Key parties on both side of the debate say that despite recent optimism, direct air links between Taiwan and the Philippines are unlikely to resume any time soon.
While the Taiwan government is still angry about the Philippines illegally breaking the 1996 air agreement, the Philippine government remains intent on protecting its debt-ridden flag carrier, Philippine Airlines (PAL).
"I don't know when we will be ready to resume talks," said Joseph Tien, of Taiwan's Civil Aeronautics Administration (CAA).
"We have some pre-conditions," Tien said. "Number one is national prestige, and number two is international law. Each side must respect the existing agreement."
The CAA is upset that the Philippines broke the 1996 air agreement, a crime that was compounded by the manner in which it was done: at 10:20pm on March 15, the Philippines suspended the agreement.
PAL had no flights to Taiwan the next day, but an EVA Air flight was turned back halfway to the Philippines on the morning of March 16, and both EVA and China Airlines (CAL) were forced to re-route hundreds of Philippines-bound passengers through Hong Kong.
But in the end CAL and EVA are pragmatic businesses, and Taiwan may be willing to resume talks eventually, and even accept a reduced seat allocation.
President Joseph Estrada appears determined to protect PAL, which is 70 percent owned by his friend Lucio Tan, a beer and tobacco baron whose six-year ownership of PAL has been financially disastrous for the airline.
Besides abrogating the 1996 Taiwan-Philippines air agreement, the Estrada government has broken the law in its own country, officials said.
The official air policy of the Philippines is progressive liberalization -- that's the law, said Philippine Secretary of Tourism Gemma Cruz-Araneta.
Tan, PAL and Estrada have combined to subvert the law, said Mila Abad, president of the Freedom to Fly coalition, a lobby group that is trying to force PAL to obey the progressive liberalization order, which took effect in 1995.
"A lot of people and businesses are hurt, and all for the good of one person -- Lucio Tan. That's what we are fighting against," Abad said.
The Philippine tourism industry has reason to complain. Before the dispute, Taiwan was the number two source of Asian visitors to the Philippines, but the number of tourists from Taiwan has dropped 60 percent since the suspension of flights, said Cruz-Araneta.
Travellers from Taiwan to the Philippines now must pass through Hong Kong, or take an expensive charter flight to Subic Bay. Either way, a return ticket that once cost US$220 now sells for nearly US$500.
Because PAL's wounds are self-inflicted, the Freedom to Fly coalition believes the airline should not have government protection.
Since Tan took over PAL in 1995, the airline has lost nearly US$500 million, and is now US$2.2 billion in debt. In July 1998, PAL went bankrupt and was given protection from creditors. It suspended all flights for two weeks in September 1998, and all international flights for two months after that.
PAL's fleet has shrunk from 56 to 26 aircraft, a tiny number of planes for a country of more than 70 million people. EVA and CAL, by contrast, have a combined fleet of 85 aircraft to serve a country of 23 million.
But the lobbying efforts of the Philippines tourism industry might be in vain. PAL president Avelino Zapanta said the airline does not wish to return to an era of open competition. "Our previous administration has given away too many seats," he said.
"The Ramos administration wanted economic improvement. And one of the things that they did was to open up the Philippines, but in their case they just gave it away," he said.
On the subject of the suspended Taiwan-Philippines agreement, Zapanta is equally adamant.
"They [CAL and EVA] were filling up their flights with Sixth Freedom traffic between the US and the Philippines via Taipei," he said.
"That was destroying our non-stop service between the US and the Philippines, particularly because they priced it at half of what we've priced our trans-Pacific routes."
CAL and EVA, especially CAL, were operating their flights between Taiwan and the US virtually empty. They would rather carry Filipinos at half price than fly their aircraft empty.
Like the Philippine Department of Tourism, and the Freedom to Fly coalition, executives from CAL and EVA have been critical of the close relationship between PAL owner Tan and President Estrada, and they are upset that the 1996 agreement was broken so abruptly.
However, their initial anger has been replaced by an insistence that the Philippines adheres to terms of the previous agreement.
"If the Philippines wants to get back to the negotiating table, they have to go back to the 1996 agreement,"said EVA deputy senior vice president Nieh Kuo-wei (
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