China Airlines and EVA Air respond to massive change in Taiwan – but the foreign LCCs are coming

Profits have tumbled or become losses at China Airlines and EVA Air, Taiwan's two largest carriers and its only intercontinental ones. But the financials – affected by the usual suspects of high fuel and depressed freight and economic certainty – belie sound restructuring the carriers are making to respond to significant changes in the Taiwanese market, long one of the quietest areas in North Asia.

The opening of cross-Strait flights to China has, in a short time frame, delivered them an entirely new and very profitable market. It has meant pulling back elsewhere to pump capacity into the mainland - although additional aircraft were also acquired.

China Airlines is looking to permanently de-emphasise cargo's revenue contribution, sensing it to be too volatile, while EVA Air wants to increase its share. As the mainland market continues to expand, new growth (and competition) is also emerging from Japan after an open skies bilateral agreement. Further liberalisation across Asia will open new markets, but serving regional routes bears the risk of being pushed off if low cost carriers, much discussed in Taiwan - but mostly ignored - gain traction.

For all the change that has occurred, much more is inevitable in 2013.

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