Still awaiting its first overseas flight, is China funded Pokhara airport in Nepal turning into a White Elephant?

Kathmandu: When the highly awaited Pokhara International Airport in western Nepal was opened on January 1, a huge celebration erupted in the lake city because the several decades long dream of building an international airport in the city had been fulfilled.

Pokhara city authority gave the residents of the city a day off to celebrate the completion of the project and there was a great jubilation when Nepali Prime Minister inaugurated the new international airport.

But the inauguration of the airport was carried out without a single international flight in the new airport that had been bankrolled by China and built by a Chinese company.

But 10 months down the line, the airport which lies in the scenic Himalayan valley and is the gateway to the world-famous Annapurna Circuit trekking route, has failed to attract single international airlines to the tourism city of the Himalayan nation.

“Since its inauguration, we have invited the international airlines to start international flights from and to the new airport,” Jaganath Niraula, spokesperson at Civil Aviation Authority of Nepal (CAAN), developer of the project which is also the regulator of the aviation sector in Nepal, told India Narrative. “But not a single airline has so far formally requested the CAAN to start to start international flight from this airport.”

He said that the airport is well equipped to start the international flights which has been proved by two chartered flights that took place in this airport. A chartered flight of Sichuan Airlines had landed in Pokhara in June carrying officials and players to participate in the Nepal-China Friendship Dragon Boat Race Festival held in Pokhara city.

Though domestic and foreign international airlines have so far failed to approach the CAAN to start the international flights and to this new airport, Buddha Air, a dominant player in the domestic market which also has licence for international flights, had sought to start international flights from Pokhara to three cities of India.

According to Niraula, Buddha had sought approval from the Indian authorities to land its planes in three Indian cities—New Delhi, Dehradun, and Varanasi from Pokhara. “Buddha has not yet received approval from the Indian authorities,” he said.

Besides Buddha, even state-owned Nepal Airlines has also not shown any interest to start to operate international flights from this new airport.  “Even though Nepal’s Himalaya Airlines, a Bhutanese airline, some airlines from the Gulf nations and some Chinese airlines have expressed their interest to start international flights from and to this airport, not a single airline has come up with the plan to operate international flights,” said Niraula.

The Himalaya Airline is a joint venture between Nepal and China with a majority stake of a Chinese company.  When it comes to the national flag carrier, Nepal Airlines, it has a limited fleet for international flights. It currently has four planes, two narrow bodied and two wide bodied planes. “It is fully occupied with existing scheduled flights from Tribhuvan International Airport in Kathmandu and its foreign destinations,” said Niraula.

Even though the airport was built with the Chinese aid, the Chinese airlines have also stayed away from making attempts to fly into this airport.

When Nepali Prime Minister Pushpa Kamal Dahal visited China last month, two sides agreed to support and encourage their airlines to resume and open more flights and air routes, including ones connecting Pokhara, a joint statement during the visit states.

With both Nepal based international airlines and foreign airlines showing little interest to connect its flights to Nepal’s famous tourism city, questions are being raised how the CAAN would recover the money to pay the Chinese creditor—China Export Import Bank and whether the project would turn out to be another white elephant.

The Nepal government received a $215.96 million (NPR 28.81 billion) loan from China EXIM Bank. Of the total amount of credit, 25 percent will be interest-free while the interest on the rest has been fixed at 2 percent a year with the repayment period of 20 years.

Provided international airlines continue to ignore this airport, the likelihood of the project becoming a white elephant cannot be ruled out, according to officials of CAAN.

The CAAN and China Exim Bank have signed an agreement to pay back the loans solely through the income of Pokhara airport. There is a dedicated escrow account to pay the instalments.

It will be hard for the CAAN to repay all the loans without international flights operating in this airport considering that the existing domestic airport in Pokhara had collected only NPR 116 million in fiscal year 2021-22 that ended in mid-July 2022.

Currently, only domestic flights are operational in the international airport with the airline companies not seeking to operate international flights.

“Income generated from domestic flights has been enough just for covering the operation cost only,” said Niraula. However, the CAAN officials say that the airlines would be bound to use Pokhara and Bhairahawa international airports in bordering Lumbini if they want to add more flights in Nepal because Tribhuvan International Airport in Kathmandu has hardly any extra capacity to add slots for airlines.

“Immediately, international flight is not operating in Pokhara airport but it can happen in the near future because the city has huge potential to attract foreign tourists,” said Niraula.  Though international flights in the international airport are yet to begin, Nepal has already started paying the interest of the loans to be paid to the China Exim Bank.

The CAAN had started paying interest and commitment fees to the China Exim Bank since fiscal year 2017-18, a year after the loan agreement was signed to build the airport.

Till last fiscal year 2022-23, as much as NPR 944.53 million ($7 million) was paid to the Chinese bank in the form of commitment fee and interest, according to the annual report 2022-23 of Public Debt Management Office.

“Nepal will soon have to start paying the principal too as the grace period will be over by the end of 2023,” said an official of the Public Debt Management Office.

Even though overall Chinese debt to Nepal is comparatively very low, unsuccessful Chinese funded projects could contribute to the country’s growing debt burden. Another unsuccessful venture with Chinese assistance is six Chinese made aircraft which were acquired from 2014 to 2018 under grant and loan deal.

Of six aircraft, one crashed while two 56-seater MA60 and three 17-seater Y12e—have been grounded and turned to be more trouble than they are worth for the Nepal Airlines, the state-owned power utility body.

Acquired at a total grant worth 180 million yuan and a loan worth 228 million yuan, these planes are now in auction at junkyard price, according to the national flag carrier.

And, questions are being raised whether the Pokhara International Airport will be another failed experience in Nepal with Chinese assistance.  Nepali officials said that two factors could be responsible for why the airlines have not shown interest to start flights in this airport.

One is the lack of shorter routes via India. Currently, Nepal has a single-entry route Simara via India for all the airlines except for planes that come from China.

Nepal has sought more air routes via India through the western side of Nepal-in order to facilitate the movement of international flights, particularly those coming from western Nepal, to the two new international airports in Bhairahawa and Pokhara in western Nepal.

A senior official of CAAN said that airlines flying to Pokhara International Airport through the western route would arrive 20 minutes earlier than they would do while using existing Simar route.  “If India does not allow air entry routes from Nepal’s western region, it will be costly for the carrier to land planes in Pokhara International Airport,” said the CAAN official.

Colder relations between India and China relations and China’s proclamation that Pokhara International Airport was built under the Belt and Road Initiative (BRI) also has not helped to get approval of India for new air entry routes.

India has been protesting the BRI because of construction of the China-Pakistan Economic Corridor in Pakistan occupied Kashmir which New Delhi considers as its own territory, under BRI.

There is also the issue of load restrictions for flying in Pokhara International Airport.

In January, the Kathmandu Post reported, quoting unnamed CAAN officials and some pilots that a preliminary report has shown a payload penalty for airlines ranging from 5-10 tonnes, depending on the temperature and distance. Payload penalty means load restriction in an aircraft to fly in a certain airport.

“The permissible load for an A320 is 77 tonnes, but an A320 taking off from Pokhara will be allowed to carry a maximum load of only 68 tonnes.  This will prevent narrow-body jets from flying at full capacity at the new airport,” two pilots told The Kathmandu Post.

However, a senior CAAN official admitted that there could be payload issues but no airline company has stated to what extent they could face payload penalty.

Besides these issues, the CAAN has also been failing to conduct marketing of this airport even though it has been built as a tourism hotspot. “Nepal has also lagged behind in economic diplomacy to operate this airport,” said another CAAN official.

With international flights not beginning in the airport, the initial jubilant mood among city dwellers has become sober in recent days.

Damodar Poudel Bairagi, a lawmaker from Kashki district where Pokhara lies, said it was the government’s failure that no international flight had taken place in the Pokhara International Airport so far.

“The Prime Minister visited both India and China, two major tourist source markets in the last few months. Our question is whether he could secure cooperation from them to enable operation of international flights in this airport,” Poudel told India Narrative.  “The government must ensure that the international flights take place in this airport. We are still hopeful it will happen.”

Also Read: Nepal-China tensions could rise after Beijing lists Pokhara international airport as BRI project