Despite the competition -- six airlines once flew the Taipei-Kaohsiung route -- most of the domestic carriers posted healthy profits in the mid-1990s. Taiwan was considered a shining success airline deregulation, and was held forth as an example for other Asian countries to follow.
Today the situation is very different. Just four airlines fly domestic routes, and all of them are struggling to make money. The four carriers -- UNI Air (
The prospects for 2001 look just as bleak, with all four airlines predicting losses on domestic routes. Taiwan is a troubled market, said Daniel Pierce, director of Asia Pacific sales for Bombardier Aerospace. Passenger traffic is stagnant or dropping, the airlines have excess capacity, and now the high-speed train is being built, and its fares will be 25 percent lower than the air fares. Several factors caused the decline in domestic air traffic. Costs increased as the airlines switched from cheap and efficient propeller-driven airplanes to gas-guzzling jets, which are more expensive to buy, maintain and operate. Ticket prices rose -- last year the airlines raised fares 20 to 30 percent on key routes, and up to 50 percent on secondary routes -- and customers found other travel options. The north-south highway has been expanded and is faster than it was five years ago, and train and bus services have also improved. Taiwan's slowing economy and depressed stock market contributed to the decline, and a long series of accidents has also taken a toll. From 1993 to 1999, Taiwan's airlines suffered seven fatal accidents that killed 500 people. China Airlines (華航) had four wrecks in the 1990s, causing 469 deaths and destroying four airplanes, and Formosa Airlines (國華航空) crashed a Dornier 228 in Matsu in 1997, killing 16 people.
* In 1995, a construction company bought China Asia Airlines, and changed its name to U-Land (瑞聯航空). Despite marketing innovations that included NT$1 fares, and using betel-nut girls as vendors, U-Land was grounded by the Civil Aeronautics Administration last year due to maintenance violations and unpaid fees.
* In 1996, China Airlines bought a controlling stake in Formosa Airlines, and later merged Formosa with its international subsidiary, Mandarin Airlines. Mandarin was launched to fly to politically sensitive destinations, but it became superfluous when China Airlines re-painted its airplanes in 1995, replacing the provocative Republic of China flag with an innocuous plum blossom.
* In 1998, EVA merged subsidiaries Great China (大華航空), Taiwan Airlines (台灣航空) and Makung (馬公航空) into a single carrier called UNI Air.
* TransAsia and Far East Air are still flying, and China Airlines and EVA gave all local routes to their subsidiaries. That leaves the current four airlines: TransAsia, Far East Air, UNI and Mandarin.
Another Formosa Airlines Dornier 228 crashed in Matsu in April 1996, two months before China Airlines bought its controlling stake, causing five deaths, while a third Formosa Dornier 228 plunged into the sea near Green Island in 1993, taking six lives. A TransAsia Airways ATR 72 wreck in 1995 killed four more.
As passenger numbers declined, the airlines were slow to cut routes and sell aircraft, a standard industry practice that reduces costs and provides quick income. The carriers are reluctant to prune their fleets because they are waiting for direct flights from Taiwan to China. Rather than sell aircraft now, and then buy or lease more planes when direct flights begin, they are choosing to retain their current fleets in anticipation of a cross-strait breakthrough.
The airlines also have limited freedom to cut services. They must apply for government approval to reduce frequencies or eliminate routes, and such approval is seldom given. On Feb. 1, CAA did allow the airlines to drop 47 frequencies per week, and each carrier cancelled several routes. "We would like to cut flights further to save money, but we cannot because of the government pressure," said Mandarin Airlines spokesman Vincent Chen.
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