PRIA: Can it earn Rs 1.5 billion a year to avoid loss?

Published On: January 5, 2023 09:00 AM NPT By: Santosh Pokharel

POKHARA, Jan 5: Pokhara's old airport earned Rs 115.9 million in the last fiscal year. This income is the highest due to the addition of flights after the decline in corona infection. But the flights from the old airport have been diverted to the new international airport from January 1.

This income earned by the old airport also includes fees paid by 'STOL' (short takeoff and landing) aircraft including helicopters and ultra lights. The STOL aircraft, helicopters and ultra lights will still operate from the old airport. 

After January 1, domestic flights and landings of large aircraft are being done from the international airport. The share of fees paid by STOL aircraft, ultra lights and helicopters used to be about five percent of the airport's revenue. It seems that the new airport will have to work hard to increase the income to meet the expenses. But now, as the income of both airports will be combined together, there will not be much difference, says the official of Civil Aviation Authority of Nepal (CAAN).

After the Pokhara Regional International Airport (PRIA) came into operation, apart from the old ones, some new airlines have also started flying. The number of flights from the international airport may increase as night flights can also be booked. It will definitely increase the income of the airport.

The authority has implemented a new regulation and increased the airport service fee from 29th December 2022. When flying from the old airport, this fee was four hundred rupees. Now the fee has increased to five hundred rupees per person when flying from the international airport. About 75 percent of airport revenue is passenger service fees. The rest of the revenue is paid by the airline for landing, take-off, communication, and parking.                            

The number of air passengers coming to Pokhara is increasing every year. According to the authority, this number was around 850,000 in 2022, which is the highest ever. This number was 720,000 in 2019 before the corona infection started. Lately, air passengers are on the rise due to the difficult travel of the highway. Apart from that, an official of the authority says that when flights start from the international airport, more passengers will be added and the share of income will increase even more if there are night flights. According to the official, if there are at least 900,000 passengers annually, half of them will pay the service fee in Pokhara. In that case, Pokhara International Airport's income from passenger service fees will be at least 230 million rupees. Apart from that, Pokhara International Airport will earn about 300 million rupees a year from the fees paid by the old airport and airline companies.

"The airport was certain to earn about 250 million rupees this year if the passenger service fee was doubled, even if flights and landings were made from the old airport  ," a source said, “"But when flying from the international airport, the service fee will be even higher, so the authority will earn at least 300 million rupees a year."

International flights will increase income. If only one international flight carrying at least 100 passengers daily comes to Pokhara, the relevant airline company should pay a minimum fee of three hundred thousand rupees. Even if there are flights of that size throughout the year, the airport earns about 120 million rupees per year from a single international flight, said the official of the authority. But for that, it is necessary to have an international flight. Income will not increase unless there is an international flight.

When the construction of Pokhara International Airport started, the land of the airport was 3106 ropani. But the airport is built on an area of 3899 ropani. The authority has spent about 8 billion rupees from its own resources to buy the insufficient land. Apart from that, the Authority had initially taken a loan of 22 billion rupees from China's Export-Import (Exim) Bank to build the airport. It has now increased to more than 28 and a half billion rupees. Out of which 25 percent (7 billion 130 million) has no interest agreement. 2% interest has to be paid on the remaining 75% amount (21 billion 400 million). Interest-free loan principal also has to be paid in installments. Apart from that, the principal along with the interest amount should also be paid.

According to Gyanendra Bhul, information officer of the airport, the grace period of the loan paid by Pokhara International Airport is 7 years. This means that Pokhara Airport did not have to pay loan installments for almost seven years of the construction period. From 2024, counting from 2017, the authority has to repay the loan installments. The loan must be repaid within 13 years.

After Pokhara International Airport came into operation, analysis of its economic situation has started. A few days ago, former Finance Minister Rameshwar Khanal said in an event held in Pokhara that the Pokhara International Airport will be able to cover its costs in nine years. But for that Khanal's condition was that a sufficient number of foreign tourists should enter Pokhara. He said that there will be large-scale activities in Pokhara and if enough foreign tourists can be brought in, air flights will be added and it will be easy to increase the income of the airport.

According to Bhul, the information officer of the authority, Pokhara Airport should have at least one hundred domestic flights per day and at least 50 international flights per week to cover all expenses. "Pokhara Airport can survive even on domestic flights. Pokhara has a different kind of travelers than other places, that is, Pokhara is comfortable as a destination for foreign tourists," he said, “So far only flights are taking place during the day. Now, if all aircrafts are able to carry passengers at full capacity at night, there will be no problem in income”. He said that the annual cost of Pokhara Airport could be 400 to 600 million rupees. “Tribhuvan International Airport has become profitable after 70 years of operation. So let's not look at Pokhara as a profit and loss right now," he said, "let's see that the service is commercialized. The state also has an equal responsibility in this. Apart from that, there will be no problem if the private sector shows interest”. Pokhara International Airport has to pay about 3.2 million dollars in interest and operating expenses and should earn about one and a half billion rupees a year. He said that the government and the private sector should be equally active to generate that income.

"In the current situation, the airport itself will raise all the operating expenses. But the authority can spend the income from elsewhere to pay the interest and installments of the loan. In that case, it will not be possible to build more physical infrastructure” said another official of the authority,”If another international airport is to be built in Nijgadh, there will be a lack of funds.” Anandraj Mulmi, the former president of Federation of Nepal Chambers of Commerce and Industry, says that even though Pokhara has an international airport, there are challenges in its operation. “A good product has been prepared. But now there is a need for marketing," he said. According to him, this airport, which has a runway of 2,500 meters, would have been competitive with Kathmandu if the runway could have been extended by three kilometers. But he said that chance is gone now.

“If it was a competitor of Kathmandu, it would have been more reliable. As the runway is a bit small, there may be some problems," he said. "Since all large-sized aircrafts cannot land in Pokhara, there is a suspicion that international flights will only be for short distances." He said that now that the airport is ready, both the government and the private sector should take initiatives for marketing. He said that if the airport is not utilized to the maximum, it will incur losses.

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