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Himalaya Airlines, a joint venture between Nepal and China, inaugurated the Kathmandu-Shanghai-Kathmandu flight on December 2. The first outbound flight, H9 780, departed from Tribhuvan International Airport at 09:50 hours (local time) and reached Shanghai Pudong International Airport, at 16:31 hours (local time), with a flight duration of 4 hours and 7 minutes. A total of 137 passengers along with an infant boarded the first flight.

The inaugural flight event was graced by the Xie Yu, Economic and Commercial Counsellor of the People’s Republic of China to Nepal as the chief guest along with Pratap Babu Tiwari, General Manager, Tribhuvan International Airport and with other dignitaries.Initially operating weekly flights on every Saturday effective December 02, 2023, the service will be increased to twice a week, on every Saturdays and Wednesdays, starting from December 20, 2023.

This historic event marked a significant milestone in Himalaya Airlines’ commitment to enhancing connectivity and promoting bilateral ties between Nepal and China, states the press release issued by the airline company. The new Kathmandu-Shanghai-Kathmandu route will offer passengers seamless travel options between the capital city of Nepal and the central coastal city of China, known for the country’s biggest city and a global financial hub. This direct link between the cities reflects Himalaya Airlines’ dedication in providing convenient, safe, and efficient travel, states the press release.

Vijay Shrestha, Vice-President of Himalaya Airlines said, “The longstanding aviation history shared by Nepal and China, spanning two decades since China initiated its inaugural passenger flights to Nepal. Over this extensive period, China has emerged as the leading contributor of airlines serving Nepal, with a total of six airlines from China operating alongside Himalaya Airlines.”

Tiwari congratulated Himalaya Airlines for the inaugural flight to Shanghai. “It is truly an exciting milestone for the airline and the airline’s commitment in providing outstanding service connecting passengers with new and diverse experience.” Tiwari wished the airlines all the success to spread their wings to new horizons and create more opportunities for travel and attract more Chinese Tourist to Nepal, connecting ties and relationship between the two nations. 

The Executive Board of the International Monetary Fund (IMF) completed the third review under the four‑year extended credit facility (ECF) for Nepal, allowing the authorities to withdraw the equivalent of $52.25m.  

This brings total disbursements under the ECF for budget support thus far to SDR $222.5m. Nepal has made good progress with the implementation of the program, which has helped mitigate the impact of the pandemic and global shocks on economic activity, protect vulnerable groups, and preserve macroeconomic and financial stability, says IMF in a press statement. 

The program is also helping to catalyze additional financing from Nepal’s development partners. Nepal’s post-pandemic rebound, fueled by a credit boom, ended last year as growth slowed markedly. Low domestic demand helped resolve external pressures but also deflated government revenue and led to a widening of the fiscal deficit despite expenditure control. 

Inflation is declining but remains high at 8.2 percent in September. Growth is expected to recover to 3.5 percent in FY 2023/24, which is below potential, led by increased domestic demand, new hydroelectric capacity, and a continued recovery in tourism. Risks are skewed to the downside. 

External sector risks dominate Nepal’s outlook given its high remittance income and dependence on imported goods. Domestically, further deterioration in bank balance sheets or lack of progress in addressing the deficiencies identified by the Asia Pacific Group of the Financial Action Task Force (FATF) could create financial system stress. 

Bo Li, Deputy Managing Director and Acting Chair, says Nepal has made important strides on its economic reform agenda. Decisive actions in monetary policy, bank regulation and rolling off covid support policies played a major role in overcoming urgent balance of payments pressure in FY 2021/22. He further said : “Reserves continue to rise without the need to use distortive import restrictions. Fiscal discipline was maintained in FY 2022/23 despite a large revenue shortfall.”

Bank supervision and regulation have improved with the rolling out of new supervisory information systems, the Working Capital Loan Guidelines and Asset Classification Regulations. Nepal’s medium-term outlook remains favorable as strategic investments in infrastructure, especially in the energy sector, are expected to support potential growth, he said. 

With growth below potential, boosting the execution of capital spending while maintaining fiscal discipline —growth friendly consolidation—is critical to provide much-needed stimulus to near-term economic growth and achieve investments that will underpin medium-term growth, he says. 

Maintaining momentum on governance reforms is critical to cementing recent gains in fiscal transparency. Further structural reforms, including to mobilize domestic revenue, strengthen public investment management and address fiscal risks, are needed to bolster medium term fiscal sustainability, he added.  “As monetary policy transmission appears weak in a context of balance sheet repair and inflation is elevated —though declining—maintaining the current cautious and data dependent monetary policy is appropriate to preserving price and external stability. 

He further says : “Improving the anti‑money laundering/combating the financing of terrorism (AML/CFT) framework and its effectiveness in line with international standards and peer evaluations is urgently needed to maintain smooth access to the global financial system. 

Reforms to implement the 2021 IMF Safeguards Assessment recommendations regarding the Nepal Rastra Bank (NRB) Act and NRB audit are a priority. “Continued progress on the structural front is also needed to foster investment and more inclusive growth, he says,  “these include improving the business climate, building human capital, and continuing to improve social safety nets, in particular the coverage of the child grant program.”

Nearly 66 percent of airline companies licensed by the government in over seven decades of Nepal’s aviation history have failed.

Experts say financial risks are the major reasons behind the high rate of airline failures in Nepal.

Nepal Airlines Corporation started operations as the national flag carrier on 1 July 1958. Many private companies came up in the Nepali sky after the government adopted a liberal market policy in the 1990s. But many of them couldn’t stay airborne for a long time. According to the Civil Aviation Authority of Nepal (CAAN), 21 airline companies are currently in operation. An airline must have at least three aircraft to start commercial flights in Nepal.

Air service is considered an attractive business. CAAN officials say that having more attraction and competition in this business is good. However, they add that airline companies are shutting down as their financial situation weakens. Gyanendra Bhul, information officer of CAAN, says many airline companies are shutting down due to air accidents and a lack of financial stability. “People find the airline business attractive and pour their money in, but after one or two accidents, they don’t have financial backup to sustain their business. As a result, the businesses fold,” he added.

Some say some airline businesses are failing due to a lack of market study and necessary preparation. Aviation expert Achyut Raj Pahadi says sufficient resources and a qualified workforce are needed for airlines to succeed. “Many companies have shut down because the promoters didn't have good financial backing. Even companies doing well have failed. This is a failure in financial management,” Pahadi added.

Former Senior Captain KB Limbu said many people are starting a business feeling that they would earn good money in a short time. “The aviation sector is not a business; it's an industry in itself. One needs to have strong financial backing, as well as a qualified workforce and necessary parts in stock,” he said, adding: “A lack of long-term planning and a business plan is one of the reasons behind the increasing failure of airline companies in Nepal.”

Former General Manager of Nepal Airlines Corporation, Dim Prasad Poudel, said a lack of a business plan is one of the reasons why Nepali airline companies aren’t sustainable. “Airline companies are failing also because of the involvement of inexperienced people in this business, a decrease in tourist footfall, and inexperienced management,” he added.

He said the government should conduct a study on the number of passengers, how many aircraft can be added in the next five years, how many companies will be sustainable, etc. “We have the tendency of providing a license whenever people apply,” he added.

Former Tourism Secretary Kedar Bahadur Adhikari said the ministry evaluates the business plan, financial statement, type of aircraft, and other technical aspects before issuing a license.

Experts, however, say the ministry doesn’t study whether the company will be viable and how far it can go financially, or whether it can bear the financial risk.

“It is difficult for the companies to survive due to the short runways in the airports. Big aircraft can’t land in many remote airstrips. As a result, they have to operate small aircraft with fewer seats. It hits their profitability,” Adhikari said. Aviation expert Pahadi said CAAN should pay attention as airline companies are failing because of financial risks. “Only the companies that have resources to finance operations for at least a year should be awarded a license,” he added. However, Bhul said CAAN doesn't have any information about the financial aspects of the company. “Our duty is to look after safety and technical aspects only,” he added.

According to CAAN, 21 airline companies have 104 aircraft, including helicopters at present. However, out of 13 aircraft of Nepal Airlines, only six - two Twin Otters, two Airbus A320s, and two Airbus A330s—are in operation. Private carrier Buddha Air has the highest number of aircraft in Nepal. Buddha is a dominant player in the domestic market. Guna Airlines has been grounded by CAAN.

Airline licensing process

Companies interested in starting an aviation business will have to submit their business plan as well as a technical and administration report to the ministry for a permit. After receiving the application, the ministry forms an evaluation committee led by a joint secretary. After evaluating the documents, the committee provides a provisional permit. Then the company will have to apply to the CAAN for an Air Operator Certificate (AOC).

The application process includes five stages - pre-application phase, formal application phase, document evaluation phase, demonstration and inspection phase, and certification phase.

The contribution-based Social Security Fund (SSF) has managed to enroll over 900,000 contributors and more than 18,000 employers in its four years of operation.

The SSF was established on 27 Nov 2018 as per the Contribution- based Social Security Act, 2018, and it operates as per the Contribution-based Social Security Operation Guidelines, 2018. The fund began enrolling contributors and employers from the first day of the fiscal year 2019/20.

Although the SSF had set a target of enrolling 30,000 employers by 2022/23, it only reached 19,439. Likewise, it had set a target of enrolling 500,000 contributors by 2022/23, but it easily surpassed this goal. It has enrolled 928,493 contributors so far.

The number of contributors started increasing after the government made it mandatory for foreign migrant workers to enroll with SSF. So far, the fund has enrolled 466,622 migrant workers. About 90 percent of the migrant workers are contributing regularly to the SSF.

The SSF has mobilized Rs 44.85bn from the contributors, with most of them subscribing to the Old Age Protection Plan of the SSF. According to the fund, it has raised Rs 37.35bn alone from contributors subscribing to the Old Age Protection Plan.

Other schemes offered by the SSF include the Medicine, Health and Maternity Protection Plan; Accident and Disability Safety Plan; and Dependent Family Protection Plan. The SSF has collected Rs 1.29bn from contributors subscribing to the Medicine, Health and Maternity Protection Plan; Rs 2.48bn from the Accident and Disability Safety Plan; and Rs 2.48bn from the Dependent Family Protection Plan. Likewise, it has collected Rs 1.53bn from additional plans. The SSF has earned an income of Rs 2.17bn in the four-year period.

Meanwhile, the SSF has distributed Rs 6.44bn in claims to 219,849 contributors in the four-year period. Likewise, it has disbursed Rs 1.75bn as loans to contributors. According to the SSF, it has disbursed Rs 1.72bn worth of ‘Special Loans’ to 9,744 contributors, Rs 28.9m worth of home loans to 17 contributors, and Rs 2.36m worth of education loans to three contributors.

Contributors who have been contributing funds to the SSF for a minimum of 36 months are eligible for the loans.