Fri, Mar 14, 2003 page10

• Far Eastern Air decides to reduce staff

  DOMESTIC AIRLINES With delays in cross-strait agreements, the high-speed railway on the horizon, reduced routes and too much competition, the carrier must adjust

  • By Kevin Chen / STAFF REPORTER
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  Far Eastern Air Transport Co (遠東航空) said yesterday that it plans to cut 10 percent of its payroll by eliminating about 120 jobs.

  Weak passenger demand and a sluggish economy were behind the decision, the company said in a statement it filed with the Taiwan Stock Exchange.

  Far Eastern Air hopes to reduce its operating costs by encouraging staff working for the company for more than 10 years to retire early, a local newspaper reported.

  The job cuts, which are to be completed by the end of March, will include pilots, technicians and administrative staff, Far Eastern spokeswoman Benny Tsao (曹冰瑩) said.

  The cuts and other restructuring plans -- such as improving fleet operation efficiency and strengthening fleet maintenance capability -- are expected to save tens of millions of NT dollars a year, he said.

  The carrier currently runs a fleet of 16 aircraft, with 100 flights a day.

  The domestic airline industry has been struggling for some time. Even the two largest domestic airlines -- Mandarin Airlines (華信航空) and Uni Airways -- operating at a loss over the last have been years, Christopher Smith, an aviation analyst at Primasia Securities Co in Taipei said yesterday.

  "Even with the help of government subsidies, many domestic routes are seeing losses," Smith said.

  Under directives from the Civil Aeronautics Administration, Far Eastern Air, Uni Airways Corp (立榮航空), and TransAsia Airways (復興航空), started to cut flights this month on Kaohsiung-Kinmen, Kaohsiung-Matsu and Taipei-Kaohsiung routes to reduce costs.

  Demand is weak for domestic carriers because of the mass relocation of Taiwanese manufacturers to China and the slow economy here, which has reduced domestic business travel, said Yan Ming-jyh (顏銘志), an aviation analyst at KGI Securities Co (中信證券).

  "Also, there's no operational efficiency," Yan said.

  Taiwanese carriers often fly the same route "with less than 30 percent of their seats filled," he said.

  Smith was not surprised to learn FAT is planning staff cuts, saying airlines have to find ways of trimming costs in order to stem the flow of red ink.

  "Pressure on airlines to improve their cost structure has been exacerbated with a spike in jet-fuel prices [about 20 percent of costs] over the last six months," he said.

  Domestic airline industry will soon face further competition from the high-speed railway, said Su Hsien-lung (蘇賢榮), secretary general of the Taipei Airlines Association (台北市航空運輸公會).

  The north-south rail system built by the Taiwan High-speed Rail Corp (台灣高鐵) is scheduled to be operational by 2005. It will take passengers between Taipei and Kaohsiung in around 90 minutes at rates cheaper than air travel.

  "The rail, once completed, will definitely deal a serious blow to domestic airlines," Su said.

  Both Yan and Smith said local air carriers have in recent years expanded their fleets in anticipation of direct air links with China, but there have been no concrete signs that such links will become a reality any time soon.

  Mergers also seem to be out of the question.

  Earlier last year Chang Jung-fa (張榮發), chairman of the Evergreen Group (長榮集團), which operates EVA Airways Corp (長榮航空) and Uni Airways, said Taiwan has long faced over-capacity, with four airlines operating in a market only large enough for two. He urged the government encourage and coordinate merger activity among carriers.

  "Consolidation in this industry is necessary, but highly unlikely," Smith said, citing differences in corporate culture and fleet composition. "A merger between airlines with different fleet types would probably create even more operational inefficiencies," he said.
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