KATHMANDU: Soaring jet fuel prices have forced domestic airlines in Nepal to raise airfares by up to 40 per cent, triggering a sharp decline in passenger numbers.
Escalating geopolitical tensions, including joint US and Israeli military operations in Iran, have sent global aviation fuel prices higher.
According to data compiled by domestic airlines and the Civil Aviation Authority of Nepal (CAAN), domestic passenger numbers fell by more than 540,000 in the fiscal year 2025-26, which ended on July 16, mainly due to rising fuel costs.
Total domestic passenger traffic fell 12 per cent from the previous fiscal year, declining from 4,557,634 passengers in 2024-25 to 4,016,880 in 2025-26 — a net loss of 540,754 travellers.
The slump was particularly severe during the final five months of the fiscal year, from February to July. Monthly passenger numbers fell 10 per cent from mid-February to mid-March, 17 per cent from mid-March to mid-April, 33 per cent from mid-April to mid-May, 34 per cent from mid-May to mid-June and 29 per cent from mid-June to mid-July.
“The direct shock of the international energy crisis hit our domestic sector squarely during this period,” said Yubaraj Bista, chief business officer at Yeti Airlines.
“While flight numbers in the first six months remained steady, the sudden spike in fuel costs made air travel unaffordable for ordinary citizens and domestic tourists.”
The downturn affected all major domestic carriers, including Buddha Air, Yeti Airlines and Shree Airlines.
Buddha Air recorded the largest numerical decline, losing 394,000 passengers, a 14 per cent drop that accounted for nearly 73 per cent of the industry’s total decline.
Despite the contraction, Buddha Air maintained its market lead with a 58.3 per cent share.
Yeti Airlines lost 93,048 passengers, a 9 per cent decline, and held a 22.5 per cent market share, while Shree Airlines proved relatively resilient, recording a 6 per cent drop.
Industry leaders warned that the financial strain was threatening the solvency of airlines.
Pratap Jung Pandey, president of the Airlines Operators Association of Nepal (AOAN) and operator of Kailash Helicopter, described the situation as critical.
“This is the second major crisis facing Nepali aviation since the Covid-19 pandemic,” Pandey said.
“Balance sheets across several airlines have turned negative, and many operators are finding it difficult simply to survive.”
Pandey said operational costs had risen further due to currency depreciation.
“Fuel prices remain high and volatile,” he said. “Crucially, fees paid by airlines to CAAN are denominated in US dollars, as are spare parts, yet our income is entirely in Nepali rupees.”
The helicopter sector has also been affected, with flight hours falling by 20 per cent to 30 per cent among Nepal’s 11 helicopter operators.
The decline in passenger numbers affected nearly every major airport in the country.
Simara recorded the steepest drop at 24 per cent, followed by Bhairahawa at 22 per cent. Traffic at Pokhara fell 11 per cent, while Nepalgunj recorded a 16 per cent decline.
Passenger numbers fell 13 per cent in Dhangadhi, 15 per cent in Surkhet and 10 per cent in Rajbiraj. Biratnagar and Bhadrapur each recorded 7 per cent declines, while Janakpur saw a 6 per cent drop.
Nepal’s domestic aviation market typically handles about 4 million to 4.5 million passengers annually.
Around 300,000 are foreign tourists, 300,000 are Indian visitors and 100,000 are employees of government and non-governmental organisations.
The remaining 3.9 million journeys are made by ordinary Nepalis travelling once or twice a year for family visits, medical treatment or social obligations.
“When airfares rose, these occasional domestic travellers simply chose not to fly,” Bista said.
“Additionally, following recent political changes, daily market tracking shows a noticeable reduction in political leaders and cadres travelling to and from Kathmandu.” - Kathmandu Post/ANN
Domestic airlines have faced several compounding challenges over the past year, including rising insurance premiums and stringent regulatory safety audits.
The added burden of fuel price volatility has further squeezed operating margins across the industry.
In response to the crisis, airline representatives recently met with CAAN Director General Mukesh Dangol to seek government intervention.
AOAN representatives pointed out that while CAAN and the International Civil Aviation Organisation closely monitor technical safety, no state mechanism addresses the financial viability of domestic airlines, leaving operators exposed to external economic shocks.
