China Airlines and TransAsia to start LCC subsidiaries as low-cost carrier fever spreads to Taiwan

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.