Mar 2007 > Executive Interview Back to latest issue

Biting the bullet

Taiwan's local carriers join forces as new train service takes its toll


UNI Air: Japan flights came just in time
Taiwan’s four main domestic airlines are aiming to pool their resources to ease the loss of passengers to the island’s new bullet train, while pursuing independent strategies on regional routes to bolster their flagging businesses.

Mandarin Airlines, UNI Air - offshoots of China Airlines and EVA Air respectively - Far Eastern Air Transport Corp (FAT) and TransAsia Airways were already suffering a steady decline in domestic traffic, from 10% to 15% a year in Mandarin Airlines’ case, before the service started.

The train now threatens to make that worse. Launched in early January, it whisks travellers from Taipei to Kaohsiung in 90 minutes, twice the flight time, but considerably less in total when flight procedures are taken into account, making a further dent in demand on the carriers’ most highly-used home route. It also links major cities on the way, including Tainan.

The US$15 billion rail system was delayed by more than a year by technical problems, but its likely economic impact has long cast a shadow over future operations by airlines waiting for the massive boost that scheduled cross-strait services will bring.

In the meantime, they are planning to allow passengers to switch from one carrier to another on the Kaohsiung route, without a ticket endorsement, smoothing the way for travellers to take a flight at any time that suits them and at short notice. Details of the agreement, likely to go into operation in March, are before Taiwan’s Fair Trade Commission, which has already agreed to it in principle.

The carriers are also now pushing for permission to reduce their domestic services by more than the 20% allowed by the commission last year. “Without the high-speed train we were only attracting about 85% of [previous] traffic. We can’t accept that decision,” said Irving Chu, public relations director at Mandarin Airlines.

Mandarin expects to cut its Kaohsiung flights from 10 a day to six or seven and all carriers are expecting a further drop in passengers of at least 25% - and in some cases much more - when the early excitement surrounding the train and cut-price tickets has evaporated.

Extra services over the Lunar New Year period in February, both in Taiwan itself and cross strait by all four carriers under the holiday charter agreement, were also blurring the picture at press time.

The trend away from the home market seems inevitable. “The Taiwan market is slowing down. Our only hope is direct flights and everybody feels we won’t see those until after 2008,” said Hanson Chang, public relations manager at Far Eastern Air Transport Corp.

While the wait goes on, FAT has put considerable resources into services to Jeju - a route also operated by TransAsia and UNI Air - using the island off the tip of South Korea as a transfer point to Shanghai, Beijing and Zhenjiang. 

China Eastern Airlines and China Southern Airlines act as its mainland partners, saving passengers some two or three hours on the travelling time when beating the cross strait ban by transiting through Hong Kong or Macau.

FAT’s four daily flights to Jeju will be increased to five in March and six in April. Shanghai connections also will rise to five within two months, while the carrier looks for further connections, to Hangzhou or in the southeastern area of China.

All four domestic airlines fly to Kinmen, the mainland-administered islands where Taiwanese are allowed to take the 40-minute ferry ride to Fujian province and on to Xiamen, if they can prove they have investments in China.

FAT, which operates a 15-strong passenger fleet of MD-82s, MD-83s and B757s, has seen international operations increase to 50% of its business from 10% five years ago.

It also flies to Incheon, Kota Kinabalu in Malaysia and Phnom Penh.

Meanwhile, UNI Air won the right to operate charters to Japan in the knick of time, said Peter Chen, president of  UNI’s parent, EVA Air. The green light allowed the carrier to switch MD-90s away from domestic routes just as the train service finally got underway.

“UNI Air had a stable 2006,” said Chen. “But all domestic carriers face a severe threat to operations.” EVA has also leased a number of UNI’s MD-11s for use on its Phnom Penh, Macau and Hanoi services, while UNI also flies to the Vietnamese capital under its own name.

“That way they don’t face a surplus of aircraft. And once cross-strait services open up, EVA will work closely with them to efficiently utilize both fleets,” said Chen.

Mandarin Airlines has targeted Vietnam as well, although in this case its destination is Ho Chi Minh City, with a three-times weekly charter service - going up to daily in July - from the central city of Taichung, aiming at business from both Taiwanese and returning Vietnamese workers. It also serves Hong Kong from Taichung, in cooperation with Hong Kong Express.

Some 30% of its business comes from the Kinmen route, through three daily flights by its Fokker 100s and on the day Orient Aviation spoke to Hsu he was excited by the prospect that travellers from Fujian might be allowed free access to Taiwan via the islands.

“If it’s true, it would more than double the traffic,” he said.

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