Nepal's government has proposed breaking up the Civil Aviation Authority of Nepal (CAAN), aiming to separate safety oversight from airport operations and air traffic services as the country works to clear European Union air-safety restrictions ahead of a 2027 ICAO audit.

What does the proposal cover?

The plan would split CAAN into at least two distinct entities: one carrying out regulatory and safety-oversight functions, and another managing airport operations and air navigation services. The configuration mirrors reforms undertaken by other civil aviation authorities seeking alignment with ICAO Standards and Recommended Practices, which treat the separation of regulator and service provider as a structural best practice.

CAAN currently performs both functions from its headquarters in Kathmandu. The authority oversees safety regulation as well as operations at Tribhuvan International Airport — Nepal's sole international gateway — and the country's domestic airport network that links the capital to remote Himalayan regions.

Why does the EU restriction matter?

Nepalese carriers have appeared on the EU Air Safety List for several years. Brussels uses the list to identify third-country operators that fail to meet international safety standards, drawing on ICAO audit findings and its own technical assessments. Inclusion bars Nepalese airlines from operating scheduled services to or within EU member states, restricting network growth, limiting code-share and dry-lease arrangements with European counterparts, and complicating wet-lease operations for European charter customers.

What does the 2027 ICAO audit assess?

ICAO conducts Universal Safety Oversight Audit Programme (USOAP) audits on a continuous basis, evaluating each state's capacity to oversee civil aviation safety across personnel licensing, aircraft operations, airworthiness, accident investigation and other domains. The 2027 cycle is the next scheduled comprehensive assessment for Nepal. Audit findings feed directly into the EU safety list and other international evaluations, including the US Federal Aviation Administration's International Aviation Safety Assessment (IASA) program, which determines whether foreign carriers can operate to the United States.

What is at stake for Nepal?

For Kathmandu, the proposed CAAN split is as much about market access as it is about safety outcomes. EU de-restriction would unlock new scheduled-service rights for Nepalese carriers, expand wet-lease options with European airlines, and reduce the operating cost of training, maintenance and crew-rotation arrangements that currently route through third countries.

The country's flag carrier, Nepal Airlines, has been the most visibly affected, unable to operate scheduled services into EU territory with the bulk of its fleet. Smaller private operators, including Yeti Airlines and Buddha Air, have similarly been blocked from EU code-share and wet-lease work.

What happens next?

The proposal must clear Nepal's parliamentary and administrative processes before the 2027 audit window opens. A roughly two-year runway leaves little margin for delay, and any successor organization would need to demonstrate independence, technical staffing and the regulatory capacity to credibly oversee Nepal's airline sector — the same criteria ICAO and the EU apply.

If Kathmandu delivers structural reform and backs it with evidence of improved oversight performance, the 2027 audit becomes an opportunity to reset international confidence. If not, Nepalese carriers face continued restriction, and the CAAN reform effort risks joining a long list of regional regulatory overhauls that produced structural change without measurable safety or commercial gains.