The challenge of liberalising airline competition in a less developed country: The case of Nepal

Abstract

A new wave of liberalisation of airline markets is taking place in less devel oped nations, although the initial motivation in most cases is to supplement the capacity of the government’s own airline. Liberalisation tends to begin with free market entry and a strong interest in privatisation whilst other regulatory controls are maintained. This position is untenable and policy makers in the less developed countries are having to learn quickly without the benefit of the detailed analyses that preceded liberalisation in the developed countries. This set of circumstances is illustrated with an examination of the situation in Nepal where, until recently, the Government's own airline enjoyed a monopoly. Though the entry of private sector airlines in Nepal has added capacity and improved services, challenges remain to be addressed. This paper explores these problems and focuses on the lessons that policy makers in the less developed countries can draw from experiences elsewhere.