What was the biggest news event in Taiwan last week? Anyone following the local news scene would surely say that it was the announcement that TransAsia Airways was stopping operations and would be dissolved.
This is clearly an important event, as it affects the lives of the company’s 1,700 employees and also has an impact on consumers. Still, the information available implies that if the situation is handled in a reasonable manner, the impact would be minimal.
It is not the end of the world when something like this happens to a business whose reputation has already suffered as badly as TransAsia’s.
The reason TransAsia opted for dissolution is that its assets are still bigger than its liabilities, which means that once the company initiates the liquidation procedure following approval at a shareholders’ meeting, it will be able to pay its government debt and taxes, employee salaries and severance payments, bank debt and even its shareholders.
The company has set up two trust accounts to handle two thorny issues, one with NT$600 million (US$18.78 million) to handle employee salaries and severance pay and another, also with NT$600 million, to handle compensation demands from passengers and travel agencies.
In addition, selling off its fleet of about 20 aircraft will not be a problem, and the overall assessment is precisely the same that TransAsia itself has made: If the company would have continued to operate, it would eventually have had to declare bankruptcy, and then it would have been more difficult for the company to meet its responsibilities.
However, as the company prepares to dissolve, several major flaws in the process have appeared.
On Monday, a huge volume of the company’s shares were traded, and legal proceedings have been initiated due to suspicions that company insiders and staff in affiliated companies engaged in insider trading.
Furthermore, in the middle of trading that day, the company issued a statement denying that it planned to suspend operations, although its office in Japan had published an announcement on its Web site saying that it would cease operations the following day.
These examples point to serious problems in TransAsia’s internal control process, which, by extension, puts the company’s credibility in serious doubt.
Third, the company on Monday afternoon announced that all its routes would be suspended the following day — for one day — without having first requested permission from the Civil Aeronautics Administration (CAA) to do so.
The announcement led the CAA to fine the company NT$3 million (US$93,920), caused chaos for passengers who had flight reservations and hurt the public interest.
Not until Tuesday afternoon, following an ad hoc board meeting, did the company call a news conference to formally announce that it would be dissolved.
The whole process leaves much to be desired.
At the news conference, the company should have offered complimentary measures to show employees, customers, suppliers, creditors, shareholders, the government and society at large that it was handling the situation and would meet its responsibilities.
For example, it could have proposed a transitional period, defining a period for handling follow-up issues and gradually decreasing its flights in order to make it easier for its technical staff and flight attendants to find new jobs.
It could also have offered reasonable conditions and tried to negotiate with other airlines to have them take over its customer services instead of abruptly announcing that it would cease operations.
Had the company done all these things, it would have been possible to diminish the social impact and leaving the passenger transport industry looking good. Instead, TransAsia Airways set a very bad example.
It is, of course, acceptable to shut down a company if it does not make money, but it should be done in a socially responsible manner.
If TransAsia Airways had handled the situation appropriately — entered into talks with external parties and had an internal decision process in place — the inappropriate practices mentioned above could have been avoided and everyone would have had a completely different view of how the company is handling its closure.
Instead, the public and the government are now left with a negative impression of the whole incident.
The fact is that TransAsia Airways has a very bad track record, including two major plane crashes and a host of safety incidents, and it would have been very difficult for the company to regain the trust of passengers.
Considering the impact of budget airlines and lax management, letting go of the business and returning the company’s resources to the market so they can be put to good use was the correct way of handling the situation.
Whether a company should be dissolved, restructured or declare bankruptcy is decided by its financial situation. Some companies start anew and others are closed down — this is just the way of free markets.
There is no reason for the government to go out of its way to take on responsibility or feel that it is under pressure by the severity of the situation. Instead, it should take a methodical approach and quickly grasp the core issues and then handle them calmly.
What the government really should do is to take an active part in supervising the follow up: It should initiate a rigorous investigation into the allegations of insider trading and bring any guilty parties to justice; urge the company to properly handle severance pay; facilitate employees’ finding new jobs; guarantee consumer rights and interests and handle the redistribution of the airline’s routes to ensure stability.
Thorough and proper handling of these issues would increase confidence in the government. It must not respond with a knee-jerk reaction to every question of whether it really understands the situation and behave as if it has done something wrong.
After all, the government does not intend to supervise and control every company in the nation and take over every business that is about to close down, does it?
The reason that we find ourselves in this preposterous situation is probably because the people in charge are being led by the nose by people with strong opinions and are unable to differentiate between who is right and who is wrong, while they forget their own expertise, common sense and experience.
This is not the way to run a nation — being a politician means being determined and having strong willpower.
Translated by Perry Svensson
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