Thu, May 22, 2003 - Page 10 News List

Airlines get bailout funds

HEAVY TURBULENCE Domestic air carriers are slated to receive welcome relief, as SARS slashes revenues and depresses flight bookings to unsustainable levels

By Joyce Huang  /  STAFF REPORTER

A sleeping passenger wear a mask to protect against SARS on an almost empty Dragonair flight from Hong Kong to Beijing yesterday. Regional airlines have seen passenger volumes plummet as much as 75 percent since the outbreak of SARS in March. Taiwan's government has approved funds to rescue the ailing industry.


The government will lend NT$4.5 billion (US$130 million) and NT$4 billion (US$115 million) to China Airlines Co (CAL, 華航) and EVA Airlines Corp (長榮航空), the nation's two international air carriers, pundits said yesterday.

Yesterday's decision, in a closed-door inter-ministerial meeting, was held to help airlines weather the SARS triggered fall-off in revenue and passenger traffic.

"The government has agreed to offer credit-guaranteed loans of NT$4.5 billion and NT$4 billion, respectively, for a period of up to two-and-one-half-years, an industry source, who requested anonymity, told the Taipei Times.

Before the meeting, Chinese-language media reported that the two airlines had sought government help in securing up to NT$9 billion in preferential loans to survive the crisis. Taiwan's four smaller airlines are also looking for cash with Uni Airways Corp (立榮航空) requesting some NT$800 million.

The bailout plan for all six airlines may cost the government some NT$10 billion in credit-guaranteed loans, the media reported.

Council for Economic Planning and Development Vice Chairwoman Ho Mei-yueh (何美玥), who headed the meeting, was not available for comment as of press time yesterday.

Both international airlines also refused to confirm the news, but did say they are in dire straits.

"The situation is worsening," EVA spokesman Nieh Kuo-wei (聶國雄) said, "the company's occupancy rate on Asian routes has dropped to between 30 percent to 40 percent, and US and European routes barely remains at 50 percent."

Most airlines need 70 percent occupancy to break even.

Last week, CAL and EVA both reported a drastic drop in last month's sales with CAL seeing a 23.8 percent drop in revenues from a year earlier. EVA saw a 9.34 percent drop in last month's revenues from a year earlier, but has since suffered a 35.86 percent drop in passenger travel in the same period before it was granted the lucrative Hong Kong to Taipei route.

Both carriers are still financially viable but have lost over NT$100 million each in just one month and may see performance worsen in the second quarter, an industry analyst said yesterday, requesting he not be named.

Of greater concern is whether weak domestic air carriers will survive the financial turbulance or declare bankruptcy if the government fails to lend a hand, the analyst added. Media has speculated Far Eastern Air Transport Co (遠東航空) may be the first to go under.

Far Eastern has recently begun to launch merger-and-acquisition talks with China Airlines and Trans-Asia Airways (復興航空) with plans to cut 10 percent of its payroll by eliminating about 120 jobs soon.

To weather the crisis, the analyst yesterday advised financially troubled carriers to seriously consider consolidation through mergers and lay-offs.

"A merger plan will help bring in capital while lay-offs will help cut back costs," he said.

China Airlines, in addition, recently proposed an early retirement plan, providing employees with three to six months pay and encouraging employees to take unpaid leave.

"The plan aims to cut back unnecessary staff but will be conducted on a voluntary basis," CAL spokesman Roger Han (韓梁中) said.

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