The government is getting ready to renew its call for private operators to apply for international routes. And learning from past experience, it is tightening procedures and enforcing stricter licensing terms.

Nepali private airlines will henceforth be required to pay royalties to fly the various routes on offer, and only airlines that plan to use jet aircraft will be allowed to bid.

But at the same time, airlines which were earlier required to begin services within six months of getting a licence will now be given a year to commence operations.

Alpine Air and Air Nepal International, the two Nepali airlines that had been squatting on permits to operate international routes out of Kathmandu for five years, had their licences scrapped in May 1999 after the expiry of the final extension. The two had received licences to operate flights to India and Europe, but were woefully unprepared to start operations.

Of the five airlines that were licensed for international routes in 1996, only one (Necon Air) is operating flights to India today. Everest Air forfeited its Rs 4 million security deposit when it tailed to start flights, although it was later able to get the decision reversed through the courts. Alpine Air and Air Nepal were given several extensions, and even had their status changed from Class A (to Europe) to Class B (regional). Yet they could not take off.

The fifth airline, Trans Continental Air Cargo, was licensed to carry international freight and it actually brought over a cargo plane and carried out a few flights. But because the aircraft did not have a Traffic Collision Avoidance System (TCAS), it was not allowed to fly to India. The plane flew off to get the system installed, and never returned. Air Nepal also brought in a Malaysia-registered Boeing 737-200 on the very day its licence was due to expire for the last time. It was probably timed to get an extension, but as the rules state that airlines have to actually begin services to qualify, the plane sat on the tarmac for ten days before heading back home.

Analysts say the government was too ambitious in hoping that new companies would be able to begin operations within six months. Also the fact that license extensions were for short periods showed a lack of understanding of the aviation industry.

The government\'s latest policy looks really tough, especially since it had granted "squatters" like Alpine Air and Air Nepal several extensions. But there is a catch; the final decision on granting licences is decided by the cabinet. And given their political connections-Alpine has Pradip Man Singh, son of the late Ganesh Man Singh as promoter, and Air Nepal has Pradip Rana. an in-law of former prime minister Sher Bahadur Deuba- the revival of their licences cannot be ruled out.

Several thousand seats a month on Nepal\'s international routes remain wasted or underutilised, mainly because flag carrier Royal Nepal Airlines is unable to fly many routes (see table). The airline is foolishly over-extended, flying longdistance routes to Japan and Europe with medium-range, narrow-body Boeing 757s, instead of concentrating on ferrying passengers to Kathmandu from regional hubs like Singapore and Dubai.

For those who think Nepali private operators will make international routes more efficient, the performance of Alpine Air and Air Nepal over the past five years is a sobering reminder that things will not be much different. Nevertheless, Alpine Air is now trying to get back its licence. Said a source: "We are trying to revive our licence because we\'ve now found external partners and can now operate. We are now at the stage of launching the airline and are negotiating with the government."

Alpine Air promoters claim they understand the needs of Nepali tourism, and also deny rumours of a rift between partners. According to the company, the reason it switched its licence category was that more established airlines (Qatar, Transavia) began operating from Europe soon after it received permission. Now with its Category B status, it can fly to India, Thailand, Bangladesh and Burma.

Air Nepal is still said to be around even though its listed telephone numbers don\'t work anymore. Industry sources say a group of hoteliers is exploring the possibility of reviving its licence.

Not everyone can get a foreign route licence. The companies that acquired them in the first round were either moneyed or had political connections, or both. But what they all had in common was a total lack of experience in running an international airline.

Necon Air has had the most professional approach-taking one step at a time and building up its experience through its routes to Calcutta, Patna and Varanasi. With an annual turnover of Rs 700m, Necon will probably be the first Nepali private airline to acquire a jet. The airline is now well placed to expand its turboprop fleet and make the leap to jets for the Calcutta and New Delhi trunk routes for which it has already received permission.

"We\'re studying the feasibility of starting those connections," says Radhesh Pant, adviser at Necon. "Lucknow could be the next one."

Even so, Necon is using only half its allocated 600 seats a week to India. It hopes to make the Varanasi connection daily after it acquires a second ATR-42 later this year.
A 737-200 leased from Malaysia by Air Nepal sat on the tarmac for ten days last year. But Air Nepal was never airborne.

Necon competes with Indian Airlines, which uses the bigger and faster Airbus 320s in its Kathmandu-Varanasi sector. Necon is not allowed to charge less than IA, and passengers prefer the jets. Still, Pant is confident that Varanasi will work when the tourist season starts: "We are doing well, with about 60 percent occupancy. Our advantage is our punctuality and the easy embarking and disembarking."

Another Nepali airline that wants to fly to India is Buddha Air. It has done well on domestic tourist routes with its brand new aircraft, but its 18-seater B1900Ds are too small for even Indian operations, and would need bigger planes if it is serious about flying to neighbouring countries like India or Bhutan. Birendra Basnet of Buddha Air says they want to use their B1900D for short Indian hops, and move into longer routes with jets after gaining the necessary experience.

Basnet blames the government for delays. "The government had said it would not licence new airlines for five years to give the private international airlines operating room. But at the same time it allowed them to sit on their licences. This has kept new players out."