SUDARSHAN RANJIT A Buddha Air ATR 42 at Pokhara airport getting ready for a flight to Kathmandu on Tuesday morning. The airline wants to make Pokhara a regional hub for flights to Indian cities.

Reaching saturation on trunk routes and facing increasing competition, Nepal's domestic airlines are starting to think outside the box to drum up business.

While Yeti's new subsidiary, Tara Air, is promoting new destinations by reviving disused airfields in remote areas (see related story), Buddha Air is starting flights to India using Pokhara as a hub.

When India and Nepal signed a new Air Services Agreement in September in New Delhi, the clause opening up new destinations in the two countries went largely unnoticed by both Indian and Nepali operators. But it is this agreement that has made it possible to link Pokhara with points in India to tap the vast tourist and pilgrim market south of the border.

The India-Nepal agreement allows airlines from the two countries to offer 30,000 seats per week to and from Nepal to five cities and 21 other destinations in India including Dehradun, Bagdogra, Lucknow and Gorakhpur. This is a substantial increase in the number of seats available today.

"We think Pokhara has huge potential that is waiting to be tapped," says Buddha Air's Birendra Basnet. He points out that pushing through airport expansion in Pokhara and adding hotel capacity there would also relieve pressure
on Kathmandu.

Buddha Air faces two hurdles. First, Nepali aviation laws don't cover local operators flying international routes using turboprops like the ATR-72. The cabinet is expected to approve new terms of reference for Nepali turboprop carriers this week. Second, the landing and ground handling charges at Indian airports are high.

"The main challenge is that Indian airports have a flat rate for airport charges for international airlines operating big jets, and it is just not economical to fly to India at those rates," says Basnet. Reducing landing and ground handling charges would make it feasible for Nepali non-jet airlines to immediately start flights to destinations in north India.

Indian and Nepali airlines would also benefit from the proposed air route from Kathmandu to Delhi over Pokhara and Mahendranagar (instead of via Bhairawa and Lucknow presently). The shorter flight would shave 15 minutes off the 90-minute flight and could also reduce the exorbitantly high fares on the route.

These moves would open the floodgates of Indian tourism to Nepal. At present, Indian airlines are allowed 6,000 seats per week, which they underuse. The quota of 3,000 seats per week for the state-owned Nepal Airlines is largely wasted.

The 74-seater ATR-72 that Buddha Air wants to fly to Lucknow will only go so far, even with daily flights. Nepal's national airline will have to step in with more flights on wide-body jets to Indian metros if we are to make full use of Nepal's quota under the new agreement.

Pokhara is an attractive destination because it already has an infrastructure for tourism and is the gateway for the Annapurnas and the Muktinath pilgrimage. It also has lower airport fees and is less congested than Kathmandu. Buddha Air thinks it can offer a Rs 9,000 one-way flight between Lucknow to Pokhara with a through connection to Kathmandu. If Lucknow works well and landing fees at Indian airports are reduced, Buddha Air will consider starting Pokhara-Delhi flights.

Meanwhile, Kathmandu airport is getting an $80 million upgrade with the help of an ADB loan. There are also plans to launch Bhairawa as a regional airport as part of a circuit that takes in the birthplace of the Buddha. If Pokhara steps up to the plate, Nepal can begin looking beyond its target of 1 million tourists for Visit Nepal Year 2011.

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Back to the future - FROM ISSUE #474 (30 OCT 2009 - 05 NOV 2009)