The Airline Operators Association of Nepal (AOAN) has announced the biggest cut in the fuel surcharge with oil prices tumbling. The fuel surcharge added to the price of a plane ticket has been slashed by Rs170 to Rs 580 depending on the distance, which airline officials said was the sharpest cut in the last seven months. The revised airfares will come into effect from August 7, the AOAN said on Tuesday.
Nepal Oil Corporation (NOC) on Sunday slashed the price of aviation fuel sold to domestic carriers by Rs15 per litre to Rs118 per litre. The state-owned oil monopoly makes a profit of Rs43 per litre of aviation fuel sold to domestic carriers even after reducing the price.
The corporation has been adopting a cross-subsidy mechanism by increasing aviation fuel prices to stabilize prices of other petroleum products.
Airlines are required to slash 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. They are allowed to increase the surcharge when fuel prices rise by Rs4 or more per litre.
“The lower fuel surcharges have led to a decrease in airfares as airlines have been struggling to attract passengers,” said Prajwol Thapa, senior marketing manager of Simrik Airlines.
Some airline officials said that the surcharge would be progressively reduced as the price of aviation fuel has dropped sharply. The last time domestic carriers had slashed fuel surcharges was on December 24, 2014 after NOC cut the price of aviation fuel by Rs10 per litre to Rs133 per litre.
Due to climbing fuel costs, airlines had frequently increased their fuel surcharge and its impact was visible on passenger occupancy. In the last two years, airfares have gone up by Rs2,000-2,500 on long-haul routes and Rs700-1,000 on short-haul sectors. Adversely, Nepal’s domestic air passenger movement continued to shrink for three straight years, dropping 6 percent in 2014, mainly due to high fares. For example, flying to Dhangadhi from Kathmandu costs almost as much as flying to New Delhi on a low-cost airline.
According to Tribhuvan International Airport (TIA), domestic carriers received 92,046 less flyers last year. These airlines carried 1.45 million passengers in 2014 against 1.54 million the year before. The figure includes the 26,256 passengers flown by the seven domestic helicopter companies.
Airlines saw a robust growth of 13 percent in 2008 which jumped to 33 percent in 2009 as they cut fares amid low fuel costs and stiff competition. Although passenger movement increased 12.83 percent in 2010, the growth rate started dropping in 2011 and has shown a negative growth since 2012.
Airline officials said that as fuel accounts for 30-35 percent of the total operating costs, it becomes the single biggest factor in losses if the fuel surcharge is not raised.
REVISED FUEL SURCHARGE
SECTOR NEW FUEL SURCHARGE REVISED AIRFARE
Lukla $15 $159
Dhangadhi Rs 4,570 Rs 10,825
Mountain flight Rs 4,425 Rs 9,725
Nepalgunj Rs 3,465 Rs 8,100
Bhadrapur Rs 3,245 Rs 7,480
Biratnagar Rs 2,725 Rs 6,495
Bhairahawa Rs 2,430 Rs 5,690
Tumlingtar Rs 2,430 Rs 5,175
Pokhara Rs 1,990 Rs 4,390
Janakpur Rs 1,770 Rs 3,875
Bharatpur Rs 1,545 Rs 3,370
Simara Rs 1,325 Rs 2,665