Despite repeated commitments to reform Nepal's aviation sector for 15 years, the separation of the regulatory and service provider bodies has not yet been completed. Due to this delay, Nepali airlines have been on the European Union (EU) blacklist for more than a decade. Although the new government has pledged to split the Civil Aviation Authority of Nepal (CAN) by next month, past failed attempts still cast doubts on its implementation.

15 tourism ministers have come and gone during this period. Draft laws have been prepared, amended, passed, withdrawn and resubmitted. However, the separation of Nepal's civil aviation regulator and service provider has not yet been completed.

Meanwhile, international aviation regulators are putting the greatest pressure on this. The results of this are clearly visible on the international stage. It has been more than a decade since the European Commission blacklisted Nepali airlines over safety concerns. The ban has prevented Nepali airlines from flying to Europe, which has long had a negative impact on the country's tourism image.

On June 9, the European Commission released its latest report on the EU Air Safety List. It has kept Nepali airlines on its list of bad airlines after 13 years, citing lack of concrete progress in aviation governance and safety reforms.

Now, the newly formed government led by Balendra Shah has reiterated its resolve to complete the work that previous governments failed to do. In the public budget on June 15, the government committed to splitting the Civil Aviation Authority of Nepal (CAN) by mid-February.

The proposed reform would split CAN into two separate entities. One regulatory body, which would be responsible for safety monitoring and regulation. The other service provider body, which would manage airport operations and air navigation services.

International aviation bodies have long argued that having both roles within the same organization would create a conflict of interest. Officials at the Ministry of Culture, Tourism and Civil Aviation have claimed that the process of separating the regulatory and service provider bodies is moving forward this time. Indu Ghimire, joint secretary of the ministry, said, “We are working on civil aviation bills internally. After the internal assessment is completed, we are preparing to send the draft bills to the ministries of law and finance. We are moving forward with the work to complete the work within the mid-January deadline.”

The Civil Aviation Authority Bill and the Air Services Authority Bill are the backbone of the proposed restructuring. These two bills seek to clearly separate the regulatory and operational functions, which is the practice adopted by most countries in the world with strong aviation safety systems. However, despite repeated commitments, Nepal has not been able to implement the reforms. The first attempt to separate the regulator and the service provider was made in 2010.

At that time, Nepal had signed a financing agreement with the Asian Development Bank (ADB) under the Air Transport Capacity Building Project. Spanish consultancy Ineco, which received investment from this project, prepared the first draft of the law in 2014 at a cost of $4.2 million.

The proposed law was registered in Parliament in February 2020. In August 2021, the National Assembly unanimously approved both bills. They were then scheduled to be discussed in the House of Representatives in March 2022. However, the then Minister for Culture, Tourism and Civil Aviation, Prem Bahadur Ale, requested Parliament to block the bills, citing disagreements among employees within the authority.

After the 2022 general election, the laws were sent back to the ministry. Subsequent governments also tried to move the bill forward. However, these bills were again stalled due to political transition and other priorities. In February 2025, the then Tourism Minister Badri Prasad Pandey re-registered the bills in the House of Representatives. Parliamentary committees proposed extensive amendments. However, before this process could proceed, the House of Representatives was dissolved following the Gen Z movement. Today, the bills are back in the ministry for review. Officials say that preparations are underway to incorporate the concerns raised by employees and stakeholders in the latest version and send it for inter-ministerial consultations.

These repeated delays have frustrated not only international partners but also Nepal's tourism and aviation industry. Nepal's aviation sector has long faced allegations of corruption, political interference, weak monitoring and institutional conflicts of interest. This has damaged Nepal's international aviation reputation.

Former MP and Nepali Congress leader Udaya Shamsher Rana says that the inability to separate the regulator and service provider is Nepal's weakness. 'We hope that the new government is well aware of this issue and there will be no delay in this process,' he said.

Aviation experts allege that the problem in this separation is due to the interests of the bureaucracy, employee organizations and political players. They say that employees and politicians have not tried to separate the regulator and service provider because the current structure will maintain power and control over large financial resources. It is certainly difficult to measure in numbers how much Nepal has lost after being placed on the European Commission's air safety list, but the loss is huge.

'The tourism sector and Nepal Airlines Corporation have been greatly affected by this,' said Birendra Bahadur Basnet, executive chairman of Buddha Air, Nepal's largest private airline. To establish Nepal as a premium tourism destination, a reliable aviation system is needed to instill confidence among travelers.

Nepali airlines have not been able to fly to European destinations due to the existing restrictions. The EU has been discouraging member-state airlines from expanding services to Nepal due to these restrictions.

“This may have also deterred high-end tourists from visiting Nepal. It has limited the possibilities of fully utilizing the new international airport in Bhairahawa,” Basnet said. He said the new government was serious about implementing the commitments mentioned in the budget. He said a clear deadline for reforms had been included in it. However, he said the success of the safety monitoring system would depend on how independent and autonomous the new regulatory body that will be formed after the law is implemented will be.

Nepal’s aviation industry is also facing a serious credibility crisis. Despite improvements in infrastructure and training in recent years, safety concerns remain. Nepal has suffered eight plane crashes since the Covid pandemic, killing more than 100 people.

International aviation regulators have also been closely monitoring these developments. For them, the issue is not just about legislation. In a meeting with journalists in Kathmandu last May, EU Ambassador Veronique Lorenzo said that every Nepali minister she met had committed to aviation reform.

“Every minister in Nepal has worked in that direction. We hope that there will be some progress in the future,” she said, adding that the EU has never pushed for a specific legal framework. “We have never asked for a change in the law.” We only requested that there should be an independent mechanism to end the conflict of interest.’