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Taiwanese airlines facing profit struggle, group says

Taiwanese airlines may struggle to post profits this year as higher fuel costs erode gains from the start of regular services to China, the Taipei Airlines Association said.

Flights to China “aren’t a panacea,” Tony Su (蘇宏義), chairman of the group, which represents six carriers, said in an interview in Taipei on Friday. The services “are a business opportunity, but there is no guarantee the aviation industry can make money given the high oil prices.”

Five Taiwanese airlines, including China Airlines (華航) and EVA Airways Corp (長榮), the two biggest, began weekend flights to China on Friday, following the easing of a 59-year restriction. The carriers are seeking a further relaxation so they can fly more than the current cap of 18 return flights a week.

“How do you make the cake bigger? Allowing more tourists is one way,” said Su, who is also chairman of EVA Air’s Uni Airways Corp (立榮航空) unit.

Taiwan only allows 3,000 Chinese tourists a day at present.

Carriers need to fill 65 percent of seats to break even on the cross-strait flights, Su said.

He declined to say whether airlines were likely to achieve this target in the long term.

EVA Air and Uni Air filled more than 80 percent of seats in the first week, EVA Air acting spokeswoman Katherine Ko (柯文玲) said yesterday by phone.

Rising fuel costs may cause Uni Air’s losses to “be even worse this year” than last year’s NT$400 million (US$13 million), Su said.

Every US$1 increase in the price of a barrel of oil raises Uni Air’s annual costs by NT$100 million, he said.

The price of oil in New York trading has doubled over the past year. The price of jet fuel has jumped 64 percent this year in Singapore trading, hitting a record US$181.85 on Thursday.

Fuel now accounts for about half of Uni Air’s operating costs, compared with 20 percent when oil cost US$50 a barrel, Su said. Far Eastern Air Transport Corp (遠東航空), which served similar routes to Uni Air, halted flights earlier this year amid the surging prices.

Uni Air flies to domestic destinations and Asian cities, including Seoul, Hong Kong and Hanoi. It operates 11 Boeing Co MD-90s and nine Bombardier Inc Dash-8s, according to its Web site.

The carrier has replaced steel cutlery on planes with lighter plastic ones to help cut fuel costs, Su said. It has also sold six aircraft since 2004, he added.

China and Taiwan are to hold talks after the Olympics next month to discuss increasing the frequencies of cross-strait services, Su said. The discussions will also cover cargo flights, he said.
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