Chairman Basnete says that the issue of dollar fares is very sensitive and that in-depth discussions with domestic airlines are needed before removing it.
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Buddha Air has warned that the removal of the 'dollar fare' (airfare in foreign currency) for foreign passengers on domestic flights will have a major economic impact.
At a press briefing held at the company's headquarters in Jawalakhel on Monday, Buddha Air Executive Chairman Birendra Bahadur Basnet called the proposal to remove dollar fares on domestic flights 'a sensitive issue like firing a cannonball' and said it would cause a major stir in the domestic aviation sector.
Buddha Air, which has at least 60 percent market share in domestic flights, said that the issue of dollar fares is very sensitive and that in-depth discussions with domestic airlines are needed before removing it.
According to Executive Chairman Basnet, if such a decision is implemented, the airfares paid by Nepali passengers could increase by almost 50 percent. 'If dollar fares are removed, our cost structure will become unbalanced, which will directly affect the tickets of Nepali passengers,' he said.
According to Basnet, the dollar fare system currently used by airlines in Nepal from abroad balances the deficit (cross subsidy) for Nepali passengers.
According to him, the dollar fare is mainly applied to sectors with a high number of international tourists, including Pokhara, which is helping to make up for the deficit of other domestic and less frequented routes.
'If this is removed, the entire network will be unbalanced,' he said. Basnet said that there has been no adjustment in the airfare structure in the last decade and that costs have increased significantly due to the lack of price adjustment after 2072 BS.
According to him, the dollar exchange rate in 2072 BS has increased from 74 rupees to about 151 rupees by 2083 BS. Engine maintenance costs have increased from 500,000 dollars to 200,000 dollars. The cost of aircraft insurance has also increased significantly. ‘But the fare structure has been the same for 11 years,’ he said.
The news that international oil prices have crossed $100 per barrel due to US-Iran tensions has also increased pressure on the aviation industry. Buddha Air has said that the number of daily flights has decreased due to this. According to the company, only about 50 (one-way) flights are being operated, down from 75 a month ago. ‘The number of non-essential passengers is traveling,’ Basnet said. Although the company has been serving about 7,000 passengers daily, the number of foreign passengers, especially those using dollar fares, has decreased by 5-600.
Basnet said that time has been requested from Tourism and Civil Aviation Minister Khadak Raj Poudel for discussions on dollar fares, but has not been received yet. However, he said that the minister has assured cooperation on the issue.
According to him, if the decision to remove dollar fares is taken unilaterally, Nepali passengers will be the most affected. Giving the example of Sri Lanka, Basnet said, 'A policy of high spending by tourists has been adopted there and that has helped the economy. Tourists should not be brought in cheaply, but should be made to spend in a way that benefits the economy.'
Regarding Kantipur's question that there is no law to implement dollar fair in Nepal, he argued, 'There is no need for a law since it has been a practice that has been going on for 50 years.'
Recounting the experience of some foreign embassies in Kathmandu, including Denmark, who have pressured on this issue in the past, he explained it as unnatural interference by foreign envoys. 'Embassies have called airline companies and harassed them in the past as well,' he said, 'But what percentage of the salary that those ambassadors receive in tax do they pay in Nepal? We need to debate.' He also claimed that many countries in the world have different fare systems in the tourism sector, including hotels, heritage sites.
According to Basnet, the number of passengers has decreased recently even after the Iran-US war and the tension in the Strait of Hormuz. He said that about 1,500 passengers have decreased daily and flights have decreased by about 25 percent.
Buddha Air has said that the issue of removing dollar fares could have a major impact on Nepali airfares, the company's financial stability and the tourism sector. "It is difficult to sustain the industry without adjusting the fares," Basnet said.
He stressed the need for "immediate dialogue with domestic airlines and realistic policies" with the government.
