EU Transport Commissioner Siim Kallas announced yesterday that the 28-nation bloc had placed all of Nepal's airlines on its safety blacklist, banning them from flying to the EU, saying their safety record "does not leave us any other choice".
The move has created fear in Nepalese tourism sector about losing their business, which was set to touch USD 500 million in the next five years.
Aviation analyst Hemant Arjyal said the ban is not only a setback to Nepal's tourism, but to the country as a whole.
Last year, Nepal received 8,00,000 international visitors after years of efforts to revamp the tourism industry, which was badly hit by a decade-long Maoist insurgency which ended in 2006.
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The state-run Nepal Airlines, which flies to half a dozen foreign destinations including Hong Kong and Dubai, is the only local carrier operating international flights.
"The decision would naturally create an impact on our aviation industry," said Ratish Chandra Lal Suman, director general of Civil Aviation Authority of Nepal (CAAN).
"The decision will further hit the already slow business of the national flag carrier," he added.
Nepal's aviation safety record has taken a blow with seven crashes in the last three years, usually attributed to inexperienced pilots, poor management and maintenance.
A Chinese tourist and a local pilot were killed when an ultra-light aircraft crashed into a hill in the tourist town of Pokhara in early October.
Experts and aviation officials have said "the rush decision" of the European Commission to ban all airlines might be related to Nepal's move to permit Chinese-made MA60 aircraft in the Nepali skies, the Kathmandu Post reported.