Air Timor (6C, Dili) has terminated flights to Denpasar, Indonesia as of January 10, 2017, blaming Timorese government policy for having enabled Indonesian carriers to dump capacity in the market.

The service commenced in September 2015 and operated daily in partnership with Indonesian LCC Citilink (QG, Surabaya).

In a statement, Air Timor President Abessy Bento singled out Vice-Minister of Public Works, Transport and Communications, Inácio Moreira, for policies, he believes, have damaged the country's aviation industry and interests.

In the first instance, he lambasted the minister for having allowed NAM Air (IN, Jakarta Soekarno-Hatta) to start Dili-Denpasar flights in late 2015 despite Air Timor and Citilink's existing service.

"There were so many seats available compared to market demand that the three airlines could only achieve 50% or less Load Factor. Airlines usually need 70% to breakeven. Air fares dropped to USD70 - far below normal market prices," he said adding that Nam Air had palmed excess capacity off onto its Sriwijaya Air (SJ, Jakarta Soekarno-Hatta) parent thus exacerbating the situation.

Bento said Air Timor had incurred cumulative losses of USD3 million as of December 2016 as a result of NAM & Sriwijaya Air's market entry. With Moreira's decision to renew NAM Air's access to the Dili market, Air Timor could no longer operate the route.

"Over the last eight years we have built one of Timor’s best companies, been a big taxpayer and supporter of Tourism and support of the Government. In one year Government policy has destroyed us."

In the second instance, Bento singled out what he said was Moreira's inconsistent application of policy.

He claims that in April 2016, the Ministry asked Air Timor to replace its eighteen year-old A320-200 with a younger model. Timorese ageing aircraft regulations limit commercial airliners to twenty years of age before they are ineligible for service.

While Air Timor complied, Bento says Moreira's threat to bar NAM Air and Sriwijaya Air from Dili should they not comply, was not enforced despite their alleged violation of the directive.

Owing to knock-on effects from the Denpasar route price war, Air Timor said it would shortly reduce its only remaining destination - Singapore Changi - from 3x weekly to 2x weekly. The service operates in tandem with SilkAir (MI, Singapore Changi).

"If the Singapore route is not revived it will close in 2017," Bento ended.

Neither Sriwijaya Air nor Minister Moreira were immediately available for comment.