Tue, Jan 18, 2005 page11

• Airlines bet on flights to China

  PLANNING AHEAD Airlines say profit is secondary to the advertising benefits the holiday charters will have, but not everyone thinks direct flights will follow soon

  • BLOOMBERG
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  China Airlines (CAL, 華航) and five other domestic carriers signed up to operate nonstop Lunar New Year charters to China, betting the largely symbolic, unprofitable flights may lead to a money-making regularly scheduled service in the future.

  "Our focus isn't profit, but the goodwill across the Taiwan Strait that may lead to future talks on direct links and great business opportunities," said Nieh Kuo-wei (聶國維), a vice president of EVA Airways Corp (長榮), which participated in the first holiday charters two years ago.

  "We broke even in 2003, but other airlines lost money," Nieh said.

  The flights, for four weeks beginning Jan. 29, will be an expanded version, with carriers from China participating for the first time. Instead of having to stop over in a third country, the nonstop flights will be required merely to pass through Hong Kong airspace.

  Shares in China Airlines, the nation's biggest carrier, and No. 2 EVA Airways rose as investors bet the resumption, after cross-strait bickering derailed them last year, portends warmer relations between China and Taiwan. The TAIEX rose 1 percent to 5,945.27.

  "The flights will help restore investor confidence," said Celine Chiang (江宜津), a fund manager at Ta Chong Investment Trust Corp (大眾投信).

  CAL said in a statement it's planning to operate the first flight this year, scheduling 4:05am service on Jan. 29 to Beijing from Taipei. EVA Air plans four charters, beginning Jan. 29.

  CAL shares rose 0.5 percent to close at NT$18.50, while EVA was up 1.3 percent at NT$16.

  China Airlines, which made history two years ago when it was the first Taiwanese carrier to land in Shanghai in more than a half century, said the flights have publicity value.

  "Profit is a secondary consideration," said Johnson Sun (孫鴻文), an assistant vice president. "It's positive for our image. It has the effect of an advertisement."

  Do the special flights bring regularly scheduled service between China and Taiwan closer?

  "We don't dare make predictions about the future," Sun said. "If the government wants us to fly, we will."

  Under an agreement announced on Jan. 15 after talks in Macau, six Taiwanese carriers and six Chinese ones will operate a combined 48 flights. It will be the first time airlines from China will land in Taiwan in more than half a century.

  Political analysts like Philip Yang (楊永明) say China may be using the flights to deflect attention from its plans to enact an anti-secession law, setting up a legal framework to attack Taiwan if the island declares its independence. The National People's Congress is due to pass the bill in March.

  "I'm more cautious on whether this will lead to improving cross-strait relations," Yang, a political scientist at National Taiwan University, said of the flights.

  "China wants to balance its hardline image after it decided to propose an anti- secession law. Still, this could lay a good foundation for future dialogue on non-political issues," he said.

  The other local carriers involved in the flights are TransAsia Airways(復興), Far Eastern Air Transport Corp (遠東), Mandarin Airlines (華信) and UNI Airways Corp (立榮).

  The charters aren't expected to be big money-spinners this year because so many airlines are participating and because many Taiwanese businessmen may have already booked holiday tickets on regular flights.

  Sun said the carrier's Hong Kong-Taipei flights before Feb. 7 are already 90 percent booked and no surcharge will be imposed for those wishing to switch to the charters.

  China Airlines and subsidiary Mandarin Airlines said ticket costs will be 20 percent lower than fares on existing, indirect cross-strait services. EVA said it has yet to set the ticket prices.

  "Since each will have only four flights, the contribution to our revenue and profit will be limited," Nieh said.
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