New train could spell doom for airlines

To counter the impact the nation's first high-speed railway will have when it opens next year, four local air carriers met yesterday with aviation authorities to discuss a possible merger plan, but a government official said the plan still has a long way to go.

"There are a lot issues regarding personnel, taxation, finance and other issues to be resolved before the four companies could officially engage in a merger," Billy Chang (張國政), director-general of the Civil Aeronautics Administration (CAA) and host of the meeting, said yesterday. "The four companies are evaluating whther the merger is a viable measure of saving their businesses."

Representatives from TransAsia Airways (復興), Mandarin Airlines (華信), UNI Airways Corp (立榮) and Far East Air Transport Corp (遠東) attended the closed-door meeting. No conclusion was reached at the meeting.

The four carriers have suffered a drastic drop in passenger numbers over the past few years, and expect to see a further decline next year, as the yet-to-be launched high-speed railway will cut travel time between Taipei and Kaohsiung from almost four hours to an hour-and-a-half at fares that will be 20 percent to 30 percent lower than current air fares.

Taiwan High Speed Rail Corp (台灣高鐵), a private company that will operate the bullet train, estimates that the fare for the Taipei-Taichung route will be between NT$700 and NT$800, while Taipei-Kaohsiung will be about NT$1,200 to NT$1,500. The 345km-long railway is slated to begin commercial operation in October 2005.

According to a CAA report, the Taipei-Taichung route will suffer the most from the operation of high-speed railway, which is expected to cut airlines' passenger numbers by 51.5 percent. Taipei-Pingtung traffic will also be reduced by 47.2 percent, while 46.7 percent of Taipei-Kaohsiung passenger are expected to switch to high-speed rail.

In 2002, Evergreen Group (長榮集團) chairman Chang Jung-fa (張榮發), whose company operates EVA Airways Corp (長榮航空) and Uni Airways, said Taiwan has long faced over-capacity, with four airlines operating in a market only large enough for two. He urged the government encourage and coordinate merger activity among carriers.

Analysts had said consolidation in the industry is necessary, but said that differences in corporate culture and fleet composition were key areas to watch when determining the viability of a proposed merger.

Janet So (湛華生), public relations manager at TransAsia Airways, urged the government to come up with concrete merger policies and incentives that will protect the interests of the airlines.

"At this point, we can only adjust our structure, such as cutting money-losing routes and downsizing personnel to cut costs as much as possible," So said.

Huang Yu-lan (黃尤欄), a public relations official at Mandarin Airlines, an arm of China Airlines Co (華航), said the company will follow the government's decision if a merger is a necessary move to buffer the impact.