Taiwan’s two leading air carriers, China Airlines Ltd (CAL, 中華航空) and EVA Airways Corp (EVA, 長榮航空), are seeking administrative appeals in response to a NT$32 million (US$1.08 million) Fair Trade Commission (FTC) fine for overcharging on cross-strait flights.
The commission meted out the punishment on Thursday, saying the two carriers violated the Fair Trade Act (公平交易法) by misinforming the public that they would offer cross-strait tickets at lower prices, while increasing the number of expensive seats in their economy classes.
Both CAL, which is subject to a NT$20 million fine, and EVA, which has incurred a NT$12 million fine, said yesterday the committee’s decision was totally unacceptable to them.
“We will not eliminate the possibility of pursuing an administrative appeal, as the FTC has been at odds with CAL in interpreting the flight fares,” CAL spokesman Hamilton Liu (劉國芊) said by telephone.
Liu said CAL had never broken the Fair Trade Act, reiterating that the company adjusted ticket prices on a market basis by factoring in seasonality and mileages, as well as supply and demand.
EVA also said it never cheated consumers on the ticket prices. The carrier said in a statement that it would appeal the ruling to protect its reputation.
Share prices for the two airlines held relatively steady yesterday in Taipei trading, with CAL closing flat at NT$18.55, and EVA dropping 0.76 percent to NT$26.2, the Taiwan Stock Exchange’s data showed.
Last month, CAL saw its revenue fall 16.46 percent to NT$9.22 billion from a month earlier, while EVA posted a revenue of NT$7.14 billion, down 17 percent month-on-month, both hitting their first monthly declines since last October, the companies’ financial data showed.
The sluggish figures were largely because of decelerating cargo momentum and seasonal weakness in passenger traffic during a relatively short Lunar New Year holiday, Citigroup analyst Timothy Chen said in a research report released on Thursday.
“Although CAL’s revenue decreased last month, we expect the recovery of cargo momentum will lead to a better revenue result this month, compared with this January and February,” Liu said.
The NT$20 million fine would not affect CAL’s profits this year, even if the company has to pay it in the end, he added.
Nonetheless, Credit Suisse analyst Sam Lee forecast in a research report issued on Monday that higher fuel prices could hurt both airliners’ profits this year.
However, the local airline--operating environment remained robust, so they do not expect an oversupply this year, Lee said.
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