Aviation and Tourism in Nepal: Liberalising Airline Competition in a Less Developed Country

Abstract

Nepal is one of the world's poorest countries, but it has natural and cultural assets that have enabled it to generate a sizeable tourism industry. As part of a strategy to increase the nation's income from tourism, His Majesty's Government of Nepal is encouraging visitors to venture out of the Kathmandu Valley but it has been recognised that the domestic transport system requires improvement, especially the commercial aviation industry. Until recently, the Government's own airline has enjoyed a monopoly, but a new liberalisation policy has permitted private sector airlines to compete. Capacity and services have been upgraded as a result, but challenges remain to be addressed. Airport infrastructure is inadequate and administration of civil aviation needs to be improved. Also, the Government's airline needs strengthening if it is to play an important role in the future of the domestic aviation industry. More critical, perhaps, are the inherent flaws in the regulatory framework. The pressures on the aviation industry in Nepal are being experienced in other less developed countries. This paper draws out general implications of the move to more liberal competition policies.