Taiwan's airlines can expect a better financial performance this year as passenger and cargo numbers pick up, but the core problem of overcapacity continues to plague domestic carriers, the new chairman of the Taipei Airline Association (TAA) said yesterday.
Mike Lo (
"All the indicators, especially on cargo, are going up. So I believe this year should improve," Lo said.
Nevertheless, the government will need to play a hand in helping reduce the number of domestic airlines from four to two, he said.
"What we are saying to the government is this industry is in trouble," said Lo, who was selected as chairman of the association that represents the nation's six airlines last week.
"The government could reduce our costs with tax breaks and facilitate mergers. Also it could reduce landing fees and fuel prices which are much higher than international prices," he said.
While the government may be willing to lower costs, it has drawn the line at helping to facilitate mergers, although Minister of Transportation and Communications Lin Lin-san (林陵三) said in February that he believes that the nation's four domestic airlines will be able to merge into two companies without government assistance.
While the airlines recognize the need for consolidation, the task of coordinating mergers remains a hurdle yet to be overcome.
The poor financial performance of all four domestic airlines pushed Chang Jung-fa (
Lin said that the government had done its part by creating preferential conditions for fuel and airport service charges.
Lo will get a chance to air his views to the minister as the pair will be meeting to discuss the ailing sector next Tuesday, when he will also inquire as to government plans to bolster the tourism industry, which Lo says is another factor vital to producing a much-needed lift for the airlines.
While maintaining that government assistance would be needed to facilitate consolidation of the industry, Lo said that mergers may not necessarily be the answer.
"It's not just that we have too many airlines, but also too many aircraft and too many flights. The Taipei-Kaohsiung route, for example, has more flights than any other pair of cities in the world, resulting in an average load factor of less than 60 percent," Lo said.
Since all four carriers are using different kinds of aircraft, Lo suggested that coordination among airlines on flight frequencies and route allocation would be a logical starting point.
As for the impact of a possible loosening on the ban on direct cross-strait flights, Lo said that while it offered a greater market for struggling Taiwanese airlines, Chinese routes may not be the panacea many are hoping for.
"People believe that once the air links become a reality, there will be a lot of movement. Certainly the pie will become bigger. But in reality it won't be a one-way street. Once the link is established, China will also have carriers on the routes," he said.
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