Nepal’s domestic aviation sector is reeling as jet fuel prices that have doubled in the nation have forced airlines to raise fares, triggering a sharp drop in passenger demand across key routes from Kathmandu, the city that houses Nepal busiest airport- Tribhuvan International Airport (TIA). Major operators, including Buddha Air (U4) and Shree Airlines (SHA), report steep declines in daily traffic and widespread flight cuts during the peak travel season.
The crisis follows a historic hike in aviation turbine fuel (ATF) prices by Nepal Oil Corporation, pushing operating costs to unprecedented levels. Airlines say the combined impact of rising fuel costs and weakening demand is threatening profitability and forcing the industry into survival mode.
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Demand Slumps across Nepalese Airports
Domestic carriers have witnessed a rapid fall in passenger numbers after ticket prices surged in response to rising fuel costs. Buddha Air (U4), Nepal’s largest private airline, reported a daily drop of around 1,500 passengers, down from an average of 8,000, The Kathmandu Post reported. The same publication also noted that the airline has already reduced at least 25 percent of its daily flights due to weak occupancy levels.
According to data from planespotters.net, Buddha Air has a fleet of sixteen aircraft (two ATR 42s and fourteen ATR 72s) and these average twenty years. Buddha is also the nation’s largest carrier.
Similarly, Shree Airlines (SHA) has seen passenger movement fall by 30–40 percent. The airline’s daily traffic has dropped from roughly 3,000 to about 2,000 passengers, highlighting the depth of the downturn. The corporate director at Shree Airlines, Anil Manandhar, was quoted to have said:
It’s a big decline during the peak travel season….The hike in fuel prices has not only dented domestic passenger movement, it has affected the entire tourism industry.
A lot of tourists take flights to what is considered to be the most dangerous airport in the world- Lukla Airport (LUA), to start their trekking journey to the Everest Base Camp in the month of April and May- which are considered to be some of the best months for trekking in Nepal. But doubling of the prices of jet fuel will mean that the flight tickets have also soared.
One has to note that Buddha and Shree don’t have flights to Lukla Airport.
Cost Pressures Rise for Nepalese Airlines
Fuel costs have become the dominant financial burden for airlines, reshaping the economics of domestic aviation in Nepal. According to industry leaders, aviation fuel now accounts for nearly 50 percent of total operating expenses, up from 25–30 percent previously.
The spike follows aggressive price revisions by Nepal Oil Corporation, which raised ATF rates to record highs in early April. Prices for international carriers surged to $1,716 per kilolitre, while domestic rates nearly doubled to Rs257 per litre after consecutive hikes.
| Category | Previous Price | New Price | Change |
|---|---|---|---|
| ATF – International airlines (Kathmandu) | $965 approx (derived earlier baseline not stated) | $1,716 per kilolitre | +77.63% |
| Previous international peak | $1,645/kL (June 19, 2022) | — | New record broken |
| ATF – Domestic airlines | Rs 190/litre | Rs 251/litre | +97.63% |
| Latest revision (April 9) | Rs 251/litre | Rs 257/litre | +Rs 6/litre |
| Previous domestic peak | Rs 190/litre (Sept 1, 2022) | — | Surpassed |
Data: The Kathmandu Post
Officials attribute the increase to global supply constraints and elevated demand linked to geopolitical tensions in West Asia. The depreciation of the Nepali rupee against the US dollar has further compounded the situation by increasing the cost of aircraft spare parts and maintenance.
Airlines now face a dual challenge: sharply rising costs and declining revenues. This imbalance is eroding profit margins and limiting their ability to sustain operations at current levels.
Fares Have Doubled on Some Routes
Airlines have begun adjusting fares in line with regulatory provisions that require fuel surcharge revisions when prices fluctuate significantly. On major routes such as Kathmandu–Dhangadhi, ticket prices have risen sharply, with upper fares exceeding Rs22,000 one way.
Even on shorter routes like Kathmandu–Simara, fare increases have made air travel less accessible to price-sensitive passengers. As a result, many travelers are opting for alternative modes of transport. The following table gives us a scale of the price hikes:
| Route | Previous Fare | Current Fare | Components / Notes |
|---|---|---|---|
| Kathmandu–Dhangadhi (upper fare) | — | Rs 22,270 | Includes Rs 2,504 VAT + Rs 500 service charge |
| Kathmandu–Dhangadhi (lower fare) | — | Rs 16,085 | — |
| Kathmandu–Dhangadhi (promo fare) | — | Rs 11,600 | One-way |
| Fuel surcharge increase (Dhangadhi route) | — | +Rs 5,480 | Longest domestic route |
| Kathmandu–Simara total fare | — | Rs 5,099 | Includes Rs 529 VAT + Rs 500 service charge |
| Fuel surcharge increase (Simara route) | — | +Rs 1,140 | Shortest domestic route |
Despite modest growth in 2025, when domestic airlines carried a record 4.56 million passengers, the current trajectory signals a potential reversal. Infrastructure constraints, slow tourism recovery, and external cost pressures are now weighing heavily on the sector.
Aviation stakeholders caution that prolonged high fuel prices could lead to deeper capacity cuts, route rationalisation, and financial strain across the industry. If the trend continues, the ripple effects may extend beyond airlines, impacting tourism, trade, and the broader Nepali economy.
With uncertainty looming, Nepal’s aviation sector faces a critical period where cost control, demand recovery, and policy support will determine its near-term stability.