Druk Air & Bhutan Airlines

Bhutan Airlines and Druk Air struggle with Nu 1.8 bn in losses

The Coronavirus has left many business entities in shambles all across the world and the air transportation business is no exception. With the measly number of clients, the two airlines in Bhutan are struggling to meet the daily operational costs let alone make a profit.

Bhutan Airlines

After the onset of pandemic from March last year, the Bhutan Airlines incurred losses amounting to Nu.487 million in 2020 and a total of more than 1 Billion as of today. Being a private business, the aircrafts in Bhutan airlines are on lease and subject to monthly payments for the use of the asset, not to mention the expenditure incurred for sustaining the engineering teams, flight operations team, pilots/co-pilots, transportation security, managers, airport and avionics mechanics, etc. are tantamount to costs incurred in just keeping the aircrafts in good shape. 

“We have lost half of our staff as of now. Some have resigned and others are laid off and some others have been assigned to work in other sister companies (subsidiary companies) owned by the Tashi Group, which leaves us with 92 staffs still currently working, “said Ugyen Tenzin, the General Manager Commercial of Bhutan Airlines.

Ugyen also said that in order to cover the losses, it’s going to take a ‘long long time’, and unless the Government intervenes, the situation of the Tashi Airlines looks very grim. He said the staff of Tashi Airlines have their hands full from trying to meet the daily operational costs, forget about covering such huge losses.

It has been learnt that after the pandemic, the Bhutan Airlines stopped transporting any passengers and now it only transships imported goods and cargos especially from Bangkok and Nepal. The cargo consists mostly of imported goods like garments, clothes, shopping items, materials etc and the clients are mostly businessmen, shopkeepers and DHL. The Bhutan Airlines are only barely able to cover the maintenance and operational costs from cargo delivery and there is stiff competition with the ferry/ship which delivers goods at cheaper rates, forcing Bhutan Airlines to reduce delivery charge from 180 Thai Baht to around 120 Thai Baht per unit of commodity.

“As of now it is pretty frustrating that there is nothing we can do right now except wait by occasionally delivering cargos and hope things get better when the pandemic completely settles down and tourism fully operates like pre-pandemic times. Each day the liability keeps accumulating from scheduled maintenances, keeping flight engineers and specialists ready at all times and giving salary to employees as well as paying lease using the rental aircrafts and increasing fuel prices,” Ugyen added.

Bhutan Airlines was doing pretty well during the pre-pandemic times. In the view of the pandemic, the Government has deferred the loan payment of Tashi Airlines.

Druk Air

Druk Air has been hardest hit among the DHI companies with its main source of revenue completely cut off. With its drop of passengers from 249,474 in 2019 to 39,870 in 2020 consisting mostly of Bhutanese returning home, the company suffered a loss of Nu 814.4 million. While the number of flights operated also reduced significantly, the scheduled maintenance, which constituted the main part of expenditure, continues to be conducted.  From a Projected revenue of Nu.5.7 billion, Druk Air in 2020 only made 1.4 in total revenue.

“We faced serious reduction in the number of Passengers directly affecting the Druk Air revenue, “said Tandi Wangchuk, Chief Executive Officer of Druk Air.” On the other side there were several additional charges the airports globally levied in the view of pandemic. Druk Air as the national flag carrier had no option but to continue operations at minimal revenue and increased operating cost scenario. Besides as most of the airports banned operations, it was a challenge to get the aeronautical approvals done especially when operating the repatriation flights.

While Druk air had not laid off any of its employees, since the pandemic has put the sustainability of the company at stake, the pilots and licensed engineers volunteered to take a pay cut of 25% on their gross salary.  “This came as a huge relief to the financial strain on the company,” Tandi added.

Not to be left far behind, the other employees volunteered to take 15% pay cut also and the board of directors decided not to take any board sitting fees. Also, almost all station managers posted outside have been recalled as most stations do not have flight operations. This, all together, has translated to saving the company Nu. 5.8 million every month. Furthermore, all expatriate Airbus captains have been relieved. This has further saved the company Nu. 8.11 million monthly. Besides that, selective allowances have been discontinued while deferring payment of leave encashment. For inland travel, pooling vehicle is recommended and incentives provided for those taking leave without pay and extraordinary leave.

When asked about the current situation of Druk Air, Tandi Wangchuk answered,” The situation has not yet improved. While Druk Air is continuing operations to ensure its mandate of connecting Bhutan to the world, it is covering its major operating cost from loan. Druk air has been borrowing from DHI and BOB to pay salary to its employees, and although the Government and other agencies have been incredibly supportive, Druk Air is still financially challenged and stressed. Druk Gyalpo’s Relief Kidu on loan interest payment has helped reduce our expenses by Nu.134 million.” There was also a waiver of rental, parking, navigation fee at the Paro International airport that amounted to a saving of 5 million for the year 2020.

On the international sector, Druk air is currently operating twice weekly flights to Bangkok, and once weekly to Delhi and Kolkata on the bubble flight arrangement with Government of India. Domestic flights are under normal operations except Gelephu.

 Regarding the future plans, the CEO said that nothing can be ascertained at this juncture considering the pandemic. However, on a very positive note, Drukair plans to increase flights to its major sectors gradually with up to 3.5 flights to Bangkok, 3 flights to Delhi, 2.5 flights to Kathmandu by the end of 2022. Cargo is one area where Drukair is earning some revenue operating twice weekly flights to Bangkok and few cargo charters to Kathmandu. As per the current operating trend, most of the travelers are students and Bhutanese working abroad.

The Druk Air has taken COVID protocols very seriously. Since the outbreak of COVID-19, Airbus issued a bulletin to use AMS 1453 disinfectant on aircrafts (Airbus and ATR). Taking this one step ahead, Drukair cleans all aircraft with Lizol disinfectant cleaner and then disinfects it with AMS 1453 disinfectant after every chartered relief flight. This is above and beyond the requirements of any health authority worldwide. Various other SOPs are also strictly followed said the Druk Air management.

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