The government has acknowledged that the domestic market is not large enough for two airlines
Aviation: The government has decided to give Tashi Air a three-year grace period to resume domestic operations.
The information and communications minister DN Dhungyel confirmed the government’s decision yesterday.
Lyonpo DN Dhungyel said that the latest decision has been made for several reasons.
One, that the domestic air service business is not profitable even for one airline currently. Only the national airline, Drukair, operates in the domestic sector today.
The second reason is because Drukair is provided a subsidy by the government while Tashi Air does not receive any, the minister said.
The minister added that Yonphula domestic airport is also currently under repair. The airport is scheduled to be completed by October this year.
It was also pointed out that a helicopter service is now available in the country.
“Considering the above factors, the government has decided to grant a grace period of three years,” lyonpo said.
The grace period began from March 8, this year.
This means Tashi Air will have to resume domestic operations only by March 2019.
As it was initially required to resume domestic services by October 2014, the private airline now will have received a total of seven years grace.
The airline suspended domestic services in 2012.
The latest decision comes following the prime minister’s instructions to the information and communications ministry during its midterm review last month to submit its recommendations on the issue.
The airline, which was supposed to resume domestic operations this month, had re-appealed to the government and reiterated that the domestic market is too small for two airlines. It also pointed out that having it operate one more loss making business, in addition to its international services which are still in the red, would risk the entire business shutting down.
The Cabinet had already turned down the airline’s requests twice before.
In response to its first appeal made in 2014, the government in March 2015 decided that Tashi Air would still have to resume domestic services despite admitting that the market is not large enough for two airlines.
Another appeal was submitted and the government decided again that the original contract had to be respected on legal grounds. The government instructed Tashi Air to resume domestic operations by this month.
Both the CEOs of Tashi Air and Drukair declined to comment as official word had not been received.
However, Drukair had earlier argued that even though the domestic market is too small for two airlines, Tashi Air should be required to operate domestically. It reasoned that despite the international market being too small for two airlines, Tashi Air was allowed by the government to launch international services on grounds that competition would help.
Gyalsten K Dorji
An earlier version of the this story stated that Tashi Air would be resuming domestic air services in 2018. Tashi Air will be resuming domestic air services only in 2019. The error is regretted.