In a major development for Nepal’s domestic aviation sector, airfares have been recalibrated following a recent reduction in aviation fuel prices by the Nepal Oil Corporation (NOC). The cut in fuel costs has prompted the Nepal Civil Aviation Authority (CAAN) to lower the fuel surcharge component that forms a part of the maximum airfare ceiling on various domestic routes. Although airline ticket prices in the market remain below the newly set maximum limits, the adjustment marks a step toward more affordable air travel for Nepali passengers and reflects broader efforts to temper operational costs amid fluctuating global fuel markets.
Background: Fuel Price Reduction and Aviation Sector Response
On December 31, 2025, the Nepal Oil Corporation announced a reduction in the price of aviation fuel by Rs. 6 per liter for domestic flights. This adjustment came alongside cuts in petrol and diesel prices, with petrol reduced by Rs. 4 per liter and diesel by Rs. 5 per liter. The revised price structure became effective from the early hours of the following day, setting the stage for subsequent fare adjustments by aviation authorities.
Aviation fuel constitutes a significant portion of airline operational costs—often nearly 30–40% of the total cost of a domestic flight. When fuel prices decline, it becomes feasible for regulators and airline operators to reconsider fare structures and reduce the cost burden on passengers. In this instance, CAAN responded by reviewing and adjusting the maximum allowable fuel surcharge component of airfares across multiple domestic flight routes.
The aviation regulator has set new fuel surcharge rates at Rs. 68.09 per minute for trunk routes and Rs. 48.64 per minute for flights to remote and mountainous regions. These figures reflect the cost savings realized from reduced jet fuel prices and are used to calculate maximum permissible airfares on regulated domestic routes.
Breakdown of Fare Reductions on Major Routes
Under the new fuel surcharge regime, Nepal Civil Aviation Authority has adjusted maximum airfares on key domestic routes, though actual tickets sold on the market may not immediately align with these ceilings. CAAN’s official list shows declines in fuel surcharge charges ranging from modest to significant, depending on distance and route.
Kathmandu Origin Routes
- Kathmandu–Dhangadhi: This long-haul Terai route saw the most notable drop in fuel surcharge, with a reduction of Rs. 265.
- Kathmandu–Jumla: Passengers on this mid-distance western route benefit from a Rs. 190 reduction.
- Kathmandu–Nepalgunj to Simikot: The fuel surcharge here was cut by Rs. 120 for the mountainous leg of the journey.
Other Notable Adjustments
- Kathmandu to Lukla: Frequently used by trekkers heading to the Everest region, this short but crucial mountain air route received a Rs. 80 reduction in fuel surcharge.
- Kathmandu to Jomsom: A popular gateway for Annapurna region trekkers, the fuel surcharge there declined by Rs. 120.
- Kathmandu to Phaplu: The surcharge was lowered by Rs. 70.
- Simra: At the lower end of the spectrum, the short Kathmandu–Simra route saw a modest Rs. 55 reduction.
- Mountain Flights: Commercial flights tailored to accommodate tourist mountain routes observed a Rs. 210 decrease.
Collectively, these adjustments represent one of the most comprehensive tariff calibrations in recent years, reflecting both fuel market realities and regulatory oversight.
Market Reality: Maximum vs. Actual Ticket Prices
Despite the reductions in fuel surcharge ceilings, the direct impact on passenger ticket prices remains limited at present. Analysts note that most airlines are already pricing tickets well below the maximum caps set by CAAN, even before the recent adjustment. For instance, while the maximum airfare from Kathmandu to Dhangadhi could legally be set above Rs. 17,000 under the new system, many airlines currently charge only around Rs. 8,000 for the same route.
This discrepancy points to competitive pricing strategies among domestic carriers as they seek to attract passengers and maximize load factors. Airlines often set ticket prices based on demand, competition, seasonal travel trends, and operational efficiency rather than strictly on regulatory maximum fare limits. Thus, while the fuel surcharge update represents an important policy shift, its immediate effect on how much passengers pay at the counter may not be dramatic.
However, industry insiders believe that the adjusted fuel surcharge could serve as a stabilizing mechanism during seasonal travel surges or periods of increased air traffic, ensuring fares do not spike excessively and remain within predictable limits.
Industry Response: Airlines and Operators
Representatives from Nepal’s domestic airlines have welcomed the fuel surcharge adjustment, calling it a “sensible and necessary measure” in light of declining fuel costs. Many operators argue that sustained lower fuel prices should eventually be reflected in base fares to encourage more Nepalis to choose air travel over alternative transport modes which, despite improvements, continue to be lengthy and arduous on many routes.
However, some airline officials caution that fuel is only one part of the cost structure. Other significant expenses—such as aircraft maintenance, leasing costs, landing fees, and wages—remain high. As a result, reductions in ticket prices cannot solely hinge on fuel cost reductions unless broader operational reforms are also implemented. While airlines are optimistic, they stress that cost efficiencies will require collaborative efforts between carriers, regulators, and infrastructure stakeholders. The Himalayan Times
Passenger Perspective: Expectations and Limitations
For everyday travelers, the news has been met with a mix of optimism and realistic expectations. Frequent flyers express hope that tickets may become more affordable, especially on long routes where air travel offers considerable time savings over ground transport. For example, what once might have cost more than Rs. 10,000 on certain routes could be increasingly competitive with bus fares when accounting for convenience, speed, and safety.
Yet, passengers also acknowledge that airline pricing dynamics are complex and influenced by global factors such as geopolitics, exchange rates, and tourism demand, especially from international markets. As such, while domestic travelers may benefit from lower fuel surcharges, full fare adjustments will likely evolve gradually.
Domestic tourists, particularly those flying to mountain destinations like Lukla and Jomsom, are interested in seeing whether lower fuel surcharges will directly translate into lower ticket prices during peak trekking seasons. This could significantly impact tourism flows in regions heavily dependent on aerial connectivity.
Economic and Policy Implications
For Nepal’s broader aviation ecosystem, the fuel price adjustment and subsequent fare recalibration underscore the intricate relationship between energy markets and air transport economics. Historically, domestic aviation in Nepal has faced volatility due to frequent shifts in global fuel prices, dependence on imported aviation fuel, and logistical complexities imposed by the country’s challenging terrain.
Energy policy experts note that the NOC’s periodic adjustments—conducted roughly every fortnight based on international price trends—help align domestic fuel prices with global realities. Such transparency in price settings ensures that airlines and passengers are not unduly burdened by outdated or inflated fuel costs.
From a regulatory standpoint, CAAN’s role in setting maximum fare ceilings serves dual purposes: protecting consumers from excessive pricing and providing airlines a framework within which to plan pricing and capacity. This balancing act is especially critical in Nepal, where air travel is not a luxury for many but a functional necessity given the country’s mountainous geography and limited surface transport networks.
Looking Forward: Airline Sector Stability and Future Trends
While the immediate impact of the fuel surcharge adjustment on ticket prices may be modest, experts suggest that sustained fuel price reductions could encourage more competitive pricing and stimulate greater passenger volumes. This is particularly relevant as Nepal’s tourism sector continues to recover post-pandemic and demand for both domestic and international travel grows.
Nepal’s aviation stakeholders are also closely monitoring fuel price trends in neighboring countries like India, where airlines face similar economic pressures and occasionally adjust flight schedules and pricing strategies based on fuel market fluctuations. Observers note that cooperation between regional aviation regulators could foster more stability across South Asia’s aviation landscape.
Additionally, discussions are underway among operators and policymakers regarding incentives for fleet modernization and fuel-efficient aircraft, which could further reduce costs and support environmentally sustainable aviation. While such initiatives require long-term investment, they represent a complementary approach to fare reductions and improved connectivity.
Conclusion
The recent adjustment in domestic airfares following a drop in aviation fuel prices represents a significant moment for Nepal’s aviation sector. By lowering fuel surcharge ceilings, regulators have enabled greater pricing flexibility for airlines and set the stage for potentially more affordable travel for passengers. Although actual ticket prices have not yet fully mirrored regulatory maximums, the move signals a broader effort to align airline costs with market realities and support both connectivity and competitiveness.
As fuel markets continue to shift, airlines, regulators, and travelers alike will watch closely how these adjustments shape future fare trends. For now, the fuel price cut offers a welcome reprieve in an industry long challenged by high operating costs and geographic complexities, bringing renewed optimism to Nepal’s skies.
