Foreign airlines earned Rs 153 billion from Nepal’s aviation market in 2024, dominating the sector while the national flag carrier, Nepal Airlines, is burdened with Rs 55 billion in debt and a severe shortage of operational aircraft. This challenging environment forces Nepal Airlines to compete with 28 foreign airlines, in addition to domestic carriers like Himalaya Airlines and Buddha Air.
Only two of Nepal Airlines’ six aircraft are currently operational, as of Ashoj 15, 2083 (BS). These include one widebody A-330 and one narrowbody A-320. The ‘Makalu’ A-330 widebody aircraft was sent to Italy for a ‘C check’ on Shrawan 25, 2083 (BS), and has not yet returned. Another A-330 widebody, ‘Annapurna’, has been grounded at Narita Airport in Japan since September 14, 2026, due to a serious engine problem. Additionally, Chinese-made aircraft acquired with concessional loans are also grounded, considered the corporation’s most unsuccessful project.
The shortage of skilled personnel is evident, with 58 foreign pilots working for Nepali aviation companies as of Ashoj 4, 2083 (BS). This includes 14 foreign-licensed pilots at Nepal Airlines and 22 at Himalaya Airlines.
Policy shortcomings and corruption
Nepal adopted economic liberalization in 1992, initiating privatization. The National Aviation Policy 2050 (BS) opened the aviation sector to private investment, marking the beginning of liberalization in air services. Nepal currently follows a ‘Liberal Sky Policy’ and has ‘Fifth Freedom Traffic Rights’.
Political interference, managerial inefficiency, and a Rs 52 billion debt burden are cited as primary reasons for Nepal Airlines’ increasing debt. The corporation’s Rs 36 billion loan has swelled to Rs 55 billion due to delayed payments. The Special Court, a court established to hear corruption cases, ruled on Mangsir 21, 2081 (BS), that Rs 1.47 billion corruption occurred during the purchase of two widebody aircraft for Nepal Airlines.
Reform efforts and an uncertain future
The government is preparing a new ‘National Aviation Policy’ after approximately 19 years, with a draft seeking suggestions from stakeholders as of Ashad 19, 2082 (BS). The proposed policy suggests replacing the ‘Liberal Sky Policy’ with an ‘Open Sky Policy’. It also allows for co-investment among federal, provincial, and local levels in domestic aviation infrastructure and permits the private sector to build and operate airports and helipads.
The Ministry of Culture, Tourism and Civil Aviation, the supreme body of the Nepal government for tourism, culture, and civil aviation affairs, has formed a five-member task force to recommend improvements for Nepal Airlines within a month. Khadak Raj Paudel, the Minister of Culture, Tourism and Civil Aviation, stated on October 2, 2026, that the government’s policy is to adopt a Public-Private Partnership (PPP) model to resolve Nepal Airlines’ issues.
Nepal Airlines proposed to the Ministry of Culture, Tourism and Civil Aviation on Chaitra 5, 2082 (BS), to acquire or lease two Twin Otter DHC-6 aircraft for high-hill and mountain regions and two ATR-72 series aircraft for main routes. Meanwhile, the Council of Ministers approved two separate acts, the ‘Nepal Civil Aviation Authority Act’ and the ‘Nepal Air Authority Act’, to split the Nepal Civil Aviation Authority (CAAN), the autonomous body regulating civil aviation and providing airport and air navigation services, into regulatory and service provider bodies.
Despite these efforts, the exact timeline for the new National Aviation Policy’s issuance and full implementation remains unclear. The permanent appointment of Nepal Airlines’ General Manager is uncertain due to an ongoing court case, and the Chairman position is also vacant, further clouding the corporation’s future. The implementation plan and timeline for the task force’s recommendations and the government’s proposed PPP model are not yet clear, and further details on the implementation and impact of splitting CAAN are awaited.
