Analysts applauded Far Eastern Group (FEG 遠東集團) after it reaffirmed its support for debt-ridden Far Eastern Air Transport (FAT
"It is positive news," said an airline industry analyst who declined to be identified. "But injecting more cash cannot solve the problem in the long run."
FEG, headed by Douglas Hsu (
However, FEG said the scale of its financial assistance would be appropriate to its 15.22 percent stake in FAT.
FEG called for a concerted effort by both the government and the private sector to solve the company's financial crisis and demanded a transparent financial restructuring plan and financial report from FAT.
After the Taipei District Court on Friday suspended trading of FAT shares for 180 days and granted FAT protection from creditors for 90 days, the stock attracted large orders at the lowest daily limit price the same day, Macro Securities Investment Consultant Co (
"There is no information about who the buyers might have been," Wang said. "However, one thing is certain -- investors are optimistic that FAT will make every effort to find money."
However, the anonymous analyst said injecting more money into a company that has become a black hole was not a viable solution without other measures.
"At least two-thirds of FAT's financial problems are a result of investment losses and the rest is the result of keen competition from the high-speed railway combined with high fuel costs," the analyst said.
The analyst said FAT's financial crisis was only the tip of the iceberg that represents an ailing industry.
Domestic airlines are losing competitiveness, which is a problem that cannot be solved without help from the Civil Aeronautic Administration, the analyst said.
"I don't think the implementation of direct flights or charter flights between Taiwan and China is a panacea to solve all their problems," the analyst said. "After all, [if Taiwan allows direct cross-strait flights] they will compete against China Airlines (
"This is an important turning point for the domestic airline industry," the analyst said. "Whether through mergers or acquisitions or by allowing market competition to push out the losers, the Civil Aeronautic Administration has to give the airlines a clear direction for the future."
Wang saw other difficulties.
"Without transparent administration, it is difficult for FEG or future investors to take full control of FAT," Wang said.
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