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CAL head denies allegations of kickbacks

China Airlines Ltd (CAL) chairman and president Ringo Chao (趙國帥) yesterday countered speculation that a recent major aircraft purchase contained irregularities and that personnel had taken kickbacks to favor aircraft manufactured by European firm Airbus SAS over the US’ Boeing company.

Chao made the comments at the legislature during a question and answer session.

“I assure you that we did not violate CAA [Civil Aviation Authority] regulations in the purchase,” Chao said.

“By opting for Airbus we saved a total of US$350 million,” he said, “We can also get the planes earlier, in 2015, whereas Boeing could not deliver until 2017.”

In addition, as China Airlines aleady operates Airbus manufactured aircraft, the airline would save on training costs, he said.

The airline, 72 percent owned by the government, is Taiwan’s largest air carrier.

approval

Chao’s comments came after Chinese Nationalist Party (KMT) Legislator Wu Yu-sheng (吳育昇) last week questioned whether CAL had signed a deal with Airbus to buy 20 A350-900s — priced at more than NT$130 billion (US$4.3 billion) — before obtaining official approval from the CAA.

Wu further accused high ranking CAL officials of taking kickbacks to close the deal, which resulted in a NT$10 billion overspend compared with CAL’s original purchasing plan under former chairman Philip Wei (魏幸雄).

Yesterday Wu further alleged that a particular CAL employee, who he did not name, had collected NT$4 million in kickbacks.

Responding to the allegations, Chao said that the purchase was legal and transparent.

“We rushed the process to secure slots for airplane delivery — the manufacturer had given us an ultimatum to finalize our orders by the end of January for us to get the plans starting 2015,” he said.

old planes

“This means that from now until 2015 CAL will have no new planes to add to our fleet — if I hadn’t made a decision to purchase new planes now, CAL would be stuck with 15-year-old planes and I would have been judged by history,” he said.

“From my experience dealing with aircraft and engine purchases I can assure you that this is a very, very good deal ­— it is one of the best deals I have seen — and the CAL team moved speedily and professionally to secure the fast disappearing plane delivery time slots,” said senior vice president of CAL’s engineering and maintenance department, Derek Cridland, who previously worked for Cathay Pacific Airways.

“To say that we ‘overpaid’ by NT$10 billion is completely inaccurate — the plan had been under evaluation while Wei was still with CAL — I merely reopened the deal with Airbus because no consensus could be reached under the conditions offered previously,” Chao said.

“This is like saying if you offered NT$500,000 for a NT$2 million car, but were rejected, and ended up paying NT$2 million, you are paying NT$1.5 million extra,” he said.

Chao said that to his knowledge no kickbacks had changed hands and that the airline welcomed any investigation.
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