Kathmandu, Aug. 2: The government has proposed sweeping new legislation that would require airlines to compensate passengers for flight delays, cancellations, lost baggage and accidents, while raising compensation for deaths in air crashes to as much as US$100,000.
The proposed Domestic Air Carrier Liability Bill, 2026, registered in the Federal Parliament by the Ministry of Culture, Tourism and Civil Aviation, aims to make Nepal’s domestic aviation sector safer, more reliable and more passenger friendly by clearly defining the legal and financial responsibilities of airlines.
Under the bill, airlines will be legally required to transport ticketed passengers safely to their destinations on the scheduled date and time. Passengers will be entitled to claim compensation if a flight is disrupted due to the airline’s negligence.
Airlines must notify passengers at least three hours in advance if a flight is delayed, cancelled or suspended. If passengers holding confirmed tickets are denied boarding because of the airline’s decision or aircraft weight restrictions, the airline must provide compensation and other prescribed facilities.
The proposed law also requires greater transparency in ticket pricing. Airlines must separately disclose airfare, airport service charges and government taxes on every ticket. Failure to do so would be treated as an offence.
The biggest change relates to compensation for air accidents. If a passenger or a third party dies in an aircraft accident, the victim’s next of kin would be entitled to compensation of up to US$100,000 in Nepali rupees. Airlines would also have to provide an immediate payment of at least Rs. 500,000 to cover funeral expenses, which would later be adjusted against the final compensation amount.
The proposed compensation marks a fivefold increase from the current maximum limit of US$20,000, which is based on the 1929 Warsaw Convention and the 1955 Hague Protocol and has long governed Nepal’s domestic aviation sector.
The bill also requires airlines to bear the full cost of medical treatment for passengers or third parties injured in an accident. Victims suffering permanent disability or other serious physical injuries would also be eligible for compensation of up to US$100,000.
Passengers would receive compensation of up to US$500 for checked baggage that is lost, destroyed or damaged, calculated at US$20 per kilogram. Airlines would also be held liable for damage to hand carried baggage caused by their negligence.
The legislation introduces clearer rules for cargo services. If declared cargo is lost or damaged, compensation equal to the declared value must be paid. Where no value has been declared, compensation would be calculated at US$10 per kilogram. Compensation would also apply if cargo is not delivered on time or is delayed by more than three days. Cargo that remains undelivered for 15 days would be considered lost.
Airlines would also be responsible for compensating people or property on the ground if they suffer damage caused by an aircraft accident or related incident.
The bill makes comprehensive insurance mandatory for all airlines, covering passengers, cargo, third party liability, war risks, terrorist incidents and rescue operations. Airlines that fail to obtain the required insurance could be ordered to comply within 35 days. Failure to do so could result in suspension of flights or cancellation of their Air Operator Certificate (AOC).
Shippers transporting dangerous goods would be held responsible for providing false information, and airlines would not be liable for losses arising from such misrepresentation.
The proposed law also sets deadlines for compensation claims. Claims involving death or permanent disability must be filed within 90 days, while claims related to flight disruptions, baggage or cargo must be submitted within 30 days with supporting evidence. Airlines would be required to decide on claims within 60 days, and dissatisfied claimants could appeal to the Director General of the Civil Aviation Authority of Nepal within 30 days.
The bill proposes stricter penalties for airlines that fail to comply. Companies that do not provide ticket details, fail to notify passengers of flight disruptions on time or refuse to provide compensation could face fines ranging from Rs. 10,000 to Rs. 50,000.
Airlines that fail to obtain mandatory insurance or refuse to pay compensation in serious cases could be fined between Rs. 1 million and Rs. 2.5 million. Repeat violations would attract double the penalty.
The government has also proposed reviewing compensation limits every 10 years based on the national inflation rate to ensure they remain relevant.
However, airlines would not be required to compensate passengers if flights are delayed or cancelled because of bad weather, natural disasters, air traffic management decisions or other circumstances beyond their control.
People’s News Monitoring Service
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