Far Eastern Air's revenue slips over last five months

Taiwan's only profitable domestic airline, Far Eastern Air Transport Corp (遠航) declared yesterday that its revenues for May had fallen by 5.3 percent to NT$563 million over the same period last year.

Total revenue for Far Eastern, which was the only domestic airline to turn a profit last year, has also fallen over the last five months by 0.18 percent to NT$2.7 billion, while the company's stock has dropped in value by over 40 percent.

Company sources attribute the stock drop to rumors that shareholder China Airlines (華航) is planning to sell off its 9 percent stake, while analysts say the revenue fall is due largely to a weakening economy, lower passenger numbers and overcapacity.

"The market is declining and there is a very serious overcapacity issue ... this has been worsened by the current economic conditions," said Linda Liu, an analyst at Primasia Securities Co. According to Liu, this is not the first year things have looked bad for domestic airlines.

"The total domestic passenger aviation market is declining ... it's not the first year it's been declining ... [and] the trend is continuing," Liu said.

According to the Civil Aeronautics Administration (CAA, 民航局), passenger numbers fell 18.6 percent between 1999 and 2000. The problem is simply that there are too many airlines and not enough passengers to go around.

To combat overcapacity, the government is reviewing a plan to consolidate the nation's four domestic airlines into two companies.

It is hoped that this plan in combination with the establishment of direct cross-strait air links with China sometime in the future, will bring profitability to the nation's domestic aviation market.

The three other domestic airlines -- Uni Airways Corp (立榮航空), TransAsia Airways (復興航空) and Mandarin Airlines (華信航空) -- have all lost money in 2000 and are projecting losses again this year.

Far Eastern Air is the largest of the domestic carriers and reports are upbeat that it will expand its 38-percent market share to 42 percent this year.

According to Far Eastern Air, passenger load factors on domestic routes stand at around 57 percent. The company expects the figure to climb to around 70 percent if cross-strait routes are offered to Taiwan-based carriers.

Last year, Far Eastern's board approved an investment budget of US$10 million and has received approval from China's civil aviation authority to operate aircraft maintenance services there.

But the chances of China routes becoming available anytime soon are slim since neither official or semi-official dialogue has taken place between the two countries since 1999.