Tashi Air

Domestic Air ServiceSix months after domestic air services were launched, Bhutan Airlines has asked the government that it be allowed to temporarily suspend domestic operations, it has been learned.

It has also been learned the government is considering the request, and it’s likely a one-year suspension will be given, but this could not be officially confirmed.

The most likely causes behind the private airline’s request are its mounting financial losses, given the low domestic traffic volume, which has been aggravated by the current Indian rupee shortage.

Financial losses are also hindering its process to lease a second aircraft, a larger airbus jet that would be used for its international operations.  It has been learned that the airline was not able to acquire a USD 4.5M loan from a local bank, given the current economic situation.

The private airline’s CEO, David Young, chose not comment on the issue at this time, but did point out that the airline is “very close” to a deal.

It is likely that Bhutan Airlines has requested the suspension of domestic operations, until it is able to bring in its airbus jet, commence international operations, therefore allowing it to subsidise its domestic flights, observers say.  But this scenario could not be verified with Bhutan Airlines.

When the government re-floated a revised request for proposals (RFP) in July 2010, it included a new option of international operations to subsidise domestic services.  The other choice was only domestic operations, but with significant government incentives included.  Bhutan Airlines, which was then Tashi Air, chose the former.

But in a surprise move to all involved, the government ended up choosing two airlines to fly domestically, instead of one, on the basis of ensuring competition and maintaining service standards.  Concerns were also raised whether two airlines would be able to sustain in an untested market.

Both national airline Drukair, and Bhutan Airlines, have been operating at a loss since operations began in December 2011, but all parties involved are optimistic of future demand picking up.

Drukair CEO, Tandin Jamso, said the national airline would not oppose Bhutan Airlines’ request to temporarily suspend domestic services, given the current lower domestic demand and financial losses.  However, he said, once the private airline’s international operations begin, it should be ensured that its domestic services re-commence at the same time, regardless of the market situation at the time.

He said that, if this is not ensured, then the revised RFP would have been pointless, and it would be unfair to other bidders, who had chosen the domestic option.

Tandin Jamso said Drukair would not seek any similar type of temporary consideration, or even compensation from the government, and the airline will maintain its domestic schedule for the convenience of passengers and tour operators. However, he said, that any added assistance from the government would be “welcome”.