Local airline companies may not greatly benefit from an increase in direct passenger flights and new cargo services between Taiwan and China amid improving cross-strait trade ties, analysts said yesterday.
Local carriers expect flights to China to double to at least 72 a week as direct transportation is expected to top the agenda of this week’s cross-strait talks. The nation’s five local airlines will each be able to provide one extra flight per day if that expectation is realized.
“Expanding passenger services, which will complete one of President Ma [Ying-jeou’s (馬英九)] campaign promises, will increase each firm’s share of the business and allow for shorter routes, which translates to fuel savings and possibly ticket savings for passengers,” Charles Ma (馬嘉禾), an airline analyst at SinoPac Securities Corp (永豐金證券), said via telephone yesterday.
The caveat lies in what demand there will be for cross-strait flights. Even the airlines are unable to provide precise estimates, he said.
“Just look at the demand for current weekend charter flights; how will increasing the number of flights and increasing the number of locations help with a basic lack of demand,” Allen Tseng (曾炎裕), an associate manager of Capital Securities Corp, (群益證券) said via a separate telephone interview yesterday.
Tseng said an increase in passenger traffic would not significantly boost the net profits of local airlines in the short term in light of their deep losses in the first three quarters.
As for direct air cargo links, Tseng said in the current environment any type of increased traffic may not be good news for the capital-intensive industry, because of exorbitant fuel prices, airplane depreciation and high fixed costs.
Tseng estimates direct air cargo flights could at best contribute 3 percent of the total revenues of airlines. But with heavy losses reported by China Airlines Ltd (CAL, 中華航空) and EVA Airways Corp (EVA, 長榮航空) this year, such a contribution would be “insignificant,” Tseng said.
In addition, direct air cargo flights between Taiwan and China would notentirely replace the cargo businesses currently routed via Hong Kong and Macao.
“It does, however, put local carriers on equal footing with international air cargo companies, because it lifts the restriction of having to stop in Hong Kong or Macau before entering China,” Tseng said.
Airline stocks traded higher as Association for Relations Across the Taiwan Strait (ARATS) Chairman Chen Yunlin (陳雲林) arrived in Taiwan yesterday.
CAL and EVA stocks both edged higher on the Taiwan Stock Exchange, with CAL trading up NT$0.7 at NT$7.89 and EVA up NT$0.51 to close at NT$8.40.
HEAVY INVESTMENT: Moody’s affirmed the firm’s ‘Aa3’ rating with a ‘stable’ outlook due to its leading position in the industry and ability to match customer requirements Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) revenue this year is expected to increase about 21 percent to NT$1.29 trillion (US$44.01 billion) from NT$1.07 trillion last year, driven by strong demand for advanced 5-nanometer and 7-nanometer chips mainly used in smartphones and high-performance computing devices, a Moody’s Investors Service report on Wednesday said. TSMC’s rate of revenue growth next year is to increase to 7.5 percent, the ratings agency said. The company, which supplies 5-nanometer chips for Apple Inc’s new iPad series, has introduced the advanced chips ahead of its competitors and gained a significant share of the market for the foundry industry’s
Shin Kong Financial Holding Co (新光金控) yesterday said that its insurance unit would adjust its investment portfolio after being banned from buying new stocks a day earlier by the Financial Supervisory Commission (FSC). “We will research what we can do based on the commission’s specific instructions after we receive the regulator’s formal documents,” Shin Kong Financial spokesman Sunny Hsu (徐順鋆) told the Taipei Times by telephone. The commission on Tuesday fined Shin Kong Life Insurance Co (新光人壽) NT$27.6 million (US$941,722) for reckless investment, and demanded that the insurer reduce its overseas investment ratio from 43 percent to 39 percent. The fine would affect
Taipei Times: When do you think the hospitality industry can return to how it was before the COVID-19 pandemic? How does Formosa International Hotels Group (FIH, 晶華酒店集團) fare this quarter and beyond? FIH chairman Steve Pan (潘思亮): The virus outbreak will have a serious impact on business travel, driven mainly by meetings, incentive travel, conferences and exhibitions over the past three decades. For the past six months, many businesspeople have grown used to exchanging information on the Internet, where more people can participate. The trend might sustain for three to five years until people are vaccinated and it is safe to
EQUITIES TAIEX moves sharply higher The TAIEX moved sharply higher yesterday as buying focused on Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) after a strong showing by its American Depositary Receipts overnight. However, the gains were capped after the benchmark index breached 13,000 points and ran into technical hurdles, prompting investors to turn cautious, dealers said. At the end of the session, the TAIEX was up 131.11 points, or 1.02 percent, at 12,976.76. Turnover was NT$206.328 billion (US$7.04 billion), with foreign institutional investors buying a net NT$18.47 billion in shares, Taiwan Stock Exchange data showed. TSMC rose 2.92 percent to close at NT$458.