In the tumultuous year of 2023, Nepal’s domestic air travel sector faced a substantial downturn, characterized by a notable 7.07 percent decrease in passenger growth compared to the preceding year. A confluence of factors contributed to this decline, including a nationwide economic slowdown, escalating airfare, and a series of aviation mishaps, most notably the tragic Yeti Airlines crash in January 2023 that claimed the lives of all 72 individuals on board. The aftermath of the crash saw a pronounced dip in passenger confidence, with domestic airlines witnessing a significant drop in occupancy, falling below 40 percent in the months following the incident.
Beyond the immediate impact of aviation tragedies, the industry contended with broader economic challenges. Nepal entered its first recession in six decades, driven by persistent inflation and political instability. The economic slump eroded people’s disposable income, further compounded by a substantial increase in jet fuel prices. Despite a subsequent drop in fuel costs, domestic airlines struggled to recover, with the benefits not translating into improved occupancies. Additionally, the government’s decision to impose a 13 percent value-added tax (VAT) on air tickets from mid-September 2023 exacerbated the financial strain on both airlines and passengers.
The repercussions of this challenging environment were evident across the industry. Several airlines, including Guna Airlines, succumbed to financial difficulties and ceased operations in February 2023. According to industry experts, the year 2023 surpassed even the challenges posed by the COVID-19 pandemic, marking it as the worst year for airlines in recent memory. Looking ahead to 2024, the industry remains pessimistic, citing significant cancellations during the winter months and ongoing challenges related to adverse weather conditions, including prolonged cold waves affecting both crop yields and air travel.
Within this challenging landscape, Buddha Air emerged as a noteworthy exception, recording an impressive 7.94 percent growth in passenger numbers in 2023. With 17 aircraft in its fleet, Buddha Air secured a commanding 63 percent market share, outperforming its competitors. However, other carriers, such as Yeti Airlines, Shree Airlines, Saurya Airlines, Guna Airlines, Tara Air, Summit Air, and state-owned Nepal Airlines, faced varying degrees of negative passenger growth. As the industry navigates uncertainty and grapples with a complex set of challenges, the future trajectory remains uncertain, demanding resilience, adaptability, and strategic planning from all stakeholders in Nepal’s domestic aviation sector.
