel unaffordable for ordinary citizens and domestic tourists.”

The downturn hit all major domestic carriers, including Buddha Air, Yeti Airlines, and Shree Airlines. Buddha Air experienced the largest numerical loss, dropping 394,000 passengers—a 14 percent decline that accounted for nearly 73 percent of the industry’s total drop.

Despite the contraction, Buddha Air maintained its market lead with a 58.3 percent share. Yeti Airlines lost 93,048 passengers (a 9 percent decline), holding a 22.5 percent market share, while Shree Airlines proved relatively resilient with a modest 6 percent drop.

Industry leaders warn that the financial strain threatens carrier solvency. Pratap Jung Pandey, president of the Airlines Operators Association of Nepal (AOAN) and operator of Kailash Helicopter, described the situation as critical.

“This is the second major crisis facing Nepali aviation since the Covid-19 pandemic,” said Pandey. “Balance sheets across several airlines have turned negative, and many operators are finding it difficult simply to survive.”

According to Pandey, operational costs have escalated further due to currency depreciation. “Fuel prices remain high and volatile,” he said. “Crucially, fees paid by airlines to CAAN are denominated in US dollars, as are spare parts, yet our income is entirely in Nepali rupees.”

The helicopter sector has felt a similar pinch, with flight hours down 20 to 30 percent across Nepal’s 11 helicopter operators.

The passenger decline spanned nearly every major airport in Nepal. Simara experienced the steepest drop at 24 percent, followed by Bhairahawa at 22 percent. Traffic at Pokhara shrank by 11 percent, while Nepalgunj fell by 16 percent. Dhangadhi dropped 13 percent, Surkhet 15 percent, and Rajbiraj 10 percent. Biratnagar and Bhadrapur each saw 7 percent decreases, while Janakpur recorded a 6 percent decline.

Nepal’s domestic aviation market relies on roughly 4 to 4.5 million passengers annually. Around 300,000 are foreign tourists, 300,000 Indian visitors, and 100,000 employees of Nepal government and non-governmental organisations. The remaining 3.9 million journeys are made by ordinary Nepalis travelling once or twice a year for family visits, medical treatment, or social obligations.

“When airfares rose, these occasional domestic travellers simply chose not to fly,” Bista explained. “Additionally, following recent political changes, daily market tracking shows a noticeable reduction in political leaders and cadres travelling to and from Kathmandu.”

Domestic airlines in Nepal faced compounding challenges over the past year, including rising insurance premiums and stringent regulatory safety audits. The added burden of fuel price volatility has further squeezed operational margins across the board.

In response to the crisis, airline representatives recently met with CAAN Director General Mukesh Dangol to seek government intervention. The AOAN representatives pointed out that while CAAN and the International Civil Aviation Organisation closely monitor technical safety, no state mechanism addresses the financial viability of domestic airlines, leaving operators exposed during external economic shocks.