Taipei Times (TT): Some people have said this may not be the best time for TransAsia Airways Corp (復興航空) to list on the Taiwan Stock Exchange in light of the recent market turmoil. How do you feel about this?
Vincent Lin (林明昇): TransAsia has proven itself to be a company that deserves the attention of investors, based on the company’s performance over the first half of this year. That was why the company’s management team decided not to delay the listing despite the recent volatility of the stock market. TransAsia’s listing has our full support.
TT: What were the major factors behind the NT$409 million [US$13.41 million], or NT$0.72 per share, profit that TransAsia Airways posted for the first half of the year, the highest earnings per share [EPS] among local peers?
Andy Chen (陳嘉): One important factor is the way in which we have established TransAsia as a “regional air carrier.” This positioning helped us establish a clearer picture when managing the company.
Taking the fleet as an example, we currently own a total of 16 airplanes, including nine ATR72 Series, which save us 75 percent on fuel costs on short distance routes compared with larger airplanes. We also have two Airbus A320 Series and five Airbus A321 Series planes, which allow us to operate on routes with higher passenger demand.
The fleet exactly matches the company’s strategy of reducing the amount of time our aircraft remain idle and as a result -TransAsia airplanes are never parked in airport landing bays for long.
Basically, we can accept an aircraft utilization rate of about nine hours a day, but the average utilization time of the airplanes TransAsia uses on cross-strait routes is more than 10 hours, allowing us to make greater savings.
TT: How about the issue of aviation rights?
Chen: It is not easy for a small airline like TransAsia to gain aviation rights, which is why we only operate eight regular international routes and 22 regular cross-strait routes. However, we do make flexible use of chartered flights to expand the services we provide in cities where we do not have aviation rights. This allows us to prove that we have the ability to run these routes, which will hopefully help us secure more aviation rights in the future.
TT: Company data shows that cross-strait routes have made a major contribution to company revenue. Is this trend likely to continue?
Chen: Cross-strait routes accounted for about 30 percent of the company’s overall revenue in the first half of the year, international routes and domestic routes 25 percent each and chartered flights and other businesses for 10 percent each.
I think that the 30 percent of revenue accounted for by cross-strait routes is the highest it will go. Our upcoming new routes and destinations will ensure that this revenue structure gradually balances out, but cross-strait routes are still likely to remain an important driver for company revenue.
TT: Some analysts have said that the increasing number of cross-strait flights could lead to oversupply. What do you think?
Chen: That is not a problem for TransAsia, as demand continues to outstrip supply on our current routes, which are mainly to higher-tier cities and are certain to remain profitable.
TT: What is the company’s future plan on expanding routes?
Lin: We expect to offer a complete service all over Asia in five years by focusing on increasing mid-haul routes to cities in China, Northeast and Southeast Asia. Australia is also a possible destination for us.
Chen: We will add three cross-strait routes including Taoyuan to Xuzhou, -Kaohsiung to Nanning and Kaohsiung to Hefei next month, as well as an international route from Kaohsiung to Hanoi in Vietnam. In addition, TransAsia also expects to establish regular routes to Japan amid the coming open-skies agreement between Taiwan and Japan.
TT: Do you have any plans to expand your fleet?
Chen: The company placed an order with Airbus SAS for two large A330-300 aircraft and six A321 Series aircraft, which will be delivered in the fourth quarter of next year. In June, TransAsia ordered six A321Neo aircraft, which would allow us to cut fuel costs by 15 percent, while retaining the right to order another six airplanes if necessary. These planes will be delivered by 2020. Prior to these two orders, we plan to charter an A321 series aircraft this month, and another in March next year, to meet rising demand.
TT: What is your outlook for the industry? Is TransAsia considering focusing more on cargo business in the future?
Lin: It is hard to forecast the future of the industry, so we will carefully evaluate every expansion plan so as to minimize the risks involved. For the moment, at least, we expect cargo sector demand to remain weak. As for the price of crude oil, that is not a major problem for TransAsia, as fuel costs do not account for too much of the company’s overall costs. In the first half of the year, the figure was 28.17 percent.
Chen: Currently, cargo business accounts for just 2 percent to 3 percent of TransAsia’s revenue, as we do not have aircraft specifically dedicated for cargo.
Over the long term, the company might focus more on the cargo sector, but the short term we will stick with our current operational model of carrying goods on passenger aircraft, because that incurs only a small increase in fueling costs.
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