Nepal works to improve airport infrastructure in an attempt to boost tourism

Nepal’s Minister of Culture, Tourism and Civil Aviation) Rabindra Adhikari said recently, “The key to unleash Nepal’s tourism potential is developing competitive infrastructure, especially related to air connectivity and airports”. He said projects to improve Kathmandu Tribhuvan Airport and upgrade Bhairawa Gautam Buddha Airport into an international airport are “major priorities” for Nepal’s Government, adding that the government plans to develop new airports, with the aim of “increasing Nepal’s connectivity to the world markets”.


Summary:

  • The Nepalese government is seeking to improve airport infrastructure to boost tourism and meet increasing demand;
  • India and China are the largest inbound markets and account for more than a quarter of current tourist arrivals;
  • Despite no direct air services the US, the UK and Germany are three of the top five source markets for Nepal and strong targets for growth;
  • Existing development plans call for two of the country’s three main airports to be upgraded, while a new airport will be built at Pokhara, Nepal’s second city.

According to the CAPA – Centre for Aviation fleet database, Nepal has a total aircraft fleet of 58 in service with three on order. The majority, over three quarters, are small commercial or regular turboprops, with only 3.4% classed as widebody jets, albeit that total is increasing as Nepal Airlines has recently added Airbus A330s into its fleet.

CHART – The market in Nepal is dominated by small commercial and smaller tuboprop aircraftSource: CAPA Fleet Database

Despite its small home airline sector, the international market is well served by foreign carriers, which make up 55% of seat capacity at Kathmandu’s Tribhuvan Airport. The main international airlines are India’s Jet Airways and the Gulf operators Qatar Airways and LCC flydubai.

CHART – Nepal Airlines is the largest single carrier at Kathmandu’s Tribhuvan International Airport, but international carriers provide the majority of capacitySource: CAPA – Centre for Aviation and OAG

While flag carrier Nepal Airlines has almost 14% of capacity its network is limited, a fleet renewal should allow for it to grow its activities both locally and into medium- and long-haul markets. Relative newcomer Himalaya Airlines is also growing its international activities. But, this doesn’t take away from the importance of foreign carriers to the Nepal market.

Official data from the Nepal Tourism Board shows tourism arrivals have lifted from just over 0.5 million arrivals in 2009 to close to one million in 2017. A record 39.7% increase was recorded in 2016 but that was mainly in response to the large downturn the previous year when there was a serious earthquake. But growth has remained strong in 2017 and through 1H2018.

CHART – Nepal annual tourism hit decade highs in 2016 and 2017 in year-on-year growth and visitor arrivals, respectivelySource: CAPA – Centre for Aviation and Nepal Tourism Board

The majority of foreign tourists are from India and China (total 28.2%) but despite there being no direct flights from the US, UK or Germany those countries occupy three of the next four places in the arrivals league, collectively with a market share of 17%. This suggests a latent demand from Western Europe and beyond.

To facilitate any demand growth it is important, as the Minister stated, to ensure sufficient infrastructure. According to the CAPA – Centre for Aviation Airport Construction Database (ACD), the Nepalese Civil Aviation Authority (CAAN) announced in Dec-2017 that it intended to undertake USD100 million in infrastructure improvement and capacity enhancement projects at Kathmandu Tribhuvan Airport by the end of FY2018:

  • Extension of runway (which is currently 3000 m);
  • Expansion and renovation of international passenger terminal;
  • Rehabilitation of runway and taxiway facilities;
  • Construction of two parallel taxiways;
  • Expansion of apron;
  • Construction of conventional and remote aircraft parking bays;
  • Upgrade of communication, security, safety, navigation and electrical equipment.

Kathmandu is the only international airport, but two others, Pokhara (328,000 passengers in 2016) and Bhairawa Gautam (168,000) are being converted into the second and third international airports.

In the case of Bhairawa Gautam, CAAN will undertake a study to determine the feasibility of operating it under a P3 model once existing works to upgrade it for international services are completed (Sep-2019).  The International Finance Corporation has offered to provide transaction advisory services. The CAPA ACD notes that those works are valued also at around USD100 million and include a new runway.

In the case of Pokhara, Nepal’s second city, the government has instructed stakeholders there to ensure the new airport development project, three kilometres east of the existing one, is completed by its 10-Jul-2021 deadline. New Pokhara Airport will be equipped with a 2500m x 60m runway. The builder is China CAMC Engineering Co and the cost is USD305 million.

Elsewhere in Nepal, CAAN has airport works planned or under construction in Argha (Bhagwati Airport); Falgunand (Sukilumba Airport); Gudel: Nagidanda (Kavre Airport).