The impact of the airfare subsidy on tourists since its launch

Since the launch of the airfare subsidy in December 2024, a total of 4,236 the Sustainable Development Fee (SDF) -paying tourists have taken advantage of the initiative.

The subsidy was launched as a strategic investment to support Bhutan’s tourism sector, especially during the lean travel months of December, January, February, June, July, and August.

The initiative is being implemented by the Department of Tourism (DoTr) in collaboration with the airlines and the Department of Immigration. It aims to make airfare more affordable for international tourists who pay SDF, helping to attract more visitors during off-peak periods.

This is because one of the main complaints of tourists and tour operators has been the high airfare.

DoTr has promoted the subsidy through various channels, including public relations and sales representative agencies, local tour operators and hoteliers, international partners, social media, digital platforms, tourism roadshows and fairs, and through the airlines themselves.

Earlier, the Minister of Finance, Lekey Dorji, highlighted that Bhutan’s internal revenue-to-GDP ratio stood at less than 14% in 2023, the lowest among Asia-Pacific countries.

However, Lyonpo Lekey Dorji explained that the airfare subsidy is a strategic initiative with long-term benefits. These include boosting domestic revenue, improving foreign exchange reserves, creating employment in the tourism sector, and increasing tourist arrivals during the lean season.

Lyonpo described the subsidy as a potential tipping point for sustainable tourism growth in Bhutan and clarified that the subsidy is not provided to airlines. Instead, it is a targeted support mechanism to reduce airfare costs for SDF-paying tourists.

So far, Nu 49.5 million (mn) has been allocated for the airfare subsidy, out of the total Nu 92 mn allocated budget. DoTr stated that it is currently focused on observing uptake and understanding traveler behavior as Bhutan approaches the peak travel period.

While it is still too early to determine the long-term direction of the initiative, the department is monitoring its impact closely. The hope is that the data collected during this period will help inform future strategies to strengthen Bhutan’s tourism sector in a sustainable way.

While Bhutan’s airfare maybe high it’s two airlines are in a catch 22 situation. The higher cost of operating at a high altitude with less load capacity and also lesser passengers prevents them from playing the volumes game of bigger airlines. It thus ends of charging more per passenger sometimes just to not make a loss.

Tour operators suggest that the two airlines must come up with a way to get greater numbers so that the cost per head comes down, otherwise it will lose passengers, including local Bhutanese to the Bagdora airport in Siliguri.