Alongside, in the same sector, Drukair has been given an all-or-nothing ultimatum

Aviation: Despite acknowledging that the domestic air market is too small for two airlines, the government has decided that Tashi Air must recommence its domestic air services.

“Cabinet decision is that Tashi Air is required to start domestic operations as per agreement,” information and communications minister DN Dhungyel said.

However, the government has also decided to place a precondition on the national airline Drukair that it either operate to all three domestic airports, or leave the domestic market.

“It can make a choice of either operating in all airports or withdraw from the domestic operations altogether,” lyonpo Dhungyel added.

Drukair had earlier proposed the domestic market be divided and that it operate to Batpalathang airport in Bumthang, while Tashi Air operate to Yonphula, Trashigang and Gelephu, Sarpang.

Drukair had notified the government in January that it would not operate to the Gelephu airport, which was opened for scheduled operations by the civil aviation department in February, and Yonphula airport, which is currently closed and scheduled for major structural work that would see it open only some time next year.

The airline pointed out that, as it uses the same aircraft for short haul international sectors, its availability for domestic operations would be a problem.

The CEOs of both Drukair and Tashi Air chose not to comment, as they were yet to receive official word of the decision.

A time frame on when Tashi Air would be required to recommence domestic air services is yet to be determined.

Information and communications secretary Dasho Kinley Dorji said the ministry would now begin discussions with the private airline to work out such details.  He said that Tashi Air would be given a “practical” and “viable” period of time to restart its domestic operations.

This will primarily include the airline searching for an aircraft to either lease or purchase.

Tashi Air won the domestic air services contract in 2010 to introduce domestic air services in Bhutan, which could then be subsidised through international air services later.

However, the government chose to allow Drukair into the domestic sector as well, after it was found that its articles of incorporation already permitted it to operate domestically, despite the government’s domestic air services’ Request for Proposals saying, only one airline would be chosen.

In June 2012, Tashi Air was allowed to suspend its domestic services a mere six months after it began operations.  This was done, as the private airline, already suffering significant losses, given low demand and competition provided by Drukair, was also not able to acquire funds to begin international air services.  Subsequently, Tashi Air sold its aircraft and leased a larger one to begin international services.

However, an agreement was made that required it to reintroduce domestic services one year after it began flying internationally.

Tashi Air was supposed to resume domestic services by October, last year.

However, while committing to meeting its domestic obligations, it appealed to the government for a two-year deferment on grounds that as its international services were yet to break even, operating two loss-making businesses simultaneously could risk the entire business shutting down.

It also proposed that if the government provided it with a five-year domestic monopoly, it would restart domestic operations in four months.

The government’s latest decision raises a number of questions, primarily why it has required Tashi Air to reenter the domestic market, when it is aware that it is not large enough for two airlines.

Another question that remains unanswered is also whether Drukair will continue to operate domestically, especially if it means operating regularly to Gelephu, and later Yonphula, which could affect its international short haul services.

Gyalsten K Dorji