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- No. 1 Hangzhang S Rd.
Dayuan Township, Taoyuan County
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China Airlines is the flag carrier of the Republic of China (Taiwan) whose majority shareholder is the China Aviation Development Foundation; a body wholly owned by the Taiwanese government. Based in Teipei, China Airlines operates a fleet which includes Boeing and Airbus equiptment supporting an extensive network within Asia as well as services to North America, Canada, Europe, Australia and the Pacific. China Airlines Cargo is the airline's freight division, operating in Asia, Europe and North America. China Airlines is considering joining the Sky Team alliance.
Location of China Airlines main hub (Taipei Taoyuan International Airport)
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1,128 total articles
Takamatsu Airport: Strong traffic growth on Shanghai route, Seoul traffic decline easing in Oct-2013
57 total articles
After over a year of very public discussion about home-grown low-cost carriers, Taiwan in a matter of weeks has received commitments from both China Airlines and TransAsia Airways to start LCC subsidiaries in the next year, making Taiwan the last major market in Asia to have an LCC. The unusually public – and sometimes fanciful – discussion has perhaps rushed these decisions ahead of what a normal commercially-oriented process would produce. These "LCCs" are still sometime away from having a coherent strategy, and then maturing. But the upside seems to be support, both internally and from the government – critical and sometimes overlooked.
In announcing their own LCC subsidiaries, China Airlines and TransAsia are each embarking on a dual-brand strategy, a popular concept seldom achieved proficiently. The dual-brand strategy will be very different for these carriers, as between each other and from other global examples. Hub carrier China Airlines has 54 aircraft, only a quarter of which are narrowbodies. The use of narrowbodies is increasing as regional liberalisation opens thinner routes and expands frequencies. So as China Airlines begins to work through the intricacies of an LCC operation, it is also seeing its own business transform rather significantly. This creates opportunity to mould the future but also adds complexity. Meanwhile TransAsia only has 11 regional aircraft, creating a challenge to gain scale on the existing operation and new LCC.
There will be much reconfiguration as the carriers test the market and discover what it means to be an LCC (as opposed to merely a low fares airline) and as the region itself undergoes much change. So perhaps Taiwan's second-largest carrier, EVA Air, will also be well advised to reconsider its past statements that it has no interest in operating an LCC. But nor is there rush for it to move from its current position of sitting on the sidelines.
Asian carriers continue to pour additional capacity into Myanmar, building on increases which were initially pursued in 2H2012 after the market quickly opened as economic sanctions which had been in place for two decades were lifted. The Myanmar international market will exceed 110,000 weekly international seats in Jan-2014, representing an increase of about 40% compared to Jan-2012 and almost 130% compared to Apr-2012, when Aung San Suu Kyi’s National League for Democracy won landmark elections.
But so far the additional capacity has outstripped demand. International passenger traffic in Myanmar has grown by about 70% over the past two years – an impressive figure but not sufficient to keep up with the capacity increases. As a result load factors to and from Myanmar are significantly below the global average.
Nearly all of the 14 foreign carriers which were already serving Myanmar before Apr-2012 have seen load factors on their Myanmar routes drop over the last year. The nine foreign carriers which have launched and retained services to Myanmar since the market opened have also so far recorded lower than normal load factors – generally in the 50% to 70% range.
The cargo industry has been clear it is suffering from the external problem of weakened supply amid a gloomy economic environment. But less apparent is the fact that the pain is largely self-inflicted: long-haul passenger flights are growing rapidly, increasing 25% on trans-Pacific routes between 2006 and 2013. That also directly increases the amount of belly capacity available for cargo, and the trans-Pacific is the world's largest cargo market.
Increasingly the aircraft of choice across the Pacific is the 777-300ER, which can carry upwards of 18% more cargo volume than the 747-400. And the 777-300ER is displacing the 747-400, with the twinjet increasing its share of trans-Pacific flights from less than 1% in 2006 to 27% in 2013. The 747-400 meanwhile accounted for 40% of flights in 2006 but only 15% in 2013.
This trend is structural and ongoing as carriers look to add trans-Pacific passenger capacity. Northeast and Southeast Asian carriers hold 29% of the 777-300ER backlog, and airframe manufacturers plan for their next-generation aircraft to carry even more cargo. This all brings into focus: just how strong is the future for dedicated freighters?
Positive change continues to occur in Taiwan. A year ago its attitude towards new local entrants was obscure but now it is becoming clear and has fewer obstacles, further illustrated by recent changes that lower the entry barrier for a company that wishes to establish a new airline – such as a low-cost carrier. Majority Taiwanese ownership is required and the Taiwanese company establishing a LCC must be in air or sea transport or trade enterprise, a wide but not unlimited category. A new entrant would not be restricted to the tiny domestic market. The mood is that a home-grown LCC (or two) is now a question of when and who.
AirAsia and Peach could be contenders in addition to LCC subsidiaries of existing Taiwanese airlines. While air service agreements are liberalising, especially in the key Japanese market, it may still be sometime before Taiwan receives its own LCC. Landing fees outside of Taipei are being reduced but there is no definitive plan for a low-cost terminal or other incentives.
Juneyao Airlines and Spring Airlines will make advances with their forthcoming entry into the highly lucrative cross-Strait market between mainland China and Taiwan, where yields approach an astronomical USD30 cents/km for the one to two hour flights. While they are due to initially serve Kaohsiung, a Taiwanese port city, they should gain entry on the key Shanghai-Taipei route later in 2013. The two privately-owned airlines are the most prominent of the carriers that launched mid-last decade during a period of relative liberalisation. Being new carriers, they have lean bases unencumbered with legacy baggage. Spring also has the distinction of being China's largest LCC by some degree, and will be the first LCC on the cross-Strait market.
The two will be expected to offer lower fares than competitors, but not by much, at least on the Shanghai-Taipei route. Demand far exceeds current supply, tightly controlled by the respective governments since scheduled cross-Strait services recommenced in 2008 as relations between the two governments warmed. There is little incentive to offer cut-throat fares as might be expected in other markets. The routes should do well for Juneyao and Spring from a marketing and profitability perspective, but their limited frequency against a backdrop of high demand means competitors should have little to worry about for the medium term. In the long term, however, these short point-to-point routes seem perfect for LCCs, if airlines are willing to make a fundamental change to their business.
Asian airline costs and efficiencies vary widely. Compared to Europe, the region is home to efficient LCCs like AirAsia, which on a stage length-adjusted basis is more efficient than Vueling or easyjet – but perhaps not Ryanair. Thai Airways is the most efficient of the major full-service Asian airlines, but it is not much more efficient than Finnair, one of Europe's leanest carriers. But Thai is certainly more efficient than many of Europe's full-service airlines, which have similar costs and stage lengths, unlike Asia's full-service carriers that occupy a wide spectrum. At the top end is Japan's All Nippon Airways, which rivals SAS' costs – Europe's most expensive major airline.
These are some of the findings from CAPA's examination of Asian airline costs. Geography and local labour costs only partially dictate total airline costs: three Japanese airlines are the most expensive in this sample. Yet Japan's independent LCC, Skymark is cheaper than any Chinese carrier while one of Asia's most efficient full-service airlines – Singapore Airlines – is from a country with a cost of living closer to the West than other parts of Asia. Many of Asia's full-service airlines need to shape up – and LCCs need to maintain cost discipline for when the cost gap is inevitably narrowed.
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