The government has granted Tashi Air a grace period of three years until 2019 to resume domestic air services. This is the most logical move at this point.
The domestic market is not large enough for even one airline, let alone two.
Having two airlines competing in the market based on a technicality would only cause further losses to both companies and risk the shut down of one.
Tashi Air’s presence in the international sector has allowed us to benefit. Lower airfares and better customer services from both airlines are a result of this competition.
It would have been a shame to lose the advantages of two airlines competing for us.
But it is a fact that the 2011 contract is not being respected. Not all may be satisfied with the decision. Tashi Air was supposed to first introduce domestic services and to subsidise it by introducing international services later.
Today, we have its international services but no domestic services.
But it is also a fact that only one airline was supposed to be operating in the domestic sector.
By ignoring the RFP at the last moment and choosing two airlines the situation was only made worse as the Indian rupee crisis followed the next year impacting Tashi Air’s ability to acquire funds to maintain services in both the domestic and international sectors.
The airline appealed to the government for time. The government studied the appeals and twice decided in the past year that the legal requirements of the RFP mattered more and that Tashi Air has to be operating domestically no matter what.
It’s latest and third decision is a departure from its previous two decisions.
The issue has not been straightforward and for now, the government’s decision makes sense.
But going forward, both Tashi Air and the government need to ensure that the need to ask for another deferment does not arise in 2019. We cannot afford another repeat and cause a mockery of the process.
This can be done by easing the business environment as much as possible and removing any limitations if there are any.
The government can also open up more markets for the two airlines by establishing more air service agreements with other countries.
The airlines must also consider not only competing with each other on existing routes but also study and identify routes on which they can compete with other airlines and also provide services that could attract foreign passengers.
The domestic market can also be helped by, for instance, facilitating the installation of aviation fuel facilities in the domestic airports. Such facilities will bring down the cost of domestic airfares and raise demand so that the domestic sector is used predominantly only by tourists but by locals as well.