The Cabinet will re-examine whether it can allow only one domestic operator
Aviation: Tashi Air, which is required to resume domestic operations by next month, has reiterated to the government that the domestic market is not large enough for two airlines.
This was revealed during the information and communication ministry’s mid-term review, last week.
The ministry in its presentation to the government also pointed out that the target of two domestic operators should be revised to one as having two is not viable.
“Tashi Air’s request or submission is that the domestic market is not viable for two operators and it should be given to one only (any one) for the time till the market is improved,” information and communications minister, DN Dhungyel said to Kuensel.
Currently, only Drukair is operating domestic services.
During the review, Prime Minister Tshering Tobgay said that the Cabinet wanted Tashi Air to operate domestic operations by any means. Tashi Air was instructed by the government to resume domestic operations by next month, in November last year.
However, he asked the ministry to submit a proposal to the Cabinet with recommendations on the legal aspect of having only one airline operate domestically, and also to provide an analysis of passenger traffic and economic viability of the domestic sector.
The proposal is expected to be submitted next week.
The private airline was initially required to recommence domestic operations by October 2014. However, the airline appealed for a two-year extension given that its international operations were still in the red and as a result, it would be operating two loss-making businesses simultaneously which could risk killing it entire operations.
In March last year, the government, despite acknowledging that the market may not be large enough for two airlines, did not accept the appeal and instructed Tashi Air that it had to resume domestic operations.
During this time, national airline Drukair also publicized its view that, despite the market being too small for two airlines, both airlines must operate. The national airline reasoned that despite the international sector not being large enough for two airlines, the government still permitted a second airline on grounds that competition is healthy. It argued that the same logic should apply for the domestic sector.
Tashi Air re-appealed and the government explored its options. It was determined that the original request for proposals had to be adhered to and that Tashi Air rejoin the domestic sector in April 2016.
The problem arises from the previous government’s decision to allow two airlines to operate domestically despite the request for proposals calling for only one airline.
Meanwhile, Tashi Air renewed the lease agreement of its Airbus aircraft with SMBC Aviation Capital for another two years on Thursday.
Gyalsten K Dorji