Airlines fight competition from China

Local air carriers are pondering ways of improving their cross-strait routes in response to an agreement signed by China and Hong Kong to expand passenger and cargo air services, which may snatch a slice out of Taiwanese airlines' profits, company officials said.

Beijing on Wednesday announced a plan to open more flights between Hong Kong and various cities in China. Under the agreement, overall passenger capacity between China and Hong Kong will be increased by 30 percent from next month, which gives Hong Kong carriers an advantage in operating cross-strait routes in terms of time and costs.

"I think the pact will more or less influence our business on China routes ... we will provide more incentives to secure our customers," said Roger Han (韓梁中), spokesman for China Airlines (華航), the nation's largest carrier.

China Airlines and smaller rival EVA Airways Corp (長榮) fly to various cities in China via Hong Kong or Macau. As direct transportation between Taiwan and China is still banned, the two companies work with Chinese airlines to carry their passengers from Hong Kong or Macau to China.

Although Hong Kong and Macau airlines departing from Taipei also need to stop at a third destination before flying to China, they are allowed to enter the communist country with the same planes, which shortens transfer times and reduces the hassle of moving passengers from one plane to another. In addition, these carriers have more flexibility in cost control compared with Taiwanese carriers.

Currently, Air Macau (澳門航空) is applying the model, which allows it to keep stopover times to under an hour.

The strategy works to attract business travelers, said Jerry Lin (林明華), a deputy manager at Lion Travel Service Co (雄獅旅行社), the nation's largest travel agency.

Lin said although Air Macau offers only three flights a week from Taipei to Shanghai, the destination in China most visited by Taiwanese travelers, the company's service has attracted many business travelers, which constitute 70 percent of all Taiwanese passengers flying to China.

As Chinese carriers have bad records as far as following flight schedules is concerned, business passengers tend to choose Air Macau to avoid delays, Lin said.

Han said that local carriers' business will be significantly affected if Cathay Pacific Airways, the dominant carrier in Hong Kong, and smaller Dragonair also adopt the model.

To secure customers, China Airlines announced a deal to cooperate on its mileage programs with China Eastern Airlines Corp (中國東方航空) to transfer its customers from Hong Kong to Shanghai. The plan would enable passengers of China Airlines flying between Taiwan and China to accumulate airmiles on the entire trip, starting next month.

Han said China Airlines hopes to create more frequent flyers with the partnership, adding that the company intends to extend the program to Air China (中國航空), which carries its passengers to Beijing.

China Airlines will also seek other stopover destinations, Han said. For example, passengers going to Shanghai will be able to stop over in Okinawa, which has a smaller airport and would ensure easier and faster transfers, he said.

EVA Airways' public relations specialist Eric Lin (林司忠) said his company is also aware of the potential threat and has engaged in talks with partners to improve service and reduce transfer times.