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Mon, Nov 06, 2006 - Page 11 News List

Domestic carriers fighting for air

SAFETY IN NUMBERS These are difficult days for the nation's aviation firms as plans for mergers begin to take shape. But even this may not be enough


China Airlines chairman Philip Wei (魏幸雄) agreed that there were too many airlines in a small market, but he said that market forces should be allowed to eliminate weak players rather than a government-led consolidation.

Unlike M&As in the banking industry, in which parties only need to take assets and liabilities into account, airlines need to integrate fleets, which is a huge cost, Wei said. The cost includes parts purchasing, maintenance and staffing, and that is why most airlines try to streamline their fleets to save money, he said.

"The combined airlines may lose a big amount of money before the synergy is created," Wei said.

A five-year tax waiver would not help the airlines, either, he said, because "the airlines already don't need to pay tax when they're in the red."

Without rich parent firms like Mandarin Airlines and Uni Airways to compensate losses, Far Eastern Air saw a loss of NT$50 million (US$1.52 million) in the first three quarters of the year, Far Eastern manager Jason Chen (陳進勇) said.

Although TransAsia Airways earned NT$14 million in the January-September period, profits may be eroded by a slack fourth quarter, So said.

Acknowledging the difficulties with consolidation, Chen said that all four airlines were trying to boost revenues in international routes. Far Eastern Air currently operates flights from Taipei to Palau, Jeju and Angkor, and from Kaohsiung to Inchon, Laoag, Hanoi and Ho Chi Minh City, as well as a number of charter flights.

After a series of promotions, the carrier's international flights have contributed to half of its revenue, Chen said.

"We are not that pessimistic about the post-bullet train era," he said.

The key to long-term survival for the carriers is still liberalization of cross-strait transportation, Chen said.

With a sizeable number of Taiwanese businesspeople traveling frequently between Taiwan and China, the new market would be a shot in the arm for the four carriers, he said.

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