Kathmandu, Nepal: Nepal has moved to split the Civil Aviation Authority of Nepal (CAAN) into separate regulatory and service-provider bodies, reviving a reform that has been stalled for more than a decade as the country faces continued EU aviation restrictions and a major ICAO safety audit in 2027.
Culture, Tourism and Civil Aviation Minister Khadak Raj Paudel registered two bills in the House of Representatives on October 2, 2026 the Nepal Civil Aviation Authority Bill, 2083 and Air Service Authority of Nepal Bill, 2083.
The proposed structure would separate safety regulation from aviation service delivery. The new Civil Aviation Authority would regulate airlines, licensing, airport certification, aviation personnel, training and maintenance organisations, conduct inspections and audits, enforce safety standards and suspend unsafe operations. The proposed Air Service Authority would operate and develop airports, provide air navigation and air traffic management services and oversee aviation infrastructure.
Paudel said, “Separating these functions will address the inherent conflict of interest in the current structure and strengthen the credibility and effectiveness of safety oversight.” He added, “Aviation safety requires continuous improvement, not a one-time structural change.”
Nepal has remained on the EU Air Safety List since December 2013. The European Commission’s June 9, 2026 update retained Nepal among countries whose aviation authorities were considered to have inadequate safety oversight. The EU list covered 154 airlines, including 126 carriers certified in 16 states affected by inadequate oversight by their national authorities.
EU Ambassador to Nepal Véronique Lorenzo, however, has clarified that Brussels has not specifically demanded legislation splitting CAAN. “The European Union has never asked for a legislative change to split service provision from regulation,” she said in May. “What it has insisted upon is the independence of each function to avoid conflicts of interest.”
Lorenzo said an EU assessment in 2023 found insufficient progress and that Nepal’s corrective action plan had moved slowly. Nepal has now submitted an updated Corrective Action Plan, which is under EU review.
The pressure is also linked to ICAO. ICAO’s first finding on CAAN’s combined regulatory and service-provider functions dates to its May 2009 audit, with subsequent audits repeatedly calling for clearer separation. Also ICAO’s 2022 position called for regulatory and service-provider functions to be separated.
Nepal is scheduled for an ICAO Universal Safety Oversight Audit Programme audit in May 2027. CAAN officials say legal and regulatory documents need to be finalized around six months beforehand, while supporting material must be submitted to ICAO several months before the inspection. Crucially, Nepal must demonstrate that new rules are not only enacted but implemented in practice.
A senior CAAN official said the country may seek an extension, stating, “We have made progress in many areas. The implementation of the new laws which envision separation of the regulatory and service-provider functions will add new impetus to the audit.” The official added, “So, an extension of the ICAO audit is necessary.”
The proposed split dates back to at least 2010, following an agreement with the Asian Development Bank under the Air Transport Capacity Enhancement Project. Spanish consultancy INECO prepared draft legislation in 2014 at a reported cost of $4.2 million.
The bills were registered in Parliament in February 2020 and unanimously endorsed by the National Assembly in August 2021, but a planned House debate in March 2022 was halted after opposition from CAAN employees. The bills returned to the ministry after the 2022 elections and were re-registered in February 2025, before again stalling amid amendments and political instability.
The latest draft was published for public feedback on July 8, 2026, before the government formally registered the bills in October.
The Air Service Authority would manage airports and air navigation, develop and maintain infrastructure, introduce new technology and improve airport services. Existing permanent CAAN employees would initially be transferred to the service-provider body, while employees seeking to join the regulator would have 60 days to apply.
The authority would be led by a government-appointed board and a managing director selected through open competition. The managing director would require a postgraduate qualification and at least 15 years of civil aviation experience, with a four-year term.
The Civil Aviation Authority, meanwhile, would become Nepal’s dedicated safety regulator. It would oversee airline and personnel licensing, airport certification, training and maintenance organisations, inspections, audits, safety-management systems, enforcement and regulatory investigations. It would have powers to impose restrictions, suspend licences and immediately stop unsafe operations.
Its director general would serve a four-year term, with reappointment possible, while the board would include government officials and aviation expertise.
The reform has become a race against the clock. Finance Minister Swarnim Wagle’s May 30, 2026 budget set a target to complete the CAAN split by mid-January 2027, partly to support Nepal’s removal from the EU Air Safety List.
But the bills reached the lower house only hours before Parliament was prorogued, according to The Kathmandu Post on October 4. A Tourism Ministry officially said, “Now that Parliament has been prorogued, we have to wait for the next session in winter to get the bills discussed and passed.” The official added, “There is no possibility for Nepal to get out of the air safety list as per the plan announced in the budget.”
The delay comes after years of safety concerns. The EU restrictions have also limited Nepali carriers’ access to European markets, discouraged European airline expansion and affected the country’s ambitions for higher-end tourism and the use of Gautam Buddha International Airport.
Nepal has now taken the legislative step, but the split is still only proposed. Parliament must pass the bills, the new institutions must be established and their independence and enforcement capability must be demonstrated before Nepal can show the EU and ICAO that the reform has translated into effective safety oversight.
