China Airlines announces major overhaul of fleet

China Airlines Ltd (華航), Taiwan's largest air carrier, said it will cut the aircraft types in its fleet to three from six to reduce maintenance costs, as its net income last year slumped to a seven-year low on surging fuel prices.

"Because of the fleet modernization and simplification, we can save a lot of money in maintenance and crew costs," chairman Philip Wei (魏幸雄) said in an interview on Thursday.

"Last year was the first time revenue exceeded NT$100 billion, but our profit was very limited," he said. The company will announce last year's results before the end of next month.

China Airlines' nine-month profit plunged 70 percent to NT$1.01 billion (US$31 million), making it unlikely that its full-year net income will surpass the NT$4.18 billion earned in 2004. Wei, who hedged 60 percent of China Airlines' fuel purchases, is awaiting government approval to add surcharges and plans to reduce unprofitable routes and operate fewer aircraft types to shield the company's profit.

China Airlines operated 67 aircraft, using six models as of September last year. The carrier plans to sell some of the older planes such as the A300 made by Airbus SAS, keeping only the Airbus A330-300 and the 737-800 and 747-400 produced by Boeing, Wei said.

The airline needs aircraft that can carry more than 400 passengers each to fly on long-haul routes to the US and Europe, Wei said.

"Now is the time for us to consider a modern jumbo fleet for the next generation," he said. China Airlines will choose between the 555-seat Airbus A380 and a passenger version of Boeing's 747-8 design, he said, declining to say when a decision will be made.

An to replace the 15 Boeing 747-400 planes in China Airlines' fleet could cost between US$4.2 billion and US$4.5 billion, based on the catalog prices of A380 and 747-8 models.

With the new planes, China Airlines plans to convert its 747-400 passenger aircraft into cargo carriers, operating the world's biggest fleet of 747-400 freighters, Wei said.

China Airlines will also reduce the frequency of some long-distance routes that aren't profitable, including flights to Rome, Houston, New York, and Frankfurt. The carrier will add services to Japan's Osaka, Sapporo and Nagoya, Wei said.