Taiwan's bullet train takes a toll on domestic air carriers

Chang Kuo-cheng, head of the Civil Aeronautics Administration (CAA), said UNI Airways Corporation was the latest carrier to move on costs, requesting the closure of two daily flights between Taipei and Chiayi in the south.

"In principle we would give the nod," Chang said, adding that closure of the route would probably take effect from August 1.

Another CAA official, who declined to be named, said the inauguration of the island's first high-speed railway, capable of handling 100 mln passengers a year, in January had dealt a final blow to domestic airlines.

He said airlines had struggled for the last decade due to general economic sluggishness and completion of the islandwide highway system.

"Taiwan airlines offering domestic flight services have seen their operations decline since they peaked in 1997," he said. "The opening of the high-speed rail is the last straw for them."

Commercial operation of the Japanese built high-speed train was launched in January, with Taipei finally linked to the southern port city of Kaohsiung in March.

Passengers pay 1,490 twd for a standard class seat from Taipei to Kaohsiung -- about 70 pct of the price of an air ticket -- for the 90 minute trip at speeds of up to 300 kilometers per hour.

Since its launch, passenger numbers on flights have dropped dramatically, slumping 24 pct year-on-year in February, 42.7 pct in March, 43.6 pct in April, 49.1 pct in May and then 58.8 pct in June.

This is not expected to improve.

The Taiwan High Speed Rail Corporation (THSRC) initially scheduled 19 round trips a day but is now expected to increase frequency to 37 from July 27, with 88 daily services the ultimate goal.

To give Taiwan's four major domestic carriers a boost, the CAA has reduced landing fees by 50 pct but the airlines are unimpressed.

"It was too little too late," said Irving Hsu of Mandarin Airlines, which swung into a loss in the first half of this year from a net profit in 2006.

TransAsia Airways said numbers on its Taipei to Kaohsiung flights have plunged by 50 pct but declined to provide revenue figures.

To help cope with the difficulties, airlines have adopted code-sharing arrangements with each other and on overseas chartered flights while the industry is hoping a ban on direct services between Taiwan and China will be lifted.

"Theoretically, present passenger volumes are sufficient to support only one carrier given the stiff competition from the high-speed train," Hsu said.

"We have to sustain a minimum operation capacity and wait for the opportunity. Otherwise, we would be caught unprepared should that day come," he said in regards to the prospect of flying to the mainland.

Taiwan's two leading air carriers -- China Airlines and EVA Airways -- fly international routes but the mainland has remained off limits since the communists and nationalists split in 1949 at the end of a civil war.

China and Taiwan first offered direct charter flights for the Lunar New Year holidays in 2005 and both sides have since agreed on more charter flights for major holidays.

Special cargo and charter services for emergency healthcare and humanitarian purposes would also be allowed.

However, Janet So, public relations manager for TransAsia Airways, said the opening-up of Chinese routes did not mean all the problems suffered by domestic carriers would be automatically solved.

"It's not going to be easy; after all the operating cost of China's airlines are relatively lower. The competition would be fierce," she said. "However, at least it would bring bigger opportunities."