Royal Monetary Authority Act of Bhutan, 2010eng5th

Annual Report 2019
Drukair Corporation Limited
www.drukair.com.bt
Annual Report 2019
THE YEAR IN REVIEW

I would like to take this opportunity to reflect on where Drukair has been in the last one
year and challenges ahead for this year. Before I do so, I would like to thank the Board for
its constant guidance and support to meet the financial and physical targets set for the year.
I also would like to thank the Pilots, Cabin Crew, Field Engineers, Quality Managers, Traffic
Controllers, Ground Operators and all the back end staff for ensuring that our flights are the
safest despite very strenuous operating environments.
The highlights of the operations for the year were that, Drukair operated a total of 5,188
flights. The total number of passengers carried has increased to 285,911 from 285,397 car-
ried in FY2018, consequently, achieving a load factor of 72.5% for 2019.
On the Financial performance, Drukair achieved the milestone of crossing over the Nu.4
billion revenue mark in FY2019. The overall income for the year, increased by 10.32%, to
Nu. 4,353.09 million from Nu. 3,945.74 million in FY2018. The increase is mainly attribut-
able to Nu. 436.30 million increase in passenger revenue (12.86% increase from FY2018) and
Nu. 22.48 million increase in chartered revenue (23.70% increase from FY2018).
Drukair retained 67% market share on the four competitive routes of Bangkok, Delhi, Kath-
mandu and Kolkata and maintained on time performance of 99.6% compared with 98.9%
of FY 2018.
Drukair achieved a Customer Satisfaction Index (CSI) of 4.01 out of 5 for 2019.
The audited accounts for 2019 had no qualifications and fulfilled all statutory requirements.
The Company has complied to all the minimum audit requirements mentioned in the Com-
panies Act 2016.
In 2019 Drukair replaced the aging ATR 42-500 with a new state-of-art ATR 42-600. The
aircraft joined on 26th October 2019.
Drukair in 2019 crossed the equator by operating long term bi-weekly chartered flight to
East Timor.
Now, looking back at 2019, of the many Corporate Social Responsibility (CSR) the Company
takes pride in the continuous initiation of Trongsa Penlop Inspire Program in FY2019 where
Drukair fully sponsored excursion tour to Thailand to 44 students selected across the coun-
try. The ultimate goal of this project was to inspire the students to strive and reach for new
heights through academic and personnel excellence. The program was first initiated in 2018.
The dedication and hard-work of the employees were appreciated and the employees re-
ceived two months of bonus and PBVA (Performance based Variance payout) of 13.52%
for the year.
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Annual Report 2019
I would like to thank the Board and DHI and congratulate the staff for the achievement.
2020 brings in its own challenges as we are targeting crossing Nu. 5.5 billion revenue mark.
This will be a historic land mark as we cross the 5 billion mark for the first time. The uncer-
tainty of government policy on regional tourism and Timely Air Service Agreements with
nations where we are planning to operate are the main challenges.
I count on each employee to deliver more efficiently and we shall put in our best efforts to
overcome the challenges ahead.
Once more, on behalf of the management of Drukair, I would like to express our sincere
gratitude to the Board and DHI for their unconditional support at all times. We would like to
put on record the management’s appreciation to the customers for their loyalty and support
to the Drukair.
I would also like to thank all the employees for the excellent safety record. I hope each of
you will carry on with the same vigilance and dedication to provide uncompromising safety,
standard and services to all our valued customers. May I also remind you of His Majesty’s
command to Drukair to always remember the three Ss: Safety, Standard and Service. To us
“Safety & Standard” should always remain the top most priority.
Tashi Delek
Tandi Wangchuk
Chief Executive Officer
ii
CONTENTS
1. Company Profile............................................1
2. Board Directors..............................................3
3. Management team......................................5
4. Directors’ Report............................................7
5. Corporate Governance Report................. 13
6. Independent Auditors’ Report...................18

Annual Report 2019
COMPANY PROFILE
Drukair is a Royal Government of Bhutan Owned Airline run by the Investment Wing,
Druk Holding & Investments Ltd. The national Airline of the Kingdom of Bhutan operates
a scheduled network within the South Asian region from its Head Quarter at Paro, a
picturesque Valley in Western Bhutan.
The national airline was conceived through a Royal Proclamation on April 5, 1981. Drukair
began commercial operations on February 11, 1983, from Paro, a 65 km drive away from
the capital, Thimphu. At the time, Paro had a little airstrip servicing helicopter operations.
Drukair began humbly with an 18-seat Dornier 228-200 that made its historic touch down
at Paro airport on January 14, 1983, to the chant of inauguration prayers, cymbals, conches
and the like, with maroon-clad monks blessing the occasion and the plane. The first link
was Kolkata, followed by eight destinations in South Asia. As more and more people took
to the skies, not just to connect but also to enjoy perhaps the most breath-taking view of
the Himalayan range, including Mt. Everest, Mt. Kanchenjunga and the highest unclimbed
mountains in Bhutan itself. Another Dornier was added to meet the increasing demand.
Drukair upgraded its fleet to BAe 146 on November, 1988, when the first jet plane touched
down at Paro with the same traditional fanfare and weeks later the second BAe 146 joined.
Drukair now operates with Airbus A319 for it’s international destinations and an ATR for
it’s domestic and regional destinations. Recently Drukair has signed purchase agreement for
the A320 NEO and an ATR-42-600. The ATR has joined the existing fleet on 26th October
2019 and the A320 NEO will join in Q1 of 2020. All the pilots, maintenance crew and
engineers are trained at the best institutes abroad.
At the end of 2019, Drukair has a fleet of four aircrafts consisting of three Airbus A319s and
one ATR-42-600 operating in 10 international airports in six countries (Bhutan, Bangladesh,
India, Nepal, Thailand and Singapore) and four domestic airports with a total Staff strength
of 509 employees.
Mission: Drukair, as a National Airline shall provide safe and reliable air transport
services, be competitive and meet the growing demands, and consistently
meet customer expectation with excellence in service
Vision: To be the leading airline connecting Bhutan and the world
Core Values: Safety, Standard, Service Excellence, Integrity, Team Work and Open Door
Culture
Slogan: On the wings of the dragon
Destinations: 10 International & 3 Domestic destinations with Paro International Airport

as its hub.
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Annual Report 2019
ORGANIZATION CHART
Board of Directors
Board Audit Committee
Chief Executive Officer Legal / Company Secretary

Internal Audit
Corporate Support Services
Corporate Planning
Airline Safety
Airline Quality
Director Director
Country Managers / Director
Finance and Corporate Commercial and Ground
Station Managers Technical Services
Services Operations
Head - Flight Head -

Head - Corporate
GM / CFO Operations & Crew Engineering &
Services
Training Maintenance
Head - Catering and Head - Ground

Head - Commercial
In-flight Duty Free Operations
Drukair Holidays
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Annual Report 2019
BOARD OF DIRECTORS
CHAIRMAN BOARD DIRECTOR BOARD DIRECTOR

Mr. Pema Chewang Mr. Sonam Phuntsho Mr. Passang Dorji
Wangdi
Secretary Chief Executive Officer
National Land Secretary Dawa Hospitality Pvt. Ltd
Commission National Environment
Commission Mr. Passang Dorji is the Chief
Mr. Pema Chewang is the Executive Officer of Dawa
Secretary of National Land Mr. Sonam Phuntsho Wangdi Hospitality Pvt. Ltd.
Commission. is the Secretary of National
Environment Commission. He has over 17 years of work
He has 28 years of experience. He has a Bachelor’s
work experience. He He has more than 33 years degree in Civil engineering
received his master in of work experience with from Thammasat University,
Development Economics the Royal Government of Thailand and a MBA from
from Australian National Bhutan. He received his Asian Institute of Management,
University,Canberra,Australia Master of International Law Philippines.
and Bachelor of Arts Degree and Economics from World
from Sherubtse College. Trade Institute, University of
Bern, Switzerland. He received
his Bachelor of Commerce
(Honors) from University of
Delhi, India.
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Annual Report 2019
BOARD OF DIRECTORS
BoarDDirector BOARD DIRECTOR BOARD DIRECTOR BOARD DIRECTOR

Mr. Kuenga Mrs. Kunzang Mr. Dorji Nima Mr. Tandi
Namgay Lhamu Wangchuk
Associate Director
Chief Executive Director of at Druk Holding Chief Executive
Officer of National and Investments Officer
State Trading Commission for (DHI) Drukair
Corporation Women and Corporation
Children (NCWC). Mr. Dorji Nima is an Limited
Mr. Kuenga Namgay Associate Director
is the Chief Executive Mrs. Kunzang Lhamu at Druk Holding and Mr. Tandi Wangchuk
Officer of State is the Director of Investments (DHI). is the Chief Executive
Trading Corporation National Commission Officer of Drukair
of Bhutan. for Women and He looks after the Corporation Limited.
Children (NCWC). performance planning,
He has over 28 years monitoring and He has more than 30
of work experience. With 26 years of evaluation for the DHI years of work experi-
He has a Bachelor’s work experience she Group. He has over 16 ence. He received his
degree in Mechanical now works in the area years of professional M.Sc. in Operational
Engineering from of gender equality work experience. Telecommunica-
Aligarh Muslim and promoting and He has a Masters tion from Coventry
University, India and protecting the rights of degree in Business University, Midlands,
a Master’s degree women and children. Administration (MBA) England, UK and
in Mechanical She has Master’s from Australian B.Sc. in EEE from
Engineering from degree in Public Graduate School of Bangladesh University
Toyohashi University Policy from the Lee Entrepreneurship, of Engineering and
of Technology, Japan. Kuan Yew School Melbourne, Australia. Technology (BUET),
of Public Policy, He received his Dhaka, Bangladesh.
National University of Bachelor of Business
Singapore. Administration
degree from Madras
University, India.
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Annual Report 2019
MANAGEMENT TEAM
Left to right: Namgay Wangchuk, Tandi Wangchuk, Karma P. Wangdi and Rinzin Dorji
Mr. Rinzin Dorji, Mr. Namgay Mr. Karma Phuntsho

Director, Wangchuk Wangdi,
Department of Finance Director, Director,
and Corporate Services Department of Department of Technical
Commercial and Ground Services
Operations
Mr. Rinzin Dorji is the Director Mr. Karma Phuntsho Wangdi
of Finance and Corporate Mr. Namgay Wangchuk is the is the Director of Technical
Services Department. He Director of Commercial and Services Department. He
received his Bachelor of Ground Operations Depart- received his Bachelor of
Commerce from Meerut ment. He received his Bachelor Arts from Sherubtse College,
University, India. He served of Arts from Sherubtse College, Bhutan. He served Drukair for
Drukair for over 27 years. Bhutan. He served Drukair for over 26 years.
31 years.
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Annual Report 2019
DIRECTORS’ REPORT
Introduction
On behalf of the Drukair Board and the Management, I extend a warm welcome to all
participants to the 29th Annual General Meeting (AGM) of Drukair Corporation Limited.
Dear Shareholder,
The Board is pleased to report the company’s performance for the period January 1, 2019 to
December 31, 2019.
1. Operational highlights
In 2019, Drukair operated with the existing fleet of three A319 and one ATR 42-500
planes and served 10 international and four domestic stations.
Drukair operated a total of 5,188 flights, a decrease of about 2% from 5,271 flights
operated in FY2018. The total number of passengers carried however, has increased
by about 0.2%, to 285,911 passengers from 285,397 passengers carried in FY2018,
consequently, achieving a load factor of 72.5% for 2019. Drukair ferried 209.528
Metric Tons (MT) of cargo, 113.050 MT of mail and 32.093 MT of excess baggage
in 2019.
In FY2019, Drukair retained 67% market share on the four competitive routes of
Bangkok, Delhi, Kathmandu and Kolkata and maintained on time performance of
99.6% compared with 98.9% of FY 2018.
In 2019 Drukair achieved a historic milestone when it crossed the equator for the first
time. On October 31st 2019, Drukair started charter operations to Dili in East Timor,
with 2 flights a week operated from Singapore to Dili.
2. Financial highlights
2.1. Total asset and liability
The total non-current asset of the company increased by 39.49%, to Nu.

5,508.29 million, from Nu. 3,948.77 million in FY2018. It was mainly on account
of purchase of ATR 42-600 under the ‘property, plant and equipment’ which
was delivered to Drukair on 22nd October 2019.
However, despite the capital advance paid towards A320 Neo and balance pay-
ment for ATR 42-600 in 2019, the ‘cash and cash equivalents’ is maintained at
696 million from Nu. 640.08 million in FY2019. For the purchase of these air-
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Annual Report 2019
crafts the company has taken loan from NPPF and SAARC Development Fund
in 2019.
Consequently, the company’s total asset increased by 34%, to Nu. 8,551.91 mil-
lion from Nu. 6,381.79 million in FY2018.
The net worth increased by 22.64%, which was due to transfer of profits for the
year. The non current liabilities, however, increased by 92.69%, to Nu. 2,775.81
million from Nu. 1,430.17 million in FY2018 mainly due to the loan taken from
NPPF and SDF for the purchase of A320 Neo and ATR 42-600.
2.2. Income
The Board would like to report that the airline operated the entire 2019 financial
year with an increased airfare of 7.5%, which was introduced in beginning of
FY2019.
Drukair achieved the milestone of crossing over the Nu.4 billion revenue mark
in FY2019. The overall income for the year, increased by 10.32%, to Nu. 4,353.09
million from Nu. 3,945.74 million in FY2018. The increase is mainly attribut-
able to Nu. 436.30 million increase in passenger revenue (12.86% increase from
FY2018) and Nu. 22.48 million increase in chartered revenue (23.70% increase
from FY2018).
2.3. Expenditure
The expenditures increased marginally by 4.38%, to Nu. 3,845.04 million from

Nu. 3,603.85 million in FY2018. The increase is mainly attributable to Nu. 140.03
million increase in ‘aircraft maintenance’ (39.77% increase from FY2018) and in-
crease in “employee cost” by Nu.70.68 million (14.64% increase from FY2018).
2.4. Profitability of the company
Considering an increase in the revenue and a marginal increase in the cost, the
Profit After Tax (PAT) increased by 115.19%, to Nu. 343.04 million from Nu.
159.41 million in FY2018.
2.5. Dividend
In order to take forward its mandates, Drukair is making investments in Air-

bus A320 NEO. For the purpose, the airline has already made capital advances
worth Nu. 1,520.97 million during the year as commitment fees and pre-delivery
payments (PDPs), which eventually decreased the cash position of the compa-
ny over the years. As there are further requirements for final payment of A320
NEO in FY2020 upon the delivery of the aircraft in March 2020, no proposal
for dividend is being made for the FY2019.
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Annual Report 2019
3. Customer Care
In order to cut down lengthy procedures and allow for a smoother and efficient com-
plaint handling in regards to damaged baggage, the management handed over the au-
thority to Station Managers (USD 30 for the repair of any repairable damage and USD
80 for baggage damaged beyond repair).
Drukair revised denied boarding policy. The denied passenger will be rescheduled on
the next Drukair flight or on any other possible airline within two nights. A monetary
compensation of USD 100 for domestic and USD 300 for international and also Dru-
kair shall arrange Hotel accommodation up to two nights.
Drukair in 2019 crossed the equator by operating long time twice a week chartered
flight to East Timor.
Drukair managed a customer satisfaction index (CSI) of 4.01 out of 5 for 2019. Dru-
kair also started with the Business process reengineering for the efficient service to our
customers.
4. Fleet Management
In 2019 Drukair replaced the aging ATR 42-500 with a new state-of-art ATR 42-600.
The aircraft joined on 26th October 2019.
Drukair has also done many route studies in order to optimize the utilization of its
aircrafts.
Drukair managed 6.57 hours of daily Airbus utilization and 3.55 hours of daily ATR
utilization.
The on time performance for the year is 99.6%.
5. HR and other systems

Drukair believes that the strength of the company lies in its employees. Thus, human
capital has always been the priority of the company. With the increase in number of
flights and passengers, Drukair recruited 64 employees, including replacement, addi-
tional staff and temporary staff in FY2019. Drukair’s employee strength as at 31 De-
cember 2019 stood at 509, which included temporary and daily wage staff.
Drukair started to prepare for mitigation of Disaster Risk whereby prepared a Disaster
Management and Contingency Plan in 2019 as mandated by the Disaster Management
Act of Bhutan 2013, Chapter 6 “Agency and Private Sector.”
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Annual Report 2019
Drukair introduced internal frame work to address Gender related issues at work place.
The internal framework includes a mechanism for addressing sexual harassment at the
workplace and also promotes a gender friendly work environment, which includes
ensuring women’s representation in decision making forums.
Drukair introduced work-study program for staff and will be sponsoring two employ-
ees for masters’ program at RIM hereafter.
Drukair, celebrated its first Drukair Day on 5th April 2019 and awards for Best Em-
ployee, Honorarium and certificate of Merit were given to the staffs.
Health and Safety Committee of Drukair was formed and registered with Department
of Labor (MoLHR).
Drukair also streamed line the procedures for Staff Welfare Fund (SWF) semso.
The pay and remunerations for the employees were revised with effect from 1st Oc-
tober 2019.
6. Corporate Governance
The Company complied with the CG Code issued by DHI. The Company’s Board
had seven Board meetings, nine Audit Committee meetings and five Human Resource
Committee meetings.
The quorum at each of these meetings were duly met. Further, the gap between two
meetings did not exceed three months in accordance with the Companies Act of Bhu-
tan, 2016.
At the end of 2019, the Drukair Board consisted of seven Directors including the
Chairman and the CEO. Mr. Pema Chewang, Secretary National Land Commission
was appointed as the Chairman. Mr. Sonam Phuntsho Wangdi Secretary National
Environment Commission, Mr. Kunga Namgay CEO, State Trading Corporation of
Bhutan, Mrs. Kunzang Lhamu Director, National Commission for Women & Chil-
dren, Mr. Dorji Nima, Associate Director, CPD, DHI and Mr. Passang Dorji, CEO
Dawa Hospitality Pvt. Ltd were reappointed and continued their directorship.
The first quarter risk management meeting was held on 27th March 2019 to update
the DCL Risk Register and Risk Treatment Action Plan (RTAP) and the final risk
management meeting was held on 23rd October 2019 for final review of compliance
to mitigation measures.
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Annual Report 2019
7. Corporate Social Responsibility

As a socially responsible company, Drukair attaches high priority in transparency,
providing right & timely information and to social wellbeing. The Corporate Social
Responsibility (CSR) of the Company is guided by the Company Guidelines on Cor-
porate Social Responsibility 2013 issued by DHI. The company ensures to implement
meaningful and sustainable CSR activities, including financial contributions and sup-
port towards the benefits of communities.
The Company has contributed its share for CSR activities as agreed and decided by
DHI for the year 2019. The Company as usual carried out rimdos at all four domestic
airports for the benefit and safety of all the employees and passengers.
Of many CSR initiatives taken by Drukair as mentioned above, the Company takes
pride in the continuous initiation of Trongsa Penlop Inspire Program in FY2019 where
Drukair fully sponsored excursion tour to Thailand to 44 students selected across the
country. The ultimate goal of this project was to inspire the students to strive and
reach for new heights through academic and personnel excellence. The program was
first initiated in 2018.
8. Statutory Audit Report

M/s. Ray & Ray was appointed by Royal Audit Authority, as the Statutory Auditor for
Drukair. For 2018 and continued for 2019, the auditors have issued unqualified audit
report. The auditors have also reported that Drukair has complied with all the require-
ments of the Companies Act of Bhutan, 2016.
9. Acknowledgments
I, as the Chairman, would like to express gratitude for the continued support and guid-
ance from the DHI, Ministry of Finance, Ministry of Economic Affairs, Ministry of
Information and Communications, Bhutan Civil Aviation Authority, Department of
Air Transport, Royal Audit Authority and other government agencies.
The Board would like to thank Drukair management and employees for their dedi-
cated hard work in improving the performance of the company. Finally, the company
would like to thank all the customers for their loyalty and support to Drukair.
Thank you,
For and on behalf of the Board,
[Pema Chewang]
CHAIRMAN
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Annual Report 2019
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Annual Report 2019
CORPORATE
GOVERNANCE REPORT
The Company complied with the Companies Act of Bhutan 2016 and the DHI CG code.
Seven Board Meetings were held in 2019 and the gap between two meetings did not exceed
three months in accordance with the Companies Act of Bhutan 2016.
Board Committees
Nine Board Audit Committee meetings and Five Board HR Committee meetings were also
convened in 2019 to deliberate issues confronting the company.
CEO and Board Remuneration

As in the previous year, the Board Directors received a fixed amount of money as sitting
fee. As such, the remuneration is not based on commission or a percentage of profits or
turnover.
Each Director is paid a sitting fee of Nu. 8,000(eight thousand) and Nu. 4,000 (four thousand)
per sitting for every board meeting and board committee meeting respectively.
The remuneration and benefits paid to the Chief Executive Officer (CEO) in FY 2019 was
Nu. 2,878,670.00 and ID ticket as per contract and the remuneration and other benefits paid
to the Directors in FY 2019 was Nu. 528,000.00 and ID tickets as per rule.
Annual General Meeting

The 28th Drukair Annual General Meeting(AGM) was held on 16 April 2019 at Drukair
Customer Service Office, Thimphu. No dividend was declared by the Company for the
financial year 2018.
The AGM decided as followings:
1. THAT the borrowing of USD 37,375,922 from NPPF for the purchase of A320
Neo and borrowing of USD 13.160 million from SDF for the purchase of ATR 42-
600 are ratified.
2. THAT the appointment of Messrs. Ray & Ray, Chartered Accountants as Statutory
Auditor of Drukair for the year 2018 as recommended by Royal Audit Authority and
the fees and out of pocket expenses paid to them are endorsed.
13
Annual Report 2019
3. THAT all the Board Directors except for CEO were retired and reappointed.
4. THAT reappointment of Mr. Tandi Wangchuk as the CEO of Drukair for the term
of three years w.e.f. 1st January 2019 and his remuneration package as fixed by DHI
Board is endorsed.
5. THAT the payment of the remuneration of the Chief Executive Officer and
Directors was approved and endorsed.
Risk Management Systems

The Board also takes responsibility to identify, isolate and manage significant risks within the
Company’s business environment.
A Risk Management Framework based on the Enterprise Risk Management principles has
been issued by DHI to ensure that Risks related to the activities undertaken by the portfolio
companies are managed deliberately and effectively through a properly established process
of assessment, resource allocation, review and reporting.
Report of compliance of mitigation measures and Updated Risk Register to the board and
DHI is being done half yearly or as per the DHI DCL Compact/TAS document, whichever
comes earlier. However, if a risk has an extreme financial or reputation impact it should be
raised immediately at the board level for further action.
As of 2019, 30 risks are still registered in the risk register with no risk at ‘Major’ impact level.
However, ‘fuel price volatility’ still retains the highest ‘risk rating’ at 9.
Concerning Safety and Risks, as of 2019, DCL has four different systems namely, Risk
Management System- implemented in 2014, Safety Management System- implemented in
2018, Occupational Health and Safety- implemented in 2Q 2019 and Disaster Management
and Contingency Plan-implemented in 3Q 2019. The four systems have minor differences
in terms of application and compliances, but they are there for one specific purpose which
is to prevent/mitigate risks and ensure the safety of the organization and its stakeholders.
Therefore, many hazards and risks identified in these four different systems overlap each
other and creates discrepancies with compliance. DCL is planning to carefully integrate these
four systems together for smooth and efficient compliance and execution.
Corporate Social Responsibility

In line with the DHI Corporate Social Responsibility (CSR) Guideline-2013, the company
ensures to implement meaningful and sustainable CSR activities, including financial
contributions and management actions towards the benefits of communities.
14
Annual Report 2019
The Company has contributed its share for CSR activities as agreed and decided by DHI for
the year 2019. The Company as usual carried out rimdos at all four domestic airports for the
benefit and safety of all the employees and passengers.
Drukair successfully carried out the second Trongsa Penlop Inspire program in 2019. Trongsa
Penlop Inspire Program, an educational outreach program was initiated in 2018 as our main
Corporate Social Responsibility (CSR) program.
Policies and Practices of CEO and Board Evaluation

The evaluation of Board Directors and CEO have been carried out for the financial year
2019 as per the existing policies and practices of DHI and DHI owned companies.
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Annual Report 2019
16
Annual Report 2019
17
Annual Report 2019
INDEPENDENT
AUDITORS’ REPORT
To the Shareholders of Drukair Corporation Limited
Opinion
We have audited the accompanying financial statements of Drukair Corporation Limited
(hereinafter referred to as the Company), which comprise the Statement of Financial Po-
sition as at 31 December 2019, the Statement of Comprehensive Income, Statement of
Changes in Equity and Statement of Cash Flows for the year then ended, and notes to the
financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects,
the financial position of Drukair Corporation Limited as at 31 December 2019 and its finan-
cial performance and its cash flows for the year then ended in accordance with Bhutanese
Accounting Standards (BAS).
Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities
for the Audit of the Financial Statements paragraph of our report. We are independent of
the Company in accordance with the International Ethics Standards Board for Accountants’
Code of Ethics for Professional Accountants (IESBA Code) together with the ethical re-
quirements that are relevant to our audit of the financial statements and we have fulfilled our
other ethical responsibilities in accordance with these requirements and the IESBA Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most sig-
nificance in our audit of the financial statements of the Company for the current year.
These matters were addressed in the context of our audit of the financial statements of the
Company as a whole in forming our opinion thereon, and in our opinion, there are no such
matters to report.
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Annual Report 2019
Emphasis of Matters
Attention is drawn to the Note No 20.1 to the Financial Statements which states about the
management decision to carry forward the net input credit of Rs. 17,930,064.47 as at 31
December, 2019 against future payables as the Government of India has not yet issued any
circular for discontinuance of such credit available.
Our opinion is not modified in respect of above mentioned matter.
Responsibilities of Management and Those charged with Gover-

nance for the Financial Statements
Management is responsible for the preparation and fair presentation of this financial state-
ment in accordance with the Bhutanese Accounting Standards (BAS) and for such internal
control as management determines is necessary to enable the preparation of financial state-
ments that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Compa-
ny’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends
to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial re-
porting process.
Auditor’s Responsibilities for the Audit of the Financial

Statements
Our objectives are to obtain responsible assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance
but is not a guarantee that an audit conducted in accordance with the International Standards
on Auditing (ISA) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
Further, we exercised professional judgment and maintained professional skepticism through

the audit and described our responsibilities in Appendix-I attached to this report as per the
requirements of Paragraph 40(b) of the ISA 700.
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Annual Report 2019
Report on Other Legal and Regulatory Requirements

As requirement by section 266 of the Companies Act of Bhutan, 2016, we enclose in the
Appendix-II, a statement on Minimum Audit Examination and Reporting Requirements
matters specified therein to the extent applicable to the Company.
As required by section 265 of the Act, we report that:

a) We have obtained all the information and explanations, which to the best of our
knowledge and belief were necessary for the purpose of our audit;
b) In our opinion proper books of account as required by law have been kept by the
Company in so far as it appears from our examination of the books;
c) The Statement of Financial Position, Statement of Comprehensive Income, Statement

of Change in Equity and the Statement of Cash flow dealt with by this report have
been prepared in accordance with the accounting principles generally accepted and are
in agreement with the books of account
d) On the basis of checking of records and information and explanations given to us,
we are of the opinion that the Company has complied with other legal and regulatory
requirements.
For Ray & Ray

Chartered Accountants
(Firm Registration No 301072)
Amitava Chowdhury
Partner
Membership No.: 056060
UDIN- 20056060AAAAA25656
Kolkata-
Date: 04.06.2020
20
Annual Report 2019
Appendix –I
Appendix to the Independent Auditor’s Report paragraph of the Auditor’s Respon-
sibilities for the Audit of the Financial Statements of Drukair Corporation Limited
for the year ended 31st December, 2019 and as per the requirement of the paragraph
40(b) of ISA 700.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional skepticism through the audit. We also:
a) Identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, design and perform audit procedures responsive to
those risks, and obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion forg-
ery, intentional omissions, misrepresentations, or the override of internal control.
b) Obtain an understanding of internal control relevant to the audit in order to design

audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control.
c) Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by management.
d) Conclude on the appropriateness of management’s use of the going concern basis of

accounting and based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related disclosures in
the financial statements or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of our audi-
tor’s report. However, future events or conditions may cause the Company to cease to
continue as a going concern.
e) Evaluate the overall presentation, structure and content of the financial statements, in-
cluding the disclosures, and whether the financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide those charged with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where ap-
plicable, related safeguards.
21
Annual Report 2019
Appendix- II
Minimum Audit Examination and Reporting Requirement
Appendix referred to in our audit Report of even date on Minimum Audit Examina-
tion and Reporting requirements
As requirement by section 266 of the Companies Act of of Bhutan, 2016 and its en-
abling provisions relating to Clause II of Schedule XIV of the erstwhile Companies Act of
Kingdom of Bhutan, 2000 thereto (the Minimum Audit Examination and Reporting Re-
quirements)and required by the Royal Audit Authority of Bhutan vide its Letter No. RAA(-
SA-10)/CFID/2019/3012 dated 30th October, 2019 and on the basis of such checks as we
considered appropriate and according to the information and explanations given to us, we
report as follows:
1. The Company has maintained proper records showing full particulars including quan-
titative details and situation of fixed assets for Head Quarter and all the stations. The
Management has carried out the physical verification of fixed assets during the year
ended 31 December, 2019 in all locations. According to the information and explana-
tions given to us, no material discrepancies were noticed on physical verification.
2. We have been informed that the fixed assets of the Company have not been revalued
during the year.
3. Physical verifications were conducted at reasonable intervals in respect of inventories

of In flight catering & duty free stocks, stock of tickets, gift stocks, Aircraft mainte-
nance consumables and Uniform Stocks.
4. In our opinion and according to the information and explanations given to us, the
procedure of physical verification of inventories followed by the management are
reasonable and adequate in relation to the size of the Company and the nature of its
business.
management has identified insignificant discrepancies on physical verification of in-
ventory of catering division as compared to the books records, and the same has been
dealt with properly in the books of account.
6. On the basis of examination of valuation of stocks and the information and expla-
nations given to us and in our opinion, the valuation is fair and proper in accordance
with the normally accepted accounting principles. The basis of valuation of inventory
is the same as in the preceding year.
22
Annual Report 2019
7. The Company had taken unsecured loan amounting to Nu 321,000,000.00 from Druk
Holding & Investment Limited, its holding company during the year 2018 and the
same has been converted into equity of the Company during the current year. In our
opinion and on the basis of information and explanations given to us, the rate of in-
terest and other terms and conditions of such loan were not prejudicial to the interest
of the Company. The Company has also taken unsecured interest free loan of Nu
507,160,012.12 from Royal Government of Bhutan in earlier years. The outstanding
balance of such loan as on 31 December 2019 is Nu 118,337,336.16. The Company
had also issued Drukair bonds amounting to Nu 2,163,433,529.33 to National Pension
and Provident Fund (NPPF) in earlier years. Yearend balance of such bonds including
interest accrued is Nu 1,327,692,041.18. Additionally, the Company has also taken
unsecured loans of Nu 585,517,134.73- from NPPF and Nu 942,500,000.00 from
SAARC Development Fund (SDF) during the current year. The yearend balance of
such loans including interest accrued is Nu 622,312,914.06 and Nu 953,324,806.16
respectively. In our opinion and on the basis of information and explanations given
to us, the rate of interest and the other terms and conditions of above loans are not
prejudicial to the interest of the Company.
Company has not granted any loan secured or unsecured to other companies, firms or
other parties and/ or to the companies under the same management. Hence this sub-
clause is not applicable.
9. In our opinion and according to the information and explanations given to us, Com-
pany has not given any loan or advances to any party. Hence this sub-clause is not
applicable.
loans/ advances granted to officers/staff are in keeping with the provisions of service
rules and no excessive / frequent advances are granted and accumulation of large ad-
vances against particular individual is avoided.
Company has established adequate system of internal controls to ensure complete-
ness, accuracy and reliability of accounting records, carrying out the business in and
orderly and efficient manner, to safeguard the assets of the Company as well as to
ensure adherence to the rules /to the rules regulations and system and procedures.
23
Annual Report 2019
12. In our opinion and according to the information and explanations given to us, having
regard to certain exceptions that some of item purchased are of special nature where
suitable alternative sources of supply does not exist for obtaining comparable quota-
tions thereof, there is an adequate system of competitive biddings, commensurate with
the size of the Company and the nature of its business, for the purchase of goods and
services including stores, and plant and machinery, equipment and other assets. As the
company is engaged in providing services, it has no requirement of raw materials.
13. (a) On the basis of checking of books of accounts and relevant records of the
Company, and according to the information and explanations given to us, we
are of the opinion that the Company has not entered into any transaction for
purchases and sale of goods and service made in pursuance of contracts or
arrangements entered into with the director(s) or any other party(ies) related to
the director(s) or with the Company or firms in which the director(s) are direct-
ly or indirectly interested except DHI subsidiaries, the details of which is duly
disclosed in the Related party transactions in notes to accounts to the financial
statements.(refer note No. 36)
(b) The examination of records does not reveal any transaction entered into by the
Company which is prejudicial to the interest of the Company wherein directors
are directly or indirectly interested.
14. In our opinion and according to the information and explanations given to us, there
are no unserviceable or damaged stores, raw materials or finished goods, which have
not been provided for in the books of account. Hence no provision for loss is re-
quired.
Company being a service sector company, maintenance of record as required under
sub-clause 15 is not applicable.
Company being a service sector company, maintenance of records as required under
sub-clause16 is not applicable. However, the Company also runs a catering unit, where
records have been maintained in respect of production.
Company being a service sector company, maintenance of records as required under
sub-clause17 is not applicable.
24
Annual Report 2019
Company is regular in depositing rates and taxes, duties, royalties, provident funds,
and other statutory dues with the appropriate authorities except in the following cases
where delay in deposit of statutory dues were observed:
Name of Nature of Due Amount Month of Due Actual date Delay

Station / deduction date of of payment in No
Division payment of days
Bangkok Withholding Tax THB. 24,675.76 April- 2019 07.05.2019 05.06.2019 29
Gaya TDS Rs.22,375.00 December-2018 07.01.2019 28.02.2019 52
on Professional Rs.54,831.00 Feb-2019 07.03.2019 28.03.2019 21
Fees
Rs.36,943.00 Dec-2019 07.01.2020 Not yet paid
Rs.892.00 Dec-2019 07.01.2020 Not yet paid
TDS on Rs.21,037.00 December-2018 07.01.2019 28.02.2019 52
Rent Rs.32,854.00 Feb-2019 07.03.2019 28.03.2019 21
Rs.41,884.00 Dec-2019 07.01.2020 Not yet paid
Drukair TDS on Rent Nu.746.00 Jan,2019 10.02.2019 10.05.2019 89
Holidays Nu.3,306.00 Feb, 2019 10.03.2019 10.05.2019 61
Nu.236.00 March, 2019 10.04.2019 10.05.2019 30
TDS on Sales Nu.8,899.00 Feb,2019 10.03.2019 10.05.2019 61
Nu.831.00 March, 2019 10.04.2019 10.05.2019 30
Finance & TDS on Nu 1,400.00 March, 2019 10.04.2019 07.06.2019 58
Accounts consultancy
Division, TDS on Hotel Nu 4,500.00 March, 2019 10.04.2019 07.06.2019 58
Paro Bills Nu 768.00 March, 2019 10.04.2019 07.06.2019 58
Nu 91.00 Jan, 2019 10.02.2019 07.06.2019 117
On the basis of checking of books of account and relevant records, we are of the opinion
that provision for corporate tax is adequate and that necessary adjustments have been made
to compute amount of tax required under the Revised Taxation Policy, 1992.
19. On the basis of checking of books of account of the Company, details of undisputed
amounts payable in respect of rates, taxes, duties, royalties, provident funds and other
statutory dues as per the last day of the financial year concerned are as under.
25
Annual Report 2019
Nature of dues Outstanding Amount Amount

amount as on paid not yet paid
31 December subsequently (Nu)
2019 (Nu)
(Nu)
TDS Payable 1,384,022.66 1,384,022.66 Nil
TDS payable on Brokerage 114,422.00 114,422.00 Nil
TDS payable on Contractor 147,850.00 147,850.00 Nil
TDS payable on Professional 493,740.00 455,905.00 37,835.00
TDS payable on rent 150,721.00 108,837.00 41,884.00
Withholding Tax payable 126,765.40 126765.40 Nil
Corporate Income Tax Payable (HO) 170,597,284.38 Nil 170,597,284.38
Corporate Income Tax Payable (Bangkok) 1,497,667.65 Nil 1,497,667.65
Corporate Income Tax Payable (Kathmandu) 3,527,880.25 Nil 3,527,880.25
Corporate Income Tax Payable (Singapore) 37,019.40 Nil 37,019.40
Corporate Income Tax Payable (Dhaka) 932,383.00 Nil 932,383.00
20. According to the information and explanations given to us and on the basis of our test
checking of the accounts and other books and records, to the best of our knowledge,
we are of the opinion that no personal expenses has been charged to the Company
accounts other than those payable under contractual obligation/service rule and/or in
accordance with generally accepted business practice.
21. The Company is a service sector company and therefore, requirement of maintenance
of reasonable system of recording receipts, issues and consumption of materials and
stores and allocating materials consumed to the respective jobs does not arise.
Company prepares quantitative reconciliation at the end of accounting year in respect
of all major items of inventories i.e. Inflight Catering & duty free stocks, stock of tick-
ets, Gift stocks, aircraft maintenance supplies and Uniform stores. The Company does
not have any finished products and therefore, quantitative reconciliation is not carried
out in respect of finished products.
Company has a system of obtaining approval of Board/appropriate authority for writ-
ing off amounts due to material loss/discrepancies in physical/ book balances of
inventories including stores, and spares.
24. The Company being a service sector company and therefore, maintenance of record
as required under sub-clause 24 is not applicable for this company
26
Annual Report 2019
25. In our opinion and according to the information and explanations given to us, there is
a reasonable system of authorization at proper levels, and an adequate system of in-
ternal control commensurate with the size of Company and the nature of its business,
on issue of stores.
Company has a reasonable system of periodical review of tariffs and based on such
review and considering the market and economic conditions, the tariff rates are deter-
mined and approved by the commercial committee constituted by the management.
Also, the Company has proper costing system for the purpose of fixation of tariff
rates.
credit sales policy of the Company is reasonable and no credit rating of customers is
carried out as the same is not applicable for the Company.
agency commission structure is in accordance with the industry norms/ market con-
ditions. Additionally, according to the information and explanations given to us, the
Company has a proper system of evaluating performance of each agent on a periodic
basis.
Company has reasonable system of continuous follow-up with debtors and other par-
ties for recovery of outstanding amounts. Also age wise analysis is carried out for
management information and follow up action.
management of liquid resources particularly Cash/Bank and short term deposits etc.
are adequate and that excessive amount are not lying idle in non-interest bearing ac-
counts and withdrawals of loan amounts are made after assessing the requirement
of fund from time to time and no excess amounts is withdrawn leading to avoidable
interest burden on the Company.
activities carried out by the Company are lawful and intra-vires to the Articles of the
Company.
activities /investment decisions are made subject to prior approval of the Board and
investments in new projects i.e. acquisition of aircrafts are made only after ascertaining
the technical and economic feasibility of such new ventures.
27
Annual Report 2019
Company has established effective budgetary control system.
34. The Company being a service sector company and therefore the system of input-out-
put relationship, Standard Costing and variance analysis is not applicable to the Com-
pany.
details of remuneration, commission and other payments made in cash or in kind to
the Board of Directors including the Chief Executive Officer or any of their relatives
(including spouse(s) and child/children) by the Company directly or indirectly are dis-
closed in Note No. 36 in the Notes to Accounts.
management of the Company complies with the directives of the Board of Directors
as we have not come across any such incidence where it is not complied.
officials of the Company have not transmitted any price sensitive information which
are not made publicly available, unauthorized to their relatives / friends/ associates or
close persons which would directly or indirectly benefit themselves. We have however
relied on the management assertion on the same and cannot independently verify the
same.
Company maintains a reasonable system of costing to ascertain the cost of its services
and enable it to make proper pricing decisions for its services.
39. In our opinion and according to the information and explanations given to us, proper
records are kept for inter unit transactions/services and arrangements for services
made with other agencies engaged in similar activities.
Company has executed agreements properly and the terms and conditions of leases
are reasonable and the same are applied for machinery/ equipment acquired on lease
or leased out to others.
28
Annual Report 2019
41. Computerized Accounting Environment:
1. In our opinion and according to the information and explanations given to us,
the size and nature of I.T. (Computer) system and installations are adequate for
organizational and system development and other relevant internal control.
the Company has adequate safeguard measures and back up facilities. Additional
offsite backup sys tem has been implemented in Thimphu as offsite backup.
there are backup facilities of keeping files at different and remote location.
the operational controls are adequate to ensure correctness and validity of input
data and out-put information.
the measures to prevent unauthorized access over the computer installation and
files are in existence and adequate.
42. General
1. Going Concern Problems
On the basis of the attached Financial Statement for the year ended 31Decem-
ber 2019, audited by us, the company has earned profit during the current year.
Net Worth of the Company is positive and the financial position of the Compa-
ny is healthy and we have no reason to believe that the company is not a going
concern. Accordingly, the financial statements have been prepared under the
going concern basis.
2. Ratio Analysis (attached separately)
The significant ratios indicating the financial health and performance of the
Company are given in attachment of this report as per Annexure-I.
29
Annual Report 2019
3. Compliance with the Companies Act of the Kingdom of Bhutan:
According to the information and explanations given to us by the management

and based on a Compliance Checklist duly audited by us, the Company has com-
plied with the applicable provisions of the Companies Act of Bhutan, 2016.
Details of Compliance calendar and Compliance checklist are given in EXHIB-
IT- A & EXHIBIT-B respectively.
4. Adherence to Laws, Rules and Regulations:
Audit of the Company is governed by the Companies Act of Bhutan, 2016

and the scope of audit is limited to examination and reviews of the financial
statements as produced to us by the Management. In the course of audit, we
have considered the compliance of provisions of the said Companies Act and
its Articles of Incorporation relevant to the financial statements and we are un-
able to state whether the Company has been complying with all applicable laws
(other than the Companies Act), rules and regulation, systems, procedures and
practices.
For Ray & Ray

(Firm Registration No 301072E)
Amitava Chowdhury
Partner
Membership No.: 056060
UDIN- 20056060AAAAA25656
Kolkata
Date- 04.06.2020
30
Financial Statements
Drukair Coporation Limited
Statements of Financial Position as at 31 December 2019.........................32
Statements of Comprehensive Income for the years ended

31 December 2019 ........................................................................................34
Statements of Changes in Equity for the years ended

31 December 2019 .........................................................................................36
Statements of Cash Flows for the years ended 31 December 2019..........38
Notes forming part of the Financial Statements..........................................39

Annual Report 2019
Statement of Financial Position

Amounts in Nu
Particulars Related As on 31 As on 31
Note December 2019 December 2018
Non-current assets
Property, plant and equipment 5 5,465,452,573 3,817,913,296
Intangible assets 6 10,899,466 12,423,736
Investments 8 - 52,399,379
Trade and other receivables 9 10,101,448 13,603,105
Deposit for gratuity 10 21,841,116 52,406,244
Deferred tax asset 11 - 19,912
Total 5,508,294,603 3,948,765,673

Current assets
Asset held for sale 7 233,613,413 -
Inventories 13 120,753,707 101,883,739
Trade and other receivables 9 164,158,620 172,064,419
Deposit for gratuity 10 97,343,435 111,475,493
Capital Advances 12 1,520,971,327 1,119,839,606
Cash and cash equivalents 14 696,388,005 640,085,428
Other current assets 15 210,388,347 287,677,644
Total 3,043,616,855 2,433,026,329

Total assets 8,551,911,459 6,381,792,002
Equity attributable to owners of the parent
Share capital 16 2,558,351,900 2,225,211,100
Reserves 16 1,067,462,901 731,295,325
Total 3,625,814,801 2,956,506,425
Non-current liabilities
Borrowing 17 2,640,968,015 1,363,104,901
Provisions 18 114,840,346 67,067,447
Total 2,755,808,361 1,430,172,348
32
Annual Report 2019
Statement of Financial Position Contd.,

Amounts in Nu
Particulars Related As on 31 As on 31
Note December 2019 December 2018
Current liabilities
Borrowing 17 380,699,082 676,149,914
Trade and other payables 19 912,179,355 462,925,178
Other liabilities 20 700,426,386 742,130,806
Provisions 18 176,983,473 113,907,332
Total 2,170,288,296 1,995,113,229

Total equity and liabilities 8,551,911,459 6,381,792,002
The above statement of Financial Position is to be read in conjunction with the accompa-
nying notes.
For Ray & Ray For Drukair Corporation Limited

Firm Regn. No. 301072E

Aimtava Chowdhury Pema Chewang Tandi Wangchuk

Partner Chairman Chief Executive Officer
Membership No. 056060
UDIN- 20056060AAAAA25656
Place: Kolkatta
Dated: 04.06.2020
Rinzin Dorji
Director FCSD

Place:Thimphu
Dated: 03.03.2020
33
Annual Report 2019
Statement of Comprehensive Income

Amounts in Nu
Particulars Note no. For the year ended,
31 December 2019 31 December 2018
Operating revenue
Traffic revenue 21 4,034,457,102 3,585,764,303
Other operating revenue 22 127,422,346 110,131,019
Total Operating Revenue 4,161,879,447 3,695,895,322
Operating Expenses
Flight operation costs 23 1,532,712,248 1,645,634,514
Other operation costs 24 200,126,380 185,265,083
Aircraft maintenance costs 25 492,105,013 352,069,695
Other maintenance costs 26 10,148,459 25,478,063
Employee costs 27 553,447,339 482,766,623
Marketing and Sales 28 239,229,438 216,823,622
Other costs 29 215,614,691 204,020,559
Depreciation and amortisation expenses 5 416,514,738 412,530,862
Total operating expenditure 3,659,898,305 3,524,589,020
Operating profit/(loss) 501,981,142 171,306,302
Non-operating items
Non-operating revenue 30 191,211,802 249,839,801
Finance Cost 31 (185,141,283) (159,263,604)
Profit/(loss) before tax 508,051,661 261,882,499
Tax Expenses
Current Year (152,510,156) (78,584,662)
Earlier Years 431,531 (7,458,842)
CIT paid outside Bhutan (12,911,160) (16,296,751)
Deferred Tax Income/(Expense) (19,912) (130,517)
Profit/(loss) after tax for the financial year 343,041,964 159,411,728
Attributable to the owners of the parent 343,041,964 159,411,728
Earnings per share
-Basic 32 13.85 7.16
-Diluted 32 13.85 7.16
34
Annual Report 2019
Statement of Comprehensive Income Contd.,

Amounts in Nu
Particulars Note no. For the year ended
31 December 31 December
2019 2018
Other Comprehensive Income
Currency translation difference 33,491,939 (47,201,756)
Actuarial Gains/(Losses) (40,366,327) 9,019,048
Total Comprehensive income for the year 336,919,073 121,229,020
nying notes.



UDIN- 20056060AAAAA25656
Place: Kolkatta
Dated: 04.06.2020
Rinzin Dorji
Director FCSD

Place:Thimphu
Dated: 03.03.2020
35
Annual Report 2019
Statement of Change in Equity

Amounts in Nu
Particulars Issued Translation Actuarial Retained Total
capital reserve reserve Earnings
Balance as at 1 2,225,211,100 18,543,939 (8,458,780) 721,210,164 2,956,506,425
January 2019
Equity Share issues 333,140,800 333,140,800
during the year
2019
Profit/(Loss) for 343,041,964 343,041,964
the year 2019
Other -
Comprehensive
Income/loss for
the year 2019
Translation Loss 33,491,939 33,491,939
Actuarial gains (40,366,327) (40,366,327)
Balance at 2,558,351,900 52,035,878 (48,825,107) 1,064,252,128 3,625,814,801
31December 2019
nying notes.



UDIN- 20056060AAAAA25656
Place: Kolkatta
Dated: 04.06.2020
Rinzin Dorji
Director FCSD

Place:Thimphu
Dated: 03.03.2020
36
Annual Report 2019
Statement of Cash Flow Amounts in Nu

Amounts in Nu
Particulars 2019 2018
Cash flow from operating activities (A)
Profit Before Income Tax 508,051,661 261,882,499
Depreciation, amortization and impairment 416,514,738 412,530,862
Gain/Loss on sale of PPE 3,739,393 4,325,406

Interest Income (130,651,501) (141,872,570)
Interest Expense 163,483,209 137,952,531
Stores and Spares written off 5,238,814 1,738,972
Prior period payout 83,727

Operating profit before working capital changes 966,376,313 676,641,427

Current asset and liability changes

Movement in Trade and other Liabilities 407,549,757 121,620,711
Movement in Provisions 32,118,089 (214,065,094)
Movement in Inventory (18,869,968) 1,277,578
Movement in Trade and other receivables 11,407,457 (56,544,321)

Movement in other current asset 77,289,297 (47,754,319)

Movement in deposits receivable 42,988,263 (8,973,387)
552,482,895 (204,438,832)
Taxes paid (98,405,359) (67,844,710)
454,077,536 (272,283,542)
Total cash flow from operating activities 1,420,453,849 404,357,885
Cash flow from investing activities (B)
Non-current asset and liability changes
Advance paid for PPE (401,111,809) (1,080,119,689)
Investment encashed 52,399,379 (52,399,379)

Purchase of PPE and intangible assets (2,319,950,076) (582,656,067)

Interest income 132,360,425 141,872,570
Total cash flow from investing activities (2,536,302,081) (1,573,302,565)

Cash flow from financing activities ( C)
Loan from DHI - 321,000,000
Repayment of Bond (216,343,353) (216,343,151)
Repayment of Interest free loan (33,810,667) (33,810,667)
Dividend payout - (108,000,000)
37
Annual Report 2019
Statement of Cash Flow Contd.,

Amounts in Nu
Particulars 2019 2018
Loan from NPPF 585,517,135 -
Loan from SDF 942,500,000 -
Interest paid (125,793,205) (137,952,531)
Total cash flow from financing activities 1,152,069,910 (175,106,350)
Changes in Cash and cash equivalents (A)+(B)+( C) 36,221,677 (1,344,051,030)
Cash and cash equivalents at beginning of year 640,085,428 1,924,757,764
676,307,106 637,009,311
Effects of change in foreign exchange rate on cash 20,080,900 59,378,694
and cash equivalents increase/(decrease)
Cash and cash equivalents at the end of year 696,388,005 640,085,428
nying notes.



UDIN- 20056060AAAAA25656
Place: Kolkatta
Dated: 04.06.2020
Rinzin Dorji
Director FCSD

Place:Thimphu
Dated: 03.03.2020

38
Annual Report 2019
INDEX
1. General information............................................................................................................. 40
2. Transition to Bhutan Accounting Standards (BAS.......................................................... 40
3. Summary of Significant Accounting Policies................................................................... 42
4. Critical accounting estimates and assumptions................................................................ 56
5. Property, plant and equipment............................................................................................ 59
6. Intangible assets..................................................................................................................... 61
7. Asset held for sale................................................................................................................. 61
8. Investments- non current ................................................................................................... 61
9. Trade & other receivables.................................................................................................... 61
10. Deposits for gratuity............................................................................................................. 62
11. Deferred tax asset.................................................................................................................. 62
12. Other noncurrent assets....................................................................................................... 62
13. Inventories.............................................................................................................................. 62
14. Cash and cash equivalents.................................................................................................... 63
15. Other current assets.............................................................................................................. 63
16. Share Capial............................................................................................................................ 63
17. Borrowings- unsecured........................................................................................................ 64
18. Provisions............................................................................................................................... 66
19. Trade and other payables..................................................................................................... 66
20. Other liabilities....................................................................................................................... 66
21. Traffic revenue....................................................................................................................... 67
22. Other operating revenue...................................................................................................... 67
23. Flight Operation Cost........................................................................................................... 68
24. Other operation cost............................................................................................................. 68
25. Aircraft maintenance cost.................................................................................................... 68
26. Other maintenance cost....................................................................................................... 69
27. Employee Cost...................................................................................................................... 70
28. Marketing and sales............................................................................................................... 70
29. Other cost............................................................................................................................... 71
30. Non operating revenue......................................................................................................... 72
31. Finance cost........................................................................................................................... 72
32. Earning Per Share (EPS....................................................................................................... 72
33. Fair Value measuremen........................................................................................................ 73
34. Capital management............................................................................................................. 75
35. Financial Risk Management................................................................................................. 75
36. Related party transactions.................................................................................................... 80
37. Capital management and commitments............................................................................ 83
38. Contingent liabilities............................................................................................................. 83
39. Other Notes to Accounts.................................................................................................... 84
40. Events after the reporting period....................................................................................... 88
39
Annual Report 2019
All amounts are in Bhutanese Ngultrum (‘Nu’) except at stated otherwise

Notes to Financial Statements
1. General information
Drukair Corporation Ltd. (the “Company” or “DCL”) is a wholly owned subsidiary of Druk
Holding & Investments (a Royal Government of Bhutan undertaking). The principal ac-
tivities of the company covers transport of people and cargo by air and related activities,
including leasing of aircraft both as lessee and as lessor. The company’s hub is at Paro airport
and its aircraft fly to five countries in south-east Asia.
The Company is a limited liability company incorporated and domiciled in Bhutan. The
address of its registered office is PO Box 1219, Nemeyzampa, and Paro. These financial
statements relate to the year ended 31 December 2019.
The financial statements of the Company for the year ended 31 December 2019 were autho-
rized for issue in accordance with the resolution of the Board of directors dated 2nd March
2020.
2. Transition to Bhutan Accounting Standards (BAS)

The Ministry of Finance embarked on the process of developing Accounting Standards to
promote high quality financial reporting which are consistent with international practices.
Pursuant to this development, the Ministry of Economic Affairs of Royal Government of
Bhutan has issued the Accounting Standard Rules for Companies in Bhutan, 2012, notifying
the Bhutan Accounting Standards (‘BAS’) to be implemented by the Companies in Bhutan
in three phases (I, II and III) with effect from 1 January 2013. Consequently, the Company
has followed the BAS notified for implementation with effect from 1 January 2013 in pre-
paring the financial statements from the year 2013 onwards to the extent as applicable to the
Company as under.
SL BAS Standard Name Effective

No. Date
Phase-1
1 BAS 1 Presentation of Financial Statements 1.1.2015
2 BAS 2 Inventories 1.1.2015
3 BAS 7 Statement of Cash Flows 1.1.2015
4 BAS 8 Accounting Policies, Changes in Accounting Estimates and Errors 1.1.2015
5 BAS 10 Events after the Reporting Period 1.1.2015
6 BAS 12 Income Taxes 1.1.2015
7 BAS 16 Property, Plant & Equipment 1.1.2015
8 BAS 18 Revenue 1.1.2015
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Annual Report 2019

9 BAS 20 Accounting for Government Grants and Disclosure of 1.1.2015

Government Assistance
10 BAS 21 The Effects of Changes in Foreign Exchange Rates 1.1.2015
11 BAS 23 Borrowing Costs 1.1.2015
12 BAS24 Related Party disclosures 1.1.2015
13 BAS 33 Earnings Per Share 1.1.2015
14 BAS 37 Provisions, Contingent Liabilities and Contingent Assets 1.1.2015
Phase-II
15 BAS 17 Leases 1.1.2016
16 BAS 19 Employee Benefits 1.1.2016
17 BAS 26 Accounting and reporting by retirement benefit plans 1.1.2016
18 BAS 36 Impairment of Assets 1.1.2016
19 BAS 38 Intangible Assets 1.1.2016
Phase-III
20 BAS 32 Financial Instrument: Presentation 1.1.2017
21 BFRS 1 First- time adoption of BFRS 1.1.2017
22 BFRS5 Non-Current Assets Held for Sale and discontinued Operations 1.1.2017
23 BFRS 7 Financial Instruments: disclosure 1.1.2017
24 BFRS 9 Financial Instrument 1.1.2017
25 BFRS 13 Fair Value Measurement 1.1.2017
26 BFRS 15 Revenue for Contracts with Customers 1.1.2017
2.1 The company has adopted BAS phase – I from the year 2015 and Phase II in 2016 and
the changes in accounting policies consequent on adoption of above BAS had been
accounted for in accordance with the transition provisions of the respective BAS and
has been accounted for retrospectively by restating the comparatives from the previous
GAAP to BAS with effect from 1 January 2013.
2.2 The BAS Phase- III standards applicable to the company were early adopted in 2017
and the changes in accounting policies consequent on adoption of above BAS had
been accounted for in accordance with the transition provisions of the respective BAS
and has been accounted for retrospectively by restating the comparatives from the
previous GAAP to BAS with effect from 1 January 2016.
2.3 As detailed above, the financial statements of the Company for the year current year
ended 31 December 2019 have been prepared in accordance with and are fully compli-
ant with the Bhutanese Accounting Standards (BAS), except as stated otherwise in the
financial statements.
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Annual Report 2019

3. Summary of Significant Accounting Policies

3.1 Basis of preparation
These financial statements are general purpose financial statements that have been
prepared in accordance and to comply with the BAS and the relevant provisions of
The Companies Act of Bhutan, 2016 including the Accounting Standard Rules for
Companies in Bhutan, 2012.
The said financial statements have been prepared on the accrual basis of accounting
with the historical cost convention and going concern basis except as stated otherwise
in the Financial Statements. The preparation of the Financial Statements requires the
use of certain critical accounting estimates and judgments. It also requires manage-
ment to exercise judgment in the process of applying the Company’s accounting pol-
icies and the reported amounts of revenue, expenses, assets and liabilities may differ
from the estimates. In areas involving a higher degree of judgment or complexity, or
areas where assumptions and estimates are significant to the financial statements are
disclosed in Note 4.
3.2 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements are measured using the currency of
the primary economic environment in which the Company is registered referred
to as the “functional currency”. The functional currency and presentation cur-
rency of the Company is Bhutanese Ngultrum.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions or valuation where
items are re-measured. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year-end exchange
rates of monetary assets and liabilities denominated in foreign currencies are
recognized in the Statement of Comprehensive Income.
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Annual Report 2019

3.3 Property, plant and equipment
The cost of an item of property, plant and equipment is recognized as an asset if, and
only if, it is probable that future economic benefits associated with the item will flow
to the Company and the cost can be measured reliably.
Property, plant and equipment are initially recognized at historical cost. The historical
cost of property, plant and equipment is determined as the fair value of the asset at the
date of acquisition and comprises its net purchase price after deducting for any trade
discount and rebates, including import duties and non-refundable purchase taxes, any
directly attributable costs of bringing the asset to its working condition and location
for its intended use.
Subsequent to initial recognition, property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses, if any. Subsequent ex-
penditures relating to property, plant and equipment is capitalized only when it is prob-
able that future economic benefits associated with these will flow to the Company and
the cost of the item can be measured reliably.
Subsequent costs are included in the asset’s carrying amount or recognized as a sep-
arate asset, as appropriate, only when it is probable that future economic benefits
associated with the item will flow to the Company and the cost of the item can be
measured reliably. The carrying amount of the replaced part is derecognized. All oth-
er repairs and maintenance are charged to the Statement of Comprehensive Income
during the financial period in which they are incurred.
Spare parts and servicing equipment are normally treated as inventory and expensed as
consumed. However, major spare parts and stand-by equipment are treated as property,
plant and equipment when they are expected to be used during more than one year. Also,
where the spares parts or servicing equipment can only be used in connection with an item
of property, plant and equipment they are accounted for as property, plant and equipment.
Depreciation on property, plant and equipment is computed using the straight line
method over the estimated useful lives. Freehold land is not depreciated as it has an
unlimited useful life whereas leasehold land is depreciated on a straight line method
over the primary term of the lease.
The Company has based on evaluation performed by the technical Department, estab-
lished the estimated range of useful lives of assets for depreciating its property, plant
and equipment as follows:
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Annual Report 2019

Buildings and civil structures 33.33 years

Aircraft fleet – non renewable:
(a) Aircraft frame 16 years
Aircraft fleet – renewable:
(a) Engine 12 years
(b) APU 5 years
(c) APU LLP 6 years
(d) Landing gear 10 years
(e) 6 year check 6 years
(f) 12 year check 12 years
Capital tools and rotable spare parts 3- 15 years
Furniture & Fixtures 10 years
Vehicles 6.67 years
Other Equipment 10 years
Significant parts of property, plant and equipment which are required to be replaced at
intervals and have specific useful lives are recognized and depreciated separately.
The useful life, residual value and depreciation method are reviewed, and adjusted
appropriately, at least at each Statement of Financial Position date to ensure that the
method and period of depreciation are consistent with the expected pattern of eco-
nomic benefits. Change in the estimated useful life, residual value and / or depreci-
ation method, if any, is depreciated prospectively over the asset’s remaining revised
useful life.
The cost and the accumulated depreciation for property, plant and equipment sold,
scrapped, retired or otherwise disposed off are eliminated from the financial state-
ments and the resulting gains and losses are included in the Statement of Comprehen-
sive Income.
3.4 Intangible assets
Intangible assets include computer software and are carried at cost of acquisition/im-
plementation less accumulated amortisation. Amortisation is recognized on a straight
line basis over the estimated useful life as estimated by the management.
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Annual Report 2019

3.5 Impairment of assets
The Company assesses at each balance sheet date whether there is any indication that
property, plant and equipment may be impaired based on internal or external fac-
tors. If any such indication exists, the Company estimates the recoverable amount of
the assets. If the carrying amount ofasset/cash generating unit exceeds the recover-
able amount on the reporting date, the carrying amount is reduced to the recoverable
amount. The recoverable amount is measured as the higher of the net selling price and
the value in use determined by the present value of estimated future cash flows.
3.6 Income tax
Current tax assets and liabilities for the current period are measured at the amount
expected to be recoverable from or payable to the Income tax authority based on
the current period’s taxable income. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted on the reporting date by
the Income Tax Authority.
Deferred income tax is provided on all temporary differences at the reporting date
between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes.
Deferred income tax liabilities are recognized for all taxable temporary differences
except when the deferred income tax liability arises from the initial recognition of an
asset or liability in a transaction that is not a business combination and that, at the time
of the transaction, affects neither the accounting profit nor taxable profit or loss.
Deferred income tax assets are recognized for all deductible temporary differences
to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences can be utilized, except when the deferred income tax
asset relating to the deductible temporary difference arises from the initial recognition
of an asset or liability in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit nor taxable profit or loss.
The carrying amount of deferred income tax assets is reviewed at each Balance Sheet
date and reduced to the extent that it is no longer probable that sufficient taxable prof-
its will be available to allow all or part of the asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expect-
ed to apply to the year when the asset is realized or the liability is settled, based on tax
rates (and tax laws) that have been enacted or substantively enacted at the reporting
date.
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Annual Report 2019

Deferred tax assets and liabilities are offset when there is a legally enforceable right
to set off current tax assets against current tax liabilities and the Company intends to
settle its current tax assets and liabilities on net basis. Management evaluates positions
taken in income tax returns with respect to situations in which applicable income tax
regulation is subject to interpretation.
The income tax liabilities are recognized when, despite the Company’s belief that its
income tax return positions are supportable, the Company believes, it is more likely
than not, based on the technical merits, that certain positions may not be fully sus-
tained upon review by income tax authorities. Benefits from tax positions are mea-
sured at the single best estimate of the most likely outcome.
At each Statement of Financial Position date, the tax positions are reviewed, and to the
extent that new information becomes available which causes the Company to change
its judgment regarding the adequacy of existing income tax liabilities, such changes to
income tax liabilities are duly recognized in income tax expense in the year in which
such determination is made.
Interest and penalties, if any, related to accrued liabilities for potential tax assessments
are included in income tax charge for the year in which the assessment is completed.
3.7 Investments and other financial assets
(i) Initial measurement
At initial recognition, the Company measures a financial asset at its fair value
plus, in the case of a financial asset not at fair value through profit or loss, trans-
action costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at fair value through profit or loss
are expensed in profit or loss.
(ii) Classification and subsequent measurement
For the purpose of subsequent measurement, financial assets of the Company

are classified in the following categories:
• Financial assets measured at amortized cost;

• Financial assets measured at fair value through other comprehensive
income (FVTOCI); and
• Financial assets measured at fair value through profit and loss (FVTPL)
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Annual Report 2019

The classification of financial assets depends on the entity’s business model for man-
aging the financial assets and the contractual terms of the cash flows. Management
determines the classification of its financial assets at initial recognition.
Financial assets measured at amortized cost:
A financial asset is measured at amortized cost if both the following conditions are
met:
a) The asset is held within a business model whose objective is to hold assets for
collecting contractual cash flows; and
b) Contractual terms of the asset give rise on specified dates to cash flows that are sole-
ly payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amor-
tized cost using the effective interest rate (EIR) method. Amortized cost is calculated
by taking into account any discount or premium on acquisition and fees or costs that
are an integral part of the EIR. The EIR amortization is included in finance income
in the profit or loss. The losses arising from impairment are recognized in the profit
or loss. This category generally applies to trade and other receivables, bank deposits,
security deposits, investment in Government Securities, bonds, cash and cash equiva-
lents and employee loans, etc.
Financial instruments measured at fair value through other comprehensive income
A financial instrument shall be measured at fair value through other comprehensive

income if both of the following conditions are met:
a) The objective of the business model is achieved by both collecting contractual

cash flows and selling financial assets; and
b) The asset’s contractual cash flow represents SPPI.
Financial instruments included within FVTOCI category are measured initially as well
as at each reporting period at fair value. Fair value movements are recognized in other
comprehensive income (OCI). Currently, the Company does not have any asset classi-
fied under this category
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Annual Report 2019

Financial instruments measured at fair value through profit and loss
Fair value through profit and loss is the residual category. Any financial instrument
which does not meet the criteria for categorization as at amortized cost or fair value
through other comprehensive income is classified at FVTPL. Financial instruments
included within FVTPL category are measured initially as well as at each reporting
period at fair value. Fair value movements are recorded in statement of profit and loss.
(iii) Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses
associated with its assets carried at amortized cost and FVOCI debt instruments.
The impairment methodology applied depends on whether there has been a
significant increase in credit risk. Note 35 details how the Company determines
whether there has been a significant increase in credit risk.
For trade receivables only, the Company applies the simplified approach permit-
ted by IFRS 9 Financial Instruments, which requires expected lifetime losses to
be recognized from initial recognition of the receivables.
(iv) Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a

group of similar financial assets) is primarily derecognised only when:
• The rights to receive cash flows from the asset have been transferred, or
• The Company retains the contractual rights to receive the cash flows of
the financial asset, but assumes a contractual obligation to pay the cash
flows to one or more recipients.
When the Company has transferred an asset, it evaluates whether it has sub-
stantially transferred all risks and rewards of ownership of the financial asset.
In such cases, the financial asset is derecognized. When the Company has not
transferred substantially all the risks and rewards of ownership of a financial
asset, the financial asset is not derecognized.
When the Company has neither transferred a financial asset nor retains sub-
stantially all risks and rewards of ownership of the financial asset, the financial
asset is derecognised if the entity has not retained control of the financial asset.
When the entity retains control of the financial asset, the asset is continued to be
recognized to the extent of continuing involvement in the asset.
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Annual Report 2019

(v) Income recognition
Interest income: Interest income from debt instruments is recognized using the
effective interest rate method. The effective interest rate is the rate that exactly
discounts estimated future cash receipts through the expected life of the finan-
cial asset to the gross carrying amount of a financial asset. When calculating
the effective interest rate, the Company estimates the expected cash flows by
considering all the contractual terms of the financial instrument (for example,
prepayment, extension, call and similar options) but does not consider the ex-
pected credit losses.
Dividend income: Dividends are recognized in profit or loss only when the right
to receive payment is established, it is probable that the economic benefits as-
sociated with the dividend will flow to the Company, and the amount of the
dividend can be measured reliably.
3.8 Financial Liabilities
(i) Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at

fair value through profit or loss, borrowings, payables. All financial liabilities
are recognized initially at fair value and, in the case of borrowings and payables,
net of directly attributable transaction costs. The Company’s financial liabilities
include trade and other payables, borrowings including bank overdrafts.
(ii) Subsequent measurement
The measurement of financial liabilities depends on their classification, as de-

scribed below:
Financial Liabilities at fair value through profit or loss
Financial liabilities at fair value recognized through profit or loss include finan-
cial liabilities held for trading and financial liabilities designated upon initial rec-
ognition as at fair value through profit or loss. Financial liabilities are classified
as held for trading if they are incurred for the purpose of repurchasing in the
near term.
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Annual Report 2019

Gains or losses on liabilities held for trading are recognized in the profit
or loss.
Financial liabilities designated upon initial recognition at fair value through prof-
it or loss are designated as such at the initial date of recognition, and only if the
criteria in IFRS 9 are satisfied. For liabilities designated as FVTPL, fair value
gains/ losses attributable to changes in own credit risk are recognized in OCI.
These gains/ loss are not subsequently transferred to P&L. However, the Com-
pany may transfer the cumulative gain or loss within equity. All other changes in
fair value of such liability are recognized in the statement of profit or loss. The
Company has not designated any financial liability as at fair value through profit
and loss.
Borrowings: Any difference between the proceeds (net of transaction costs) and
the redemption amount is recognized in profit or loss over the period of the
borrowings using the effective interest method. Fees paid on the establishment
of loan facilities are recognized as transaction costs of the loan to the extent that
it is probable that some or all of the facility will be drawn down. In this case, the
fee is deferred until the draw down occurs. To the extent there is no evidence
that it is probable that some or all of the facility will be drawn down, the fee is
capitalized as a prepayment for liquidity services and amortized over the period
of the facility to which it relates.
Borrowings are classified as current liabilities unless the Company has an uncon-
ditional right to defer settlement of the liability for at least 12 months after the
reporting period. Where there is a breach of a material provision of a long-term
loan arrangement on or before the end of the reporting period with the effect
that the liability becomes payable on demand on the reporting date, the entity
classify the liability as current, if the lender does not agree not to demand pay-
ment as a consequence of the breach before reporting date.
Trade and other payables: These amounts represent liabilities for goods and ser-
vices provided to the Company prior to the end of financial year which are un-
paid. Trade and other payables are presented as current liabilities unless payment
is not due within 12 months after the reporting period. They are recognized
initially at their fair value and subsequently measured at amortized cost using the
effective interest method.
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Annual Report 2019

(iii) Derecognition
A financial liability is derecognized when the obligation under the liability is dis-
charged or cancelled or expires. When an existing financial liability is replaced by
another from the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange or modification
is treated as the DE recognition of the original liability and the recognition of a
new liability. The difference in the respective carrying amounts is recognised in
the statement of profit or loss.
Borrowings are removed from the balance sheet when the obligation specified
in the contract is discharged, cancelled or expired. The difference between the
carrying amount of a financial liability that has been extinguished or transferred
to another party and the consideration paid, including any non-cash assets trans-
ferred or liabilities assumed, is recognised in profit or loss as other gains/(losses).
Financial guarantee contracts
Financial guarantee contracts are recognized as a financial liability at the time

the guarantee is issued. The liability is initially measured at fair value and subse-
quently at the higher of the amount determined in accordance with IAS 37 Pro-
visions, Contingent Liabilities and Contingent Assets and the amount initially
recognized less cumulative amortization, where appropriate.
The fair value of financial guarantees is determined as the present value of the
difference in net cash flows between the contractual payments under the debt
instrument and the payments that would be required without the guarantee, or
the estimated amount that would be payable to a third party for assuming the
obligations.
Where guarantees in relation to loans or other payables of associates are provid-

ed for no compensation, the fair values are accounted for as contributions and
recognized as part of the cost of the investment.
(iv) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the
balance sheet where there is a legally enforceable right to offset the recognised
amounts and there is an intention to settle on a net basis or realise the asset
and settle the liability simultaneously. The legally enforceable right must not be
contingent on future events and must be enforceable in the normal course of
business and in the event of default, insolvency or bankruptcy of the group or
the counterparty.
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Annual Report 2019

Investments primarily meant to be held over long term period (i.e. for more than
12 months from date of acquisition) are valued at cost. Provision is made when
in the opinion of the management there is a decline, other than temporary, in the
carrying value of such investments. Current investments are stated at the lower
of cost or quoted/fair value.
3.9 Advances
Advances represent advances paid to suppliers, contractors and employees in the or-
dinary course of the business activities of the Company. Advances are initially recog-
nized at the value of cash advanced and are assessed at each Statement of Financial
Position date for recoverability and the provision is recognized when it is more likely
that the Company will not be able to collect the same. Advances are classified under
current assets if payment is recoverable within one year or less as at Statement of
Financial Position date, if not, they are classified under non-current assets.
3.10 Cash and cash equivalents
Cash and cash equivalents include cash in hand, bank balances and deposits, other
short-term highly liquid investments with original maturities of three months or less
and that are readily convertible to known amount of cash and cash equivalent and
which are subject to an insignificant risk of changes in value.
3.11 Inventories
An inventory consists of stores and spares held for operation & maintenance and oth-
er catering/duty free inventories.
Inventories are stated at the lower of cost and net realizable value. The NRV shall be
obtained for an inventory item costing Nu. 5,000.00 and above considering the ma-
teriality of the amount. Cost is determined using the weighted average cost formula
and comprises cost of purchases and other incidental expenses incurred in acquiring
inventories and bringing them to their existing location and condition.
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Annual Report 2019

3.12 Reserves
The nature and purpose of these reserves are as follows:
i) General Reserve:
General Reserve is a free reserve. It is not maintained for any specific purpose.
It serves as a tool for meeting future requirements. General Reserve may be used
for future expansion of the business or to meet any contingent liability, or for
any other purpose which, may arise.
ii) Translation Reserve:
Any gain or loss arising from conversion of the Financial Results of foreign
operations into the local currency is transferred to the Translation Reserve. By
maintaining a translation reserve, the Company is able to set off the unrealized
foreign exchange loss in one year with the profits earned on translation of re-
sults of foreign operations in other years, without disturbing its general reserves.
iii) Actuarial Reserve
The Company accounts for the Employee Benefits on actuarial basis. Any profit
or loss arising due to change in actuarial assumptions is recorded in the Actuarial
Reserve. Any gain or loss arising on Defined Benefit Obligation is recorded in
the Actuarial reserve.
3.13 Borrowings
Borrowings are stated at principal outstanding and interest accrued and due on such
borrowings based on the applicable interest rate. Borrowings are classified as current
liabilities unless the Companyhas an unconditional right to defer settlement of the
liability for at least 12 months after the Statement of Financial Position date.
3.14 Grants
Grants from Government and Non-Government sources are recognized where there
is reasonable assurance that the grant will be received and all attached conditions will
be complied with.
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Annual Report 2019

Grants relating to expense items are recognized as income on a systematic basis over
the periods that the related costs, which it is intended to compensate, are expensed.
The unallocated portion of such grant is presented as part of Deferred Grants in the
Statement of Financial Position.
Grants related to non-current assets are treated as Deferred liability in the Statement
of Financial Position and are recognized to the Statement of Comprehensive Income
on a systematic basis over the useful life of the related assets.
Grant received as compensation for expenses/losses already incurred or with no future

related costs is recognized as income in the year it is received or becomes receivable.
BAS 20-Accounting for Government Grant and disclosure of Government Assistance

has been implemented by the Company retrospectively for the grants existed as on the
transition date.
3.15 Borrowing Costs
Borrowing costs consist of interest and other costs that Company incurs in connec-
tion with the borrowing of funds.
General and specific borrowing costs (net of investment income on temporary invest-
ment of those borrowings) that are directly attributable to the acquisition, construc-
tion or production of a qualifying asset are capitalized as part of the costs of the asset,
until such time the assets are substantially ready for their intended use or sale.A quali-
fying asset is an asset that necessarily takes a substantial period of time to get ready for
its intended use or sale, which is two years or more as decided by the Company keeping
in view the nature of assets and past trend of time taken for their completion.
All other borrowing costs are charged as expense to Statement of Comprehensive

Income in the period they occur.
3.16 Trade and other payables
Trade and other payables are obligations incurred by the Company towards purchase
of goods and availing the services that have been acquired or availed in the ordinary
course of business. Trade and other payables are classified under current liabilities, if
payment is due within 12 months as at Statement of Financial Position date, if not,
they are classified under non-current liabilities.
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Annual Report 2019

3.17 Provisions
The Company recognizes provisions when the Company has a present obligation (le-
gal or constructive) arising from past events (legal or constructive obligation), payment
for the obligation is probable, and the expenditure for settling the obligation can be
estimated reliably.
The amount recognized as a provision is the best estimate of the expenditure required
to settle the present obligation, taking into account the risks and uncertainties sur-
rounding the obligation as of the balance sheet date. When a provision is measured
using the cash flows estimated to settle the present obligation, its carrying amount is
the present value of those cash flows.
3.18 Employee benefit liabilities
Contribution to Provident Fund administered by National Pension and Provident

Fund is charged to Statement of Comprehensive Income as and when they fall due.
Retirement benefit liabilities are recognized when the Company has a present obliga-
tion (legal or constructive) as a result of past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation.
Gratuity and Leave encashment are provided for based on actuarial valuation as at
the Statement of Financial Position date. Actuarial gains and losses arising from ex-
perience adjustments and changes in actuarial assumptions are charged or credited to
equity in other comprehensive income in the period in which they arise.
Further, the contribution towards the gratuity liability is invested in fixed deposits with
the banks.
The expected cost of Performance Based Variable Payout and Annual Bonus Payout is
recognized as an expense when there is a legal or constructive obligation to make such
payments as a result of past performance and a reliable estimate of the obligation can
be made.
3.19 Revenue Recognition
Revenue is recognized to the extent that it is probable that the associated economic
benefits will flow to the Company and the revenue can be measured reliably. Revenue
is measured at the fair value of the consideration received or receivable.
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Annual Report 2019

The following specific recognition criteria must also be met before revenue is recog-
nized:
(a) Operating Revenue:
All revenues generated through operation of air transport service activities such
as airfare, administration charges, and commission earned and excess baggage
charges, cargo sales are categorized under operating revenues. Such revenues are
recognized when the services are rendered. The un-flown passenger tickets are
recognized as “Passenger Sales Liability”
(b) Non Operating Revenue:
Non-operating revenues are those income, which are earned from non-opera-
tional activities such as interest subsidy, interest income earned from deposits
and other miscellaneous incomes.
Interest income is accrued on a time proportion basis, by reference to the prin-

cipal outstanding and at the effective interest rate applicable.
Other items of revenue which arise from the provision of services incidental to
the core activities of the business are recognized when the services are provided
and it is probable that economic benefits associated with the transaction will
flow to the Company and amount can be measured reliably.
3.20 Earnings per share (‘EPS’)
The Company presents the basic and diluted EPS data for its ordinary shares. Basic
EPS is computed by dividing the net profit for the year attributable to the ordinary
shareholders of the Company by the weighted average number of ordinary shares
outstanding during the year.
Diluted EPS is computed by adjusting the net profit for the year attributable to the or-
dinary shareholders and by adjusting the weighted average number of ordinary shares
outstanding to assume conversion of all dilutive potential ordinary shares.
4. Critical accounting estimates and assumptions

The preparation of the financial statements requires management to make judgements, es-
timates and assumptions that affect the reported amounts in the financial statements. Al-
though the Company regularly assesses these estimates, actual results could differ materially
from these estimates. Changes in estimates are recorded in the year in which they become
known.
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Annual Report 2019

Actual results may differ from management’s estimates if these results differ from historical
experience or other assumptions do not turn out to be substantially accurate, even if such
assumptions were reasonable when made.
The said estimates are based on the facts and events, that existed as at the date of statement
of financial position, or that occurred after that date but provide additional evidence about
conditions existing as at the statement of financial position date.
The estimates and assumptions that have a significant risk of causing a material adjustment
to the carrying values of assets and liabilities within the next financial year are discussed
below.
a) Depreciation of Property, Plant and Equipment
Property, Plant and Equipment are depreciated on a straight-line basis at rates

that can be used to write down their cost to their estimated residual values at the
end of their useful lives. The estimates of the useful lives and residual values of
the flight equipment are made by the Company on the basis of past experience
and fleet operation performance in the industry. Changes in the expected level
of usage, technological developments, level of wear and tear could impact the
economic useful lives and the residual values of these assets, therefore future
depreciation charges could be revised and could have an impact on the profit in
future years
b) Retirement benefit obligations
The costs of retirement benefits and present value of the retirement benefit
obligations are determined using actuarial valuations. An actuarial valuation in-
volves making various assumptions which may differ from actual developments
in the future. These include the determination of the discount rate, future salary
increases, mortality rates and future pension increases. Due to the complexi-
ty of the valuation and its long-term nature, retirement benefit obligations are
sensitive to changes in these assumptions. All assumptions are reviewed at each
reporting date.
c) Provision for doubtful debts
As at each Statement of Financial Position date, the Company assesses recover-

ability of trade receivables. Provision for doubtful debts is recognized based on
the historical experience of collectability of debts. The Company estimates the
portion of its outstanding receivables that cannot be collected based on aging
schedules at an increasing percentage of each aging category. Actual doubtful
debts could differ from these estimates.
57
Annual Report 2019

d) Frequent Flyer Program
The Company has a “my happiness mile” through which program members can
convert accumulated mileage to a cabin upgrade, free tickets and other member
reward. A portion of passenger revenue attributable to the rewards for the fre-
quent flyer program is deferred. The entity should recognize this deferred reve-
nue as revenue only when the entity has fulfilled its obligations on the granting
of rewards or when the period for converting the mileage to rewards has ex-
pired. The liability for frequent flyer program is provided based on the actuarial
method which is determined from the redemption rate, loyalty points accrued
and cost per point.
e) Impairment of aircraft and related equipment
The impairment of aircraft and related equipment was based on the recoverable
amount of those assets, which is the higher of fair value less costs to sell or val-
ue-in-use of those assets. Any changes in the market price or future cash flows
will affect the recoverable amount of those assets and may lead to recognition
of additional or reversal of impairment losses.
f) Fair Value for Financial Instruments
The fair value of financial instruments that are not traded in an active market is
determined using valuation techniques. The Company uses its judgment to se-
lect a variety of methods and make assumptions that are mainly based on market
conditions existing at the end of each reporting period. Financial instruments
are valued using a discounted cash flow analysis based on assumptions support-
ed, where possible, by observable market prices or rates. The chosen valuation
techniques and assumptions used are possible effecting in determining the fair
value of financial instrument.
58
5. Property, plant and equipment

Particulars Air Craft Furniture & Office Electrical Ramp Engineering
Fleet- Non Fixture equipment Fitting & Equipment Equipment
Renewable Equipment

Balance as on 31 December 2018
Cost 6,991,218,276 18,633,343 57,962,962 15,717,921 71,981,018 26,490,267
Accumulated Depreciation (3,375,086,111) (8,107,376) (32,953,132) (4,216,260) (55,116,147) (23,584,517)
Book Value 3,616,132,165 10,525,967 25,009,830 11,501,661 16,864,870 2,905,749
Changes in Book Value during the year 2019
Additions 2,270,319,917 797,182 5,413,861 433,962 4,929,810 426,242
Disposals & Sales/ Adjustments (579,724,114) - - - - -
Depreciation on Disposals/Adjustments 346,110,700 - -
Depreciation (404,857,889) (1,422,396) (3,419,846) (1,365,047) (3,128,419) (532,766)
Total Changes in Book Value 1,631,848,615 (625,214) 1,994,015 (931,085) 1,801,391 (106,524)
Cost 8,681,814,079 19,430,525 63,376,823 16,151,883 76,910,827 26,916,509
Accumulated Depreciation (3,433,833,300) (9,529,771) (36,372,978) (5,581,307) (58,244,566) (24,117,284)
Book Value as on 31 December 2019 5,247,980,780 9,900,753 27,003,845 10,570,576 18,666,261 2,799,225
Annual Report 2019
59
60
Particulars Building Motor Miscel- Catering Tools & Work in Total

Vehicle laneous Equipment Spares Progress
Annual Report 2019
Asset

Cost 50,437,093 65,425,261 16,099,994 11,776,813 134,680,783 7,460,423,728
Accumulated Depreciation (6,814,329) (35,425,377) (5,183,152) (9,921,874)
(86,102,155) (3,642,510,431)
Book Value 43,622,763 29,999,884 10,916,842 1,854,938 48,578,629 3,817,913,297
Changes in Book Value during the year 2019 -
Additions - 9,712,803 5,676,744 3,756,945 18,327,266 155,345 2,319,950,076
Disposals & Sales/ Adjustments - - (134,659) - (6,652,542) (586,511,315)
Depreciation on Disposals/Adjustments - 346,110,700
Depreciation (1,512,798) (3,088,202) (1,492,315) (655,937) (432,010,185)
(10,534,571)
Total Changes in Book Value (1,512,798) 6,624,601 4,049,770 3,101,007 1,140,153 155,345 1,647,539,276
Balance as on 31 December 2019 -
Cost 50,437,093 75,138,063 21,642,079 15,533,757 146,355,507 155,345 9,193,862,489
Accumulated Depreciation (8,327,127) (38,513,579) (6,675,467) (10,577,812) (96,636,726) - (3,728,409,916)
Book Value as on 31 December 2019 42,109,966 36,624,485 14,966,612 4,955,945 49,718,781 155,345 5,465,452,573
The difference in depreciation amount of Nu.17,019,717 between schedule of fixed asset and statement of comprehensive income is due to
depreciation adjusted for asset purchased through credit memo and RGOB grant received as per BAS 16 and BAS 20.
Annual Report 2019

6. Intangible assets
Computer Software As at 31 Decemeber 2019 As at 31 December 2018
Opening gross carrying value (i) 16,750,670 13,138,271
Additions 3,612,399
Disposals - -
Closing gross carrying value(ii) 16,750,670 16,750,670
Opening accumulated amortization (iii) (4,326,934) (3,161,761)
Addition (1,524,270) (1,165,173)
Closing accumulated amortization (iv) (5,851,204) ( 4,326,934 )
Net carrying value (ii-iv) 10,899,466 12,423,736
7. Assets held for sale

As at 31 December 2019 As at 31 December 2018
ATR 42-500 233,613,413 -
Total 233,613,413 -
7.1 As per the purchase agreement for ATR 42-600 signed between ATR and Drukair, the
old ATR 42-500 is be redelivered to ATR upon the arrival of the new ATR 42-600.
The new ATR 42-600 was delivered to Drukair on 22 October 2019. The aircraft ATR
42-500 will be redelivered to ATR on 28 January 2020. The carrying value of ATR 42-
500 as on 31 December 2019 is Nu. 233,613,413.
8. Investments- non current

Deposit with Bank - 50,000,000
Accrued Interest - 2,399,379
Total - 52,399,379
9. Trade & other receivables

Non Current
Trade debtors 13,078,459 17,306,575
Less: Provision for Doubtful debts (2,977,012) (3,703,470)
Total 10,101,448 13,603,105
Current
Trade debtors 100,709,333 114,377,559
Security deposit paid 56,286,196 51,604,053
Accrued income 7,163,092 6,082,807
Total 164,158,620 172,064,419
61
Annual Report 2019

10. Deposits for gratuity

Non-Current
Deposit with banks for gratuity 17,916,251 46,495,236
Accrued interest 3,924,865 5,911,008
Total 21,841,116 52,406,244
Current
Deposits with bank - gratuity 86,153,698 105,850,151
Accrued interest 11,189,737 5,625,342
Total 97,343,435 111,475,493
11. Deferred tax asset

Non Current
Deferred Tax Asset - 19,912
Total - 19,912
11.1 The deferred tax benefit is claimed during the year for the differential in interest in-
come due to effective interest calculated on fixed deposit encashed during the year.
12. Other noncurrent asset

Capital Advances 1,520,971,327 1,119,839,606
Total 1,520,971,327 1,119,839,606
13. Inventories
In-flight catering & duty free stocks 69,793,467 51,076,989
Stock of tickets 1,279,562 1,278,592
Gift stocks 709,441 770,429
Aircraft maintenance consumables 45,236,829 45,240,577
Uniforms 3,734,409 3,517,151
Total 120,753,707 101,883,739
62
Annual Report 2019

14. Cash and cash equivalents

Cash and cheques in hand 7,619,411 17,433,727
In current account with banks 688,768,595 622,651,701
Total 696,388,005 640,085,428
15. Other current assets

Advance to parties 32,726,447 109,933,554
Advance to employee 1,388,050 1,639,554
Prepaid expenses 32,567,213 32,977,281
RGOB subsidy receivable 96,388,231 106,058,345
Advance tax paid 47,318,406 37,068,911
Total 210,388,347 287,677,644
16. Share Capital

Authorized for 50,000,000 equity 5,000,000,000 5,000,000,000
shares of Nu 100 each
Total 5,000,000,000 5,000,000,000
Issued, Subscribed, and fully paid up
25,583,519 (PY 22,252,111) Equity 2,558,351,900 2,225,211,100
shares of Nu 100 each, fully paid
in cash
Total 2,558,351,900 2,225,211,100
Reserves (As per SOCE) 1,067,462,901 731,295,325
16.1 All ordinary shares are ranked equally. Fully paid shares carry one vote per share and
the right to dividends. There are no restrictions on the transfer of shares in the Com-
pany or on voting rights between holders of shares. Entire share capital is held by the
Holding Company Druk Holding & Investments (A Royal Government of Bhutan
Undertaking).
63
Annual Report 2019

16.2 Reconciliation of Share capital :

At the beginning of the year
- Number of shares 22,252,111 22,252,111
- Amount (in Nu.) 2,225,211,100 2,225,211,100
Add: issued during the year - -
- Number of shares 3,331,408 -
- Amount (in. Nu) 333,140,800 -
Less: Redeemed during the year - -
- Number of shares - -
- Amount ( in Nu) - -
At the end of the year -
- Number of shares 25,583,519 22,252,111
- Amount (in. Nu) 2,558,351,900 2,225,211,100
17. Borrowings- unsecured

As at 31 December As at 31 December
2019 2018
Non-Current
Drukair Bonds from National Pension and Provi- 1,028,424,212 1,244,767,565
dent Fund (Refer Note. 17.1)
Interest free loan from RGOB (Refer Note. 17.2) 84,526,669 118,337,336
Loan from National Pension and Provident Fund 585,517,135 -
Refer Note. 17.3)
Loan from SDF (Refer Note. 17.4) 942,500,000 -
Total 2,640,968,015 1,363,104,901
Current
Drukair Bonds from National Pension and Provi- 216,343,353 216,343,353
dent Fund (Refer Note. 17.1)
Loan from Druk Hondling & Investments - 321,000,000
Ltd.,(Refer Note.17.5)
Interest free loan from RGOB (Refer Note. 17.2) 33,810,667 33,810,667
Accrued interest but not due on Bonds 82,924,477 97,208,345
Accrued interest but not due on NPPF loan 36,795,779 7,787,548
Accrued interest but not due for SDF Loan 10,824,806 -
Total 380,699,082 676,149,914
64
Annual Report 2019

17.1 Bonds:
Following series of Bonds were issued to National Pension & Provident Fund for the
purchase of aircraft –JSW
• Drukair Bond series I of Nu. 246,886,529 at coupon rate of 9% repayable with-

in 10 years in 10 annual installments with last installment due on 2/24/2024
• Drukair Bond series I of Nu. 286,039,000 at coupon rate of 9% repayable with-

in 10 years in 10 annual installments with last installment due on 8/25/2024
• Drukair Bond series I of Nu. 1,630,508,000 at coupon rate of 8.5% repayable

within 10 years in 10 annual installments with last installment due on 3/3/2025
17.2 Interest free loan:
Interest free loan of Nu. 507,160,012.12 was obtained from Royal Government of
Bhutan for the purchase of aircraft BAE-146 and is repayable within 15 years in 60
quarterly equal installments.
17.3 NPPF loan
Loan amount in Ngultrum equivalent to USD 37,375,922 (Nu. 2,709,754,345) at in-

terest rate of 7.15% repayable within 10 years in 40 quarterly equal installments was
signed between Drukair and NPPF for the purchase of A320 Neo. During the year
Drukair has withdrawn Nu. 585,517,135 against this loan.
17.4 SDF loan
Loan of USD 13,000,000 (Nu. 942,500,000) was taken from SAARC Development
Fund at the interest rate of USD 6 months LIBOR rate + 2% p.a. repayable within 10
years semi annually for the purchase of ATR 42-600 aircraft.
17.5 DHI Loan
During the year DHI loan of Nu. 321,000,000 and corresponding interest of Nu.
12,140,800 was converted to issue of shares to DHI as per DHI letter No. DHI/
FD/04/2019/193 dated 4th April 2019.
65
Annual Report 2019

18. Provisions
Non-Current
Provisions for gratuity 89,252,909 53,475,462
Provisions for leave encashment 13,553,830 8,072,497
Liability for frequent flyer program 12,033,607 5,519,488
Total 114,840,346 67,067,447
Current
Corporate income tax liability 164,638,273 98,053,847
Provisions for gratuity 6,005,243 4,507,867
Provisions for leave encashment 323,154 306,642
Liability for frequent flyer program 6,016,803 11,038,976
Total 176,983,473 113,907,332
19. Trade and other payables

Current
Trade creditors 141,370,586 148,749,416
Accrued expenses 204,704,536 97,711,468
Deposits received 521,499,446 194,097,729
Employees payables 44,604,787 22,366,564
Total 912,179,355 462,925,178
20. Other liabilities

Current
Passenger advance sales 510,016,562 544,948,766
Deferred liability for credit memo 88,776,730 106,532,076
Liability for stale cheque 4,148,917 3,105,527
Taxes and duties payable (Refer Note. 90,686,922 79,991,933
20.1)
Deferred Government Grant for Do- 6,797,254 7,552,505
mestic Operations
Total 700,426,386 742,130,806
66
Annual Report 2019

20.1 Taxes and duties payable include the following CGST, SGCT and IGST receivable and
payable in Indian Stations as at 31 December 2019. On this, the Government of India
has not yet issued any circular for discontinuation of such credit available. Therefore,
the Company has decided to carry forward the net input credit for adjustments against
future payables if any.
CGST credit Available 12,114,766.86

SGST credit Available 9,819,605.86
IGST credit Available 8,189.83
CGST On Sales Payable -1,995,218.79
SGST On Sales Payable -1,995,218.49
IGST On Sales Payable -22,060.80
Net Credit available 17,930,064.47
21. Traffic revenue

For the year ended
Passenger revenue 3,453,070,832 3,041,943,421
Insurance & Fuel Surcharge 376,465,406 351,288,012
Excess baggage 16,577,964 20,223,861
Cargo Revenue 64,794,173 58,991,337
Chartered sales 117,348,727 94,867,672
RGOB grant for domestic operation 6,200,000 18,450,000
Total 4,034,457,102 3,585,764,303
22. Other operating revenue

For the year ended
Administrative fee 6,199,292 6,938,598
No show charges 13,097,270 8,905,314
Duty free sales 27,219,915 27,949,674
Commission earned 1,722,165 2,075,161
B3 Catering sales 28,642,876 19,744,110
Cancellation charges 34,282,382 32,477,630
Drukair Holiday Inbound sales 15,690,332 12,040,533
Cargo Transshipment and handling charges 568,113 -
Total 127,422,346 110,131,019
67
Annual Report 2019

23. Flight Operation Cost

For the year ended
Aircraft fuel and oil 880,708,083 983,318,643
Aircraft navigation charges 144,051,635 155,670,772
Aircraft landing and parking fees 88,890,661 90,491,531
Aircraft ground handling and security charges 288,596,736 288,291,502
Simulator expenses 18,970,564 18,029,568
Chartered Expenses 51,328,166 44,551,086
Crew meal and outstation expenses 60,166,403 65,281,413
Total 1,532,712,248 1,645,634,514
24. Other operation cost

For the year ended
In- flight catering expenses 148,975,357 134,096,401
Drukair holiday expenses 11,815,564 7,772,378
Disrupted flight expenses 9,624,089 14,581,595
Loss baggage claim 191,059 153,324
Purchase of duty free items 16,472,063 16,826,362
Service charges 11,493,058 10,320,989
Cargo transport & handling charges 1,555,191 1,514,034
Total 200,126,380 185,265,083
25. Aircraft maintenance cost

For the year ended
Consumption stores and spares 28,099,346 24,860,536
Aircraft maintenance 452,424,682 339,451,860
Less: Credit Memorandum Utilized (2,025,714) (23,427,720)
Freight charges 8,367,884 9,446,046
Stores & scrap written off 5,238,814 1,738,972
Total 492,105,013 352,069,695
68
Annual Report 2019

25.1 CFMI has provided a Credit Memorandum of USD 1,869,611 (Nu.135,546,798) against
the purchase of new aircraft that has been inducted in March 2015 and balance as on
January 1, 2019 was USD 89,194.25 (Nu. 6,466,583). During the year Credit Memo-
randum amounting to USD 121.25 (Nu. 8,791) was utilized. The balance amount of
unutilised Credit Memorandum at the end of 2019 is USD 89,073 (Nu. 6,457,792)
which can be utilised against the future repairs/purchase of the engines and the same
will be adjusted against the cost of repair/purchase on utilisation.
25.2 B/E Aerospace has provided Credit Memorandum of USD 16,535 (Nu. 1,198,788)
against purchase of equipment for airbus A319 (JSW). During the year there is no
utilisation against this credit memorandum. Therefore, the closing balance for the of
unutilised Credit Memorandum remains same as that of 31st December 2018 i.e., USD
13,273.54 (Nu. 962,332) which can be utilised against the future repairs of the engines
and the same will be adjusted against the cost of repair on utilisation.
25.3 During the year, Air France Industries (AFI) has provided Credit Memorandum of
USD 367,351.80 (Nu. 26,633,006) as compensation for the delay in redelivery of
engine from shop visit and balance as on January 1, 2019 was USD 27,819.63 (Nu.
2,016,923). During the year USD 27,819.63 (Nu. 2,016,923) was utilized against the
engine lease for the month of January, 2019. Therefore, there is no balance under this
credit memorandum from hereon.
25.4 During the year, ATR has provided Credit Memorandum of USD 150,000 (Nu.
10,875,000) as per credit note number 90607847 against good & services for the pur-
chase of ATR MSN 1412 and USD 4,000 (Nu. 290,000) as per credit note number
90607849 against letter of agreement No.6 for the purchase of ATR MSN 1412. The
balance credit memorandum from ATR as on 31 December 2019 is USD 154,000 (Nu.
11,165,000).
26. Other maintenance cost

For the year ended
Ground transport maintenance 656,484 714,692
Maintenance of ground transport equipment 4,783,227 6,402,806
Maintenance of hanger and workshop 113,225 18,573
Other maintenance 4,595,523 18,341,993
Total 10,148,459 25,478,063
69
Annual Report 2019

27. Employee cost

For the year ended
Pay and allowances 416,820,646 368,717,443
Leave travel allowance 6,452,496 5,327,080
Productivity Allowance 14,526,017 14,450,547
Bonus and variable pay 42,292,935 12,254,403
Overtime 779,871 1,399,776
Uniform/make up expenses 14,814,232 14,285,159
Medical expenses 1,478,712 2,395,732
Staff welfare 2,110,807 343,770
Staff training and development 30,094,047 43,290,433
Leave encashment 5,639,902.59 96,285
Provident fund contribution 11,311,311 8,465,008
Retirement benefits 7,126,364 11,740,987
Total 553,447,339 482,766,623
28. Marketing and sales

For the year ended
Marketing and sales promotion 7,416,058 8,388,695
Agent Commission 231,375,964 206,389,381
Advertisement & souvenir 437,415 2,045,546
Total 239,229,438 216,823,622
70
Annual Report 2019

29. Other cost

For the year ended
Board meeting expenses 922,964 835,462
Fee & subscriptions 16,411,600 13,991,801
Printing and stationery 7,746,947 6,970,539
Office expenses 1,095,517 937,336
Lease rent (non aircraft) 15,725,479 14,960,424
Travelling expenses 26,307,116 28,632,608
Transportation expenses 4,181,098 5,020,957
Rates and taxes 4,192,327 794,038
Insurance 46,432,991 39,785,054
In-flight magazine 1,652,108 1,866,906
Communication expenses 66,411,215 63,222,275
Electricity charges 1,631,590 1,311,999
Brand Management Fee 6,744,134 10,086,447
Entertainment expenses 1,729,087 1,953,025
Books & periodicals 288,446 295,444
Corporate Social Responsibility 4,561,069 1,870,000
Donation & grants 294,576 1,119,015
Employee Engagement & religious expenses 217,017 3,717,240
loss on sale of assets 3,739,393 -
Consulting fees 3,043,379 3,897,539
Audit fees & expenses 1,426,931 382,495
Hospitality expenses 859,708 2,369,953
Total 215,614,691 204,020,559
71
Annual Report 2019

30. Non operating revenue

For the year ended
Liabilities written off 42,102,456 -
Subsidy on Interest Expense on NPPF Bond 122,733,091 130,164,984
Interest income 7,918,411 11,707,587
Gain on sale of property, plant and equipment - 4,325,406
Forex gain 13,267,295 94,483,083
Rent and other recovery 586,602 9,158,741
VAT refund 4,603,947 -
Total 191,211,802 249,839,801
31. Finance cost

For the year ended
Bank charges 21,658,074 21,311,073
Interest on borrowing & others 163,483,209 137,952,531
Total 185,141,283 159,263,604
32. Earning Per Share (EPS)

Reconciliations of net profit for the year and ordinary share used in the computation of
basic and diluted EPS are as follows:
Basic EPS attributable ordinary shares For the year ended

Net profit attributable to the owners of the company 343,041,964 159,411,728
Issued and outstanding ordinary shares at the 22,252,111 22,252,111
beginning of the year
Share allotted to DHI during the year 3,331,408
Outstanding ordinary shares at the end of the year 25,583,519 22,252,111
Weighted average number of ordinary shares 24,762,076 22,252,111
Basic and Diluted EPS attributable to ordinary 13.85 7.16
shares
72
Annual Report 2019

33. Fair Value measurements

Particulars 31 December 2019 31 December 2018
FVPL FVOCI Amortized FVPL FVOCI Amortized
Cost Cost
Financial assets
Investment - 52,399,379
Security deposit paid 56,286,196 51,604,053
Cash and cash equivalents 696,388,005 640,085,428
Trade receivables 110,810,780 127,980,664
Other receivables 7,163,092 6,082,807
Total financial assets - - 870,648,073 - - 878,152,331

Financial liabilities
Borrowing 3,021,667,098 2,039,254,815
Trade payables 141,370,586 148,749,416
Security deposit received 521,499,446 194,097,729
Other payables 253,458,240 123,183,560
Total financial - - 3,937,995,370 - - 2,505,285,520

liabilities
(i) Fair value hierarchy
This section explains the judgments and estimates made in determining the fair
values of the financial instruments that are (a) recognized and measured at fair
value and (b) measured at amortized cost and for which fair values are disclosed
in the financial statements. To provide an indication about the reliability of the
inputs used in determining fair value, the Company has classified its financial
instruments into the three levels prescribed under the accounting standard.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted

prices.
Level 2: The fair value of financial instruments that are not traded in an active
market is determined using valuation techniques which maximize the
use of observable market data and rely as little as possible on enti-
ty-specific estimates. If all significant inputs required to fair value an
instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable

market data, the instrument is included in level 3. t
73
Annual Report 2019

(ii) Valuation technique used to determine fair value
Specific valuation techniques used to value financial instruments include:
• the fair value of the financial instruments is determined using discounted

cash flow analysis.

Carrying Fair value Carrying Fair value
amount amount
Financial assets
Investments - - 52,399,379 52,399,379
Trade receivables 110,810,780 110,810,780 13,603,105 13,603,105
Total 110,810,780 110,810,780 66,002,484 66,002,484
Financial liabilities
Borrowing 3,021,667,098 3,001,893,983 1,363,104,901 1,331,870,123
Total 3,021,667,098 3,001,893,983 1,363,104,901 1,331,870,123
The carrying amount for noncurrent investments and trade receivables are con-
sidered to be the same as the fair values.
The carrying amounts of current sundry debtor, cash and cash equivalents, cur-
rent investment, interest accrued, other receivables, security deposit given and
paid, trade payables and other payables are considered to be the same as their fair
values, due to their short-term nature.
The fair values for financial instruments were calculated based on cash flows
discounted using current borrowing rate. They are classified as level 3 fair values
in the fair value hierarchy due to the inclusion of unobservable inputs including
counterparty credit risk.
Significant estimates
The fair value of financial instruments that are not traded in an active market is
determined using valuation techniques. The Company uses its judgment to se-
lect a variety of methods and make assumptions that are mainly based on market
conditions existing at the end of each reporting period. For details of the key
assumptions used and the impact of changes to these assumptions see (ii) above.
74
Annual Report 2019

34. Capital management

(a) Risk management
The Company is formed as a wholly owned subsidiary of Druk Holding &

Investments Limited (DHI). For the purpose of the Company’s capital man-
agement, capital includes issued capital, General Reserve, Translation Reserve
and all other equity reserves attributable to the equity holders of the parent.
The primary objective of the Company’s capital management is to maximize
the shareholder value and ensure that funds are available to meet future com-
mitments. The Company manages its capital structure and makes adjustments
in light of the changes in economic conditions and the requirements of the
financial covenants. To maintain or adjust the capital structure, the Company
may adjust the dividend payment to shareholders, return capital to shareholders
or issue new shares.
Capital expenditure is mostly met from operating cash flows. Fixed term bor-
rowings are only made for major capital projects. Such borrowings are repaid
when the project is completed and generating positive cash flows. In addition to
commitments to outside parties, the company has a requirement to meet divi-
dend and tax expectations, as contained in the Annual Compact with the parent
company and RGoB. The amount mentioned under total equity in balance sheet
is considered as capital by the Company.
35.
Financial Risk Management

The Company’s activities expose it to credit risk, liquidity risk and market risk (i.e. foreign
currency risk, interest rate risk and price risk).
This note explains the sources of risk which the entity is exposed to and how the entity man-
ages the risk and the impact of it in the financial statements.
75
Annual Report 2019

Risk Exposure arising from Measurement Management

Credit risk Cash and cash equivalents, trade Aging analysis Diversification of
receivables, financial assets customer base
measured at amortized cost
Liquidity risk Borrowings and other liabilities Cash flow fore- Availability of
casts committed facilities
Market risk – Future commercial transactions Cash flow Diversification of liability
foreign ex- and recognized financial liabili- forecasting
change ties not denominated in Bhuta- Sensitivity anal-
nese Ngultrum (Nu.) ysis
Market risk – Long-term borrowings at fixed Sensitivity anal- Portfolio of loan contains
interest rate rates ysis fixed interest loans from
financial institutions
(A)
Market risk

(i) Foreign currency risk
Foreign Currency risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in foreign exchange rates.
The Company is in aviation industry and has its operation in various countries.
As a result, the Company is exposed to foreign currency exposure through its
operational activities. The risk is measured through a forecast of highly probable
foreign currency cash flows. Further the Company manages its foreign currency
risk by maintaining its foreign currency exposure, as approved by Board as per
established risk management policy.

Foreign currency risk exposure

The Company’s exposure to foreign currency risk at the end of the reporting
period expressed in Nu. are as follows:

Particulars
USD SGD USD SGD
Financial assets - - - -
Financial liabilities 115,494,401 8,107,557 114,733,800 6,519,126
Net exposure to foreign cur-
rency risk (115,494,401) (8,107,557) (114,733,800) (6,519,126)
76
Annual Report 2019


USD SGD USD SGD
Financial assets 207,463 6,780,978 2,448,548 11,573,016
Financial liabilities 13,788,846 - 9,899,324 -
Net exposure to foreign currency risk (13,581,383) 6,780,978 (7,450,776) 11,573,016

USD SGD USD SGD
Financial assets 2,021,668 12,888,555 2,906,812 19,427,977
Financial liabilities - 6,053,708 14,120,050
Net exposure to foreign currency risk 2,021,668 6,834,847 2,906,812 5,307,927
Sensitivity

The sensitivity of profit or loss to changes in the exchange rates arises mainly from foreign
currency denominated financial instruments.
Particulars Impact on profit before tax

SGD sensitivity
Nu. depreciate by 5% (405,378) (325,956)
Nu. appreciate by 5% 405,378 325,956
Nu. depreciate by 5% (5,774,720) (5,736,690)
Nu. appreciate by 5% 5,774,720 5,736,690
NPR sensitivity
Nu. depreciate by 5% 339,048.92 578,651
Nu. appreciate by 5% (339,048.92) (578,651)
Thai Baht sensitivity
Nu. depreciate by 5% (679,069.15) (372,539)
Nu. appreciate by 5% 679,069 372,539
Taka sensitivity
Nu. depreciate by 5% 101,083 145,341
Nu. appreciate by 5% (101,083) (145,341)
*Holding all other variables constant
As the value of INR is equivalent to Nu. historically, the company is not exposed to foreign
exchange risk arising from foreign currency transactions in INR.
77
Annual Report 2019

(ii) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. The Com-
pany’s exposure to the risk of changes in market interest rates relates primarily
to the Company’s long-term debt obligations with floating interest rates.

The Company has only fixed rate borrowings and are carried at amortised cost.
Further the loan given and investment made by the Company is at fixed rate
interest. Interest expenses/income, are therefore not subject to interest rate risk
as defined in IFRS 7, since neither the carrying amount nor the future cash flows
will fluctuate because of a change in market interest rates.

(iii) Price Risk

The risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices (other than those arising from
interest rate risk or currency risk), whether those changes are caused by factors
specific to the individual financial instrument or its issuer or by factors affecting
all similar financial instruments traded in the market. As the company does not
have any investment in listed securities which are exposed to price risk, company
is not exposed to significant price risk.

(B) Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations asso-
ciated with financial liabilities that are settled by delivering cash or another financial asset.
Management monitors rolling forecasts of the Company’s liquidity position and cash and
cash equivalents on the basis of expected cash flows. This is generally performed in accor-
dance with practice and limits set by the Company.
i) Maturities of financial liabilities
The tables below analyze the group’s financial liabilities into relevant maturity
groupings based on the contractual maturities for all financial liabilities. The
amounts disclosed in the table are the contractual undiscounted cash flows. Bal-
ances due within 12 months equal their carrying balances as the impact of dis-
counting is not significant.
78
Annual Report 2019

Contractual maturities of financial Less than 1 More than 1 Total

liabilities year years
December 31, 2019
Trade and Other Payables 912,179,355 - 912,179,355
Borrowings 250,154,020 2,640,968,015 2,891,122,035
Interest 130,545,062 130,545,062
Total financial liabilities 1,292,878,437 2,640,968,015 3,933,846,452
(C) Credit risk
Credit risk is the risk that counterparty will not meet its obligations under a financial instru-
ment or customer contract, leading to a financial loss. The Company is exposed to credit
risk from its operating activities (primarily trade receivables) and from its financing activities,
including deposits with banks and financial institutions and other financial instruments.
i) Trade receivables
Customer credit risk is managed by each business unit subject to the Company’s
established policy, procedures and control relating to customer credit risk man-
agement.
The Company’s long term trade receivable usually from government bodies and
management expects to recover the entire amount subsequently. However, the
management has evaluated the long term trade receivable for time value of mon-
ey impact and considered it for impairment as per BFRS 9. Other trade receiv-
ables are from sale agents with a credit tenure of 30-45 days.
However, from FY 2015 the Company takes bank guarantee or advance pay-
ments from the sale agents before issuing the ticket vouchers to them for further
sale to the customers. Trade receivables are usually from government bodies
which are non-interest bearing and are generally on credit term of 30-45 days.
The Company regularly monitors its outstanding customer receivables.
The ageing of trade receivables as of balance sheet date is given below. The age
analysis has been considered from the due date:
79
Annual Report 2019

Particulars Less than More than six More than Total

six months months less 3 years
than 3 years
Trade receivable as on 31 Decem- 100,709,333 63,671 13,014,788 113,787,792
ber 2018 (Gross)
Less: Provision for impairment (2,977,012) (2,977,012)
loss
Trade receivable as on 31 100,709,333 63,671 10,037,776 110,810,780
December 2019 (Net)
The requirement for impairment is analyzed at each reporting date. The maximum exposure
to credit risk at the reporting date is the carrying value of each class of financial assets dis-
closed in Note 33.
ii) Financial instruments and cash deposits
Credit risk from balances with banks and financial institutions is managed by
the Company’s finance department. Investments of surplus funds are made only
with approved counterparties in accordance with the Company’s policy. Coun-
terparty credit limits are reviewed by the Companies’ Board of Directors on
an annual basis. The limits are set to minimize the concentration of risks and
therefore mitigate financial loss through counterparty’s potential failure to make
payments. For banks and financial institutions, only high rated banks/institu-
tions are accepted.
36. Related party transactions

The Company is a wholly owned subsidiary of Druk Holding & Investments (a Royal Gov-
ernment of Bhutan undertaking). The Company considers that for the purpose of BAS 24
the Royal Government of Bhutan is in a position of control over it, and therefore regards
the Royal Government of Bhutan and its controlled companies/corporations as related par-
ties for the purpose of the disclosures required by BAS 24.
A summary of the Company’s transactions with the Royal Government of Bhutan and its
related entities is included below:
80
Annual Report 2019

Name of Relationship Nature of transaction with Transaction Receiv-

related party related party amount in able/
Nu. (Payable)
amount in
Nu.
Druk Holding & Holding com- a) Consideration for issue of 2,558,351,900 -
Investment pany equity shares
b) Sale of air tickets 3,090,311 35,951
c) Brand management fees for 6,744,134 -
2018
d) Misc. Revenue 8,475 8,475
e) Commission 125,417 (125,417)
f) Interest on Borrowings 4,353,288 607,042
g) Donations (5,909)
h) Corporate Guarantee fees 125,137 (125,137)
Bank of Bhutan Fellow Subsid- a) Sale of air tickets 4,230,298 143,104
Limited iary b) Bank Charges 9,413,258 -
c) Purchase of POS machine 34,500 -
d) Commission 160,336 (458,588)
e) Current account 145,880,447 -
Bhutan Power Fellow Subsid- a) Sale of air tickets 9,258,525 -
Corporation iary
Limited
b)Electricity Charges 1,388,756 (128,695)
Bhutan Telecom Fellow Subsid- a) Sale of air tickets 4,619,143 -
Limited iary b) Telephone and Internet 4,295,466 (306,443)
Charges
c) Purchase of modem 65,880 -
d) Rental Charges 67,002 -
Construction De- Fellow Subsid- a) Sale of air tickets 1,489,526 310,141
velopment Corpo- iary b) Misc. Expenses 15,408 -
ration Limited c) Commission 55,952 (55,952)
Dagachhu Hydro Fellow Subsid- sale of air tickets 672,710 23,914
Power Corpora- iary
tion Limited
Dungsum Ce- Fellow Subsid- sale of air tickets 697,229 (23,802)
ment Corporation iary
Limited
Druk Green Pow- Fellow Subsid- a) Sale of air tickets 3,378,391 441,700
er Corporation iary b) commission 105,464 (213,364)
Limited
81
Annual Report 2019

Name of Relationship Nature of transaction with Transaction Receiv-

related party related party amount in able/
Nu. (Payable)
amount in
Nu.
Natural resourc- Fellow Subsid- a) Sale of air tickets 2,041,324 173,067
es Development iary b) Commission 74,247 (74,247)
Corporation
Limited
State Trading Cor-Fellow Subsid- a) Sale of air tickets 1,419,044 -
poration Limited iary b) Commission 52,495 (129,485)
c) Purchase of vehicles 3,697,368 -
d) Purchase of ICT products 272,776 -
Thimphu Tech Fellow Subsid- a) Sale of air tickets 183,234 -
Park Limited iary b) Misc. Expenses 25,000 -
Wood Craft Cen- Fellow Subsid- a) Sale of air tickets 523,405 -
tre Limited iary b) Purchase of furniture 152,890 -
Koufuku Interna- Fellow Subsid- Purchase of dairy products 2,859,934 -
tional Limited iary
Bhutan Broad Fellow Subsid- Purchase of furniture 130,412 -
Product Limited iary
Dungsam Poly- Fellow Subsid- - - -
mers Limited iary
Bhutan Board Fellow Subsid- - - -
Export Limited iary
Tangsibji Hydro Fellow Subsid- - - -
Energy Limited iary
State Mining Cor- Fellow Subsid- - - -
poration Limited iary
Penden Cement Fellow Subsid- - - -
Authority Limited iary
Key management personnel (‘KMP’)
KMPs are those persons having authority and responsibility for planning, directing and con-
trolling the activities of the Company directly or indirectly including any director whether
executive or otherwise. Key management personnel of the company for the purpose of dis-
closure of compensation include the Chief Executive Officer as required by the Companies
Act of Bhutan 2016.
82
Annual Report 2019

Summary of compensation paid to the KMP:
For the year ended December 31,
2019 2018
Basic Salary, Allowance, PF and leave encashment 2,783,136.00 2,292,040.00
Sitting Fees 92,000.00 96,000.00
Leave Travel Concession 3,534.00 15,000.00
Total 2,878,670.00 2,403,040.00
As the liabilities for gratuity and leave encashment are provided on actuarial basis for the
Company as a whole, the amounts pertaining to KMP are not included above.
Reimbursement of expenses incurred by related parties for and behalf of the Company and
vice-versa, and the related outstanding amounts have not been included in the above disclo-
sures.
The disclosures given above have been recon the basis of information available with the
Company and relied upon by the Auditors.
37. Capital management and commitments

The Company has contractual commitments of about USD 105 million (Nu. 7,612,500,000)
exclusive of rebates to Airbus SAS for the purchase of one (1) A320 NEO Aircraft with
conversion right to A319 NEO. Out of USD 105 million as on 31st December 2019 the
Company paid USD 21,263,322 (Nu. 1,541,590,845). The balance amounts are to be paid
as per the purchase agreement signed between Drukair and Airbus SAS on 10th April, 2018.
38. Contingent liabilities

i) On behalf of Air India, the Embassy of India has sent a reminder vide letter
No THI/Adm/551/1/2015 dated 07.12.2015 to settle outstanding due payable
to Air India at the earliest possible. This outstanding amount of Rs 21.70 mil-
lion is purported to be the pax compensation on the 5th freedom sector under
commercial agreement which was applicable up to 11.09.2006. The Liabilities
against this claim has not been provided in the current year accounts in light of
the matter being appealed at the highest level of both governments.
ii) As per Notice of Demand raised by the Revenue Department Nepal in re-
spect of the year 2014-15 total assessed amended tax is NPR 34,897,711.00
against which NPR 5,600,136.00 was already paid by way of advance submit-
ted tax leaving a balance due of NPR 29,297,575.00. In 2018, the Station has
deposited NPR 9,800,000.00 (33% of NPR 29,297,575.00) to appeal the case
83
Annual Report 2019

to Inland Revenue Department, Nepal for administrative review and waiver.
However, the Inland Revenue Department has passed the resolution against
Drukair’s favour. During the year the Company has further deposited NPR
4,980,588 as security deposit to Inland Revenue Office to appeal the case in the
Revenue Tribunal court. The case is still pending with Revenue Tribunal court.
iii) The tax assessment of the Company was carried out till 2017. There is a tax
demand of 5,457,834.18 pertaining to 3% TDS for commission for foreign
agents. To this, the Company has submitted an appeal to Department of Reve-
nue and Customs and the case is still pending as on 31 December 2019.
39. Other Notes to Accounts

i) Gratuity:
Defined Benefit Plans
Valuation in respect of Gratuity has been carried out by independent actuary,

Royal Insurance Corporation of Bhutan Ltd., Bhutan. The present value of the
defined benefit obligation, and the related current service cost and past service
cost, were measured using the Projected Unit Credit Method.
Disclosure as per BAS 19, ‘Employees Benefit’ for defined benefit scheme (Gra-
tuity)
1: Changes in Present Value of Obligations:

Period Year 2019
Present value of the obligation at the beginning of the period 57,983,329
Interest cost 4,217,074
Past service cost 3,004,835
Current service cost 7,346,156
Benefits paid (if any) (3,511,350)
Actuarial gain/(loss) 26,218,108
Present value of the obligation at the end of the period 95,258,152
2: The amount to be recognized in the Balance Sheet:

Period Year 2019
Fair value of plan assets at end of period 104,069,948
Net liability/(asset) recognized in Balance Sheet and related analysis 8,811,796
Funded Status 8,811,796
84
Annual Report 2019

3 (a): Expense recognized in the statement of Profit and Loss:
Period Year 2019
Interest cost 4,217,074
Past service cost 3,004,835
Expected return on plan asset (7,805,246)
Expenses to be recognized in P&L 6,762,819
3 (b): Other comprehensive (income) / expenses (Remeasurement)

Period Year 2019
Actuarial (gain)/loss - obligation 26,218,108
Actuarial (gain)/loss - plan assets 7,805,246
Total Actuarial (gain)/loss (34,023,354)
4: Table showing changes in the Fair Value of Planned Assets:

Period Year 2019
Fair value of plan assets at the beginning of the period 152,345,387
Expected return on plan assets 7,805,246
Contributions (48,275,439)
Benefits paid 0
Actuarial gain/(loss) on plan assets (7,805,246)
Fair Value of Plan Asset at the end of the Period 104,069,948
5: The assumptions employed for the calculations are tabulated:

Discount rate 7.50 % per annum
Salary Growth Rate 7.00 % per annum
Mortality 100% of IALM (2006-08)
Withdrawal rate (Per Annum) 5.00% p.a.
6: Bifurcation of net Liability

Period Year 2019
Current Liability (Short Term)* 6,005,243
Non Current Liability (Long Term) 89,252,909
Total Liability 95,258,152
ii) Leave Encashment Liability
This has been determined by actuarial method at Nu 13,876,984 the following is the summa-
ry of leave encashment as per the actuary valuation report:
85
Annual Report 2019

The table below shows a summary of the key results for the year ending 31 December 2019:
1: Present Value of Obligations:

Period Year 2019
Present value of the obligation at the beginning of the period 8,379,139
Interest cost 142,058
Past service cost 0
Benefits paid (if any) (6,485,031)
Actuarial (gain)/loss 6,342,973
2: The amount to be recognized in the Balance Sheet:

Period Year 2019
Fair value of plan assets at end of period 0
Net liability/(asset) recognized in Balance Sheet and related analysis 13,876,984
Funded Status 13,876,984
3 (a): Expense recognized in the statement of Profit and Loss:

Period Year 2019
Interest cost 142,058
Past service cost 0
Expected return on plan asset 0
Expenses to be recognized in P&L 5,639,903
3 (b): Other comprehensive (income) / expenses (Remeasurement)

Period Year 2019
Actuarial (gain)/loss - obligation 6,342,973
Actuarial (gain)/loss - plan assets 0
Total Actuarial (gain)/loss 6,342,973
4: The assumptions employed for the calculations are tabulated:

Discount rate 7.50 % per annum
Salary Growth Rate 7.00 % per annum
Mortality 100%of IALM (2006-08)
Withdrawal rate (Per Annum) 5.00% p.a.
86
Annual Report 2019

5: Bifurcation of net Liability
Period Year 2019
Current Liability (Short Term)* 323,154
Non Current Liability (Long Term) 13,553,830
Total Liability 13,876,984

iii) Liability for Frequent Flyer Programme
This has been determined by actuarial method at Nu 18.05 million (PY Nu 16.56
million). The Following Actuarial estimates were used to determine the Actuarial
Liability in 2018:
(a) Redemption Rate- 75%

(b) Loyalty Points accrued- 12,753,406
(c) Cost Per Point- 2.03
iv) Segment Information
For management purposes, the company has only one operating segment viz.
transport of people and cargo by air, mainly from Bhutan to neighbouring
countries. The company also transports people and cargo from India to third
countries and also domestically within Bhutan, but these activities are part of
the main activity. Therefore, the company’s profit and loss account and balance
sheet represent the results of this sole segment. During the year 2019, the com-
pany carried 281,663 no. of revenue passengers and 376,491.36 kg of cargo (PY:
285,397 no. revenue passengers and 347,838 kg of cargo).
v) Government grants
Grants from RGOB and other organisations relating to costs are recognised in
the income statement over the period necessary to match them with the costs
that they are intended to compensate.
vi) Benefit of Interest Free Loan
There is an interest free loan outstanding and due to the RGOB to the extent of
Nu 118 million (PY Nu. 152 million) as on 31-12-2019. The estimated interest
expenses of this loan has not been accounted for in the books of the Company.
If the interest is considered at 9% p.a., the expenses on account of this interest
for the year 2019 would be Nu 11.79 million (PY Nu 14.83 million).
87
Annual Report 2019

40. Events after the reporting period
This financial statements do not reflect any dividend payable to the shareholder as dividend
pay out is subject approval by the members in the General Meeting to be held to adopt the
financial statement for the year ended December 31, 2019. At the reporting date no proposal
for dividend declaration was received.
Signatures to Notes “1 to 40” of the financial statements for and on behalf of the Board of
Directors



UDIN- 20056060AAAAA25656
Place: Kolkatta
Dated: 04.06.2020
Rinzin Dorji
Director FCSD

Place:Thimphu
Dated: 03.03.2020
88
Annual Report 2019
RATIO ANALYSIS
ANNEXURE-I
Sl no. Particulars 2019 2018

A. Ratios for assessing financial health (in numbers)
I Current Ratio 1.40 0.66
II Debt equity Ratio 0.83 0.69
III Liquid Ratio 1.32 0.53
IV Fixed Assets to Equity 1.51 1.30
V Fixed Assets Turnover 0.74 0.94
VI Inventory Turnover for Engineerinf items 0.62 0.55
B. Ratios of assessing profitability (In percentage)
I Return on equity (%) 9.46% 5.39%
II Return on Capital employed (%) 7.64% 5.24%
III Operation and Maintenance expenses to Traffic Revenue 50.19% 55.71%
IV Earning Per Share 13.85 7.16
C. Ratios for assessing cashflow efficiency (In numbers)
I Casho flow turnover 0.35 0.13
II Operation Index 4.14 2.95
89

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Annual Report 2019

Drukair Corporation Limited

THE YEAR IN REVIEW

5. Corporate Governance Report................. 13

6. Independent Auditors’ Report...................18

Vision: To be the leading airline connecting Bhutan and the world

Slogan: On the wings of the dragon

Destinations: 10 International & 3 Domestic destinations with Paro International Airport

Board Audit Committee

Chief Executive Officer Legal / Company Secretary

Corporate Support Services

Head - Flight Head -

Head - Catering and Head - Ground

CHAIRMAN BOARD DIRECTOR BOARD DIRECTOR

BoarDDirector BOARD DIRECTOR BOARD DIRECTOR BOARD DIRECTOR

Mr. Rinzin Dorji, Mr. Namgay Mr. Karma Phuntsho

The total non-current asset of the company increased by 39.49%, to Nu.

The expenditures increased marginally by 4.38%, to Nu. 3,845.04 million from

2.4. Profitability of the company

In order to take forward its mandates, Drukair is making investments in Air-

The on time performance for the year is 99.6%.

5. HR and other systems

7. Corporate Social Responsibility

8. Statutory Audit Report

CEO and Board Remuneration

Annual General Meeting

The AGM decided as followings:

Risk Management Systems

Corporate Social Responsibility

Policies and Practices of CEO and Board Evaluation

Basis for Opinion

Key Audit Matters

Our opinion is not modified in respect of above mentioned matter.

Responsibilities of Management and Those charged with Gover-

Auditor’s Responsibilities for the Audit of the Financial

Further, we exercised professional judgment and maintained professional skepticism through

Report on Other Legal and Regulatory Requirements

As required by section 265 of the Act, we report that:

c) The Statement of Financial Position, Statement of Comprehensive Income, Statement

For Ray & Ray

b) Obtain an understanding of internal control relevant to the audit in order to design

c) Evaluate the appropriateness of accounting policies used and the reasonableness of

d) Conclude on the appropriateness of management’s use of the going concern basis of

3. Physical verifications were conducted at reasonable intervals in respect of inventories

Name of Nature of Due Amount Month of Due Actual date Delay

Nature of dues Outstanding Amount Amount

41. Computerized Accounting Environment:

1. Going Concern Problems

2. Ratio Analysis (attached separately)

3. Compliance with the Companies Act of the Kingdom of Bhutan:

According to the information and explanations given to us by the management

4. Adherence to Laws, Rules and Regulations:

Audit of the Company is governed by the Companies Act of Bhutan, 2016

For Ray & Ray

Statements of Financial Position as at 31 December 2019.........................32

Statements of Comprehensive Income for the years ended

Statements of Changes in Equity for the years ended

Statements of Cash Flows for the years ended 31 December 2019..........38

Notes forming part of the Financial Statements..........................................39