Fri, Jul 25, 2014 - Page 13 News List

TNA could suffer fallout from crash

POSSIBLE BACKLASH:A research note said the number of passengers flying with the company would likely decrease, and it might also suffer a loss in share value

By Amy Su and Crystal Hsu  /  Staff reporters

Lin Shiaw-shinn, chairman of TransAsia Airways’ parent group Goldsun Group, third right on the front row, and company officials bow as they apologize for the TransAsia Airways plane crash in Penghu County on Wednesday, at a press conference in Taipei yesterday.

Photo: Wang Min-wei, Taipei Times

A dark cloud is hanging over TransAsia Airways Corp (TNA, 復興航空) following the crash of one of its planes in Penghu County on Wednesday.

The crash of the turboprop ATR 72-600, in which 47 people died, might have a negative impact on the number of passengers flying with TNA in the next few months, dragging down the carrier’s sales performance, Primasia Securities Ltd said in a research note yesterday.

Even though most of the compensation for the casualties is set to be covered by aviation insurance, an expected rise in insurance fees in coming years might increase the carrier’s costs, Primasia said.

TNA’s operating costs totaled NT$1.14 billion (US$37.93 million) last year, with insurance fees accounting for about 3 percent, company data showed.

If responsibility for the accident is attributable to TNA, the carrier might not be able to participate in arrangements for new air rights for a year after the investigation results come out, under the regulations of the Civil Aeronautics Administration (CAA).

The incident has also raised concerns over the delayed launch of V Air (威航), TNA’s planned low-cost carrier brand.

However, Lin Shiaw-shinn (林孝信), chairman of the Goldsun Group (國產實業集團) — the parent company of TNA — said yesterday V Air is to stick to its original plan to start operations in September.

“We take full responsibility … regardless of the compensation being fully covered by the insurance company, we will do our best to cover the amount,” Lin told a media briefing after sharing his apologies.

In Taipei trading yesterday, TNA shares dropped by the daily limit of 7 percent at the opening before rising slightly to close at NT$11.25, down 5.46 percent from the previous session.

Primasis said the company’s shares might fall 10 to 15 percent this week.

The nation’s first private civilian airline might need years to rebuild its reputation, and it could be a challenge for TNA to retain its profitability this year in line with previous expectations, the brokerage said.

TNA was the only domestic carrier to post a quarterly profit in the first three months of this year, surpassing peers China Airlines Ltd (CAL, 中華航空) and EVA Airways Corp (EVA, 長榮航空).

TNA, which for the most part operates regional passenger routes in Asia, earned NT$49.62 million, or NT$0.09 per share, from January to March, according to its filing with the Taiwan Stock Exchange.

TransAsia has bought insurance valued at US$13.2 million for the ill-fated plane and another US$7.5 million against liability claims, the Financial Supervisory Commission said yesterday.

Domestic insurers might not have to bear all the losses due to the reinsurance program, the commission said, urging the companies involved to speed up the processing of applications.

Cathay Century Insurance Co (國泰產險) is the leading insurer for the downed plane, the commission said.

Seven other domestic insurers also took part in the insurance for the aircraft, the commission said.

The insurers have shifted most of the risks through the reinsurance program, the commission said, adding that local insurers would also have to pay up to US$7.5 million in liability coverage.

Cathay Century said in a statement the tragedy would not seriously affect its financial standing.

In addition, a travel agency, which arranged the Penghu trip for four of the passengers, bought liability insurance of NT$2 million for each passenger from Fubon Insurance Co (富邦產險), the commission said.

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