This weekend’s re-election of a Chinese Nationalist Party (KMT) President in the Republic of China (Taiwan) is good news for airlines operating between Taiwan and the People's Republic of China.
Since non-stop cross-straits services began in 2009, airlines from both sides have profited from a relaxation in access, with steep gains in direct city pair operations.
There had been concerns that a loss by President Ma Ying-jeou would mean his liberal attitude to relations with the mainland would be reversed under a Democratic Progressive Party (DPP) government. It was President Ma’s influence that helped remove restrictions on direct flights.
The KMT’s win should more or less mean business as usual – and a continuation of the expansion of cross-straits air travel.
With new year holiday travel now ramping up (the Lunar New Year begins on 23-Jan-2012), China Airlines (CAL), EVA Air, Uni Air and TransAsia and the major mainland airlines have greatly enlarged programmes under way.
Taiwan's Civil Aeronautics Administration has stated that Chinese and Taiwanese airlines will be adding a total of 375 services between 09-Jan-2012 and 06-Feb-2012, covering the extended holiday period, which includes mainland China's Spring Festival, a popular travelling time. Carriers added 101 services between 10-Jan-2012 and 14-Jan-2012, the day of the elections (absentee voting was not permitted), compared to 20 services in the first eight days of the holiday travel period of 2010. While still relatively modest, given the potential market size, this expansion accelerates a process that is becoming commercially valuable for the airlines and tourism interests involved.
KMT’s reduced majority should still mean Taiwan-mainland air service growth continues unabated
The election however did not deliver the KMT as strong a mandate as it previously had. Although President Ma won easily, support dropped in legislative elections, giving the KMT 64 seats of the Assembly’s 113, down from a nearly three-quarter majority previously.
This may hamper Mr Ma’s initiatives to drive ahead with liberalisation talks with mainland leaders, but political analysts do not see this as a major issue.
Mainland services are a major priority for Taiwan’s airlines
Any setback, like a reversion to the sometimes stridently anti-mainland rhetoric of the DPP, could have generated a significant negative for Taiwanese airlines. The market prospects for Taiwan-mainland services are immense, provoking Taiwan's airlines to gear up for a boom in inbound visitors from the mainland. In Sep-2011, Taiwan’s Transportation and Communications Minister Mao Chikuo went as far as to urge Taiwanese carriers to purchase more aircraft before the number of Mainland tourists permitted to visit the island increases from 5 million presently to 10 million p/a over the next three to four years.
The demand will be captured predominantly by the nation's two major carriers, EVA Air and China Airlines, but some of the nation's smaller carriers are also targeting rapid expansion in the months and years ahead on cross-Strait and near-international routes.
According to Taiwan’s Civil Aeronautics Administration, there were 196 registered aircraft in Taiwan at the end of Jun-2011. China Airlines had the largest fleet with 67 aircraft, followed by EVA Air (50), UNI Air (19), TransAsia Airways (16), Far Eastern Air Transport (10), Mandarin Airlines (eight) and Daily Air (seven).
CAL and EVA Air are responding to the call. CAL Chairman Zhang Jiazhu in Jun-2011 stated the carrier would expand its fleet from 68 to more than 100 aircraft in the next five to 10 years. EVA Air President Chang Kua-wei stated the carrier would acquire 20 aircraft to meet robust demand from China. Taiwan even stipulated to Far Eastern Air Transport last year that it was to increase its fleet size as a condition to receiving route authorities.
Nonetheless, according to OAG FleetiNet data, the rate of deliveries anticipated to Taiwanese airlines remains fairly modest – and unlikely to allow the aggregated fleet to capture the bulk of anticipated growth.
Taiwan projected delivery dates all aircraft as as 11-Nov-2011
85 Cross-Strait routes, with Taiwanese carriers operating majority of seats
There are 85 routes between mainland China and Taiwan for the week 16-Jan-2012 to 22-Jan-2012, with all in the top 20 reaching Taipei, mostly through Taoyuan International but some through Songshan. Shanghai leads as the most common point to depart mainland China from. Services are heavily regulated with agreements covering how many flights each carrier can operate. No more than two carriers can operate on any single route. The last major revision to the flight agreement was in Jun-2011.
Top 20 Routes Between mainland China and Taiwai by seats: 16-Jan-2012 to 22-Jan-2012
Taiwan's two main carriers, China Airlines and EVA, account for 30% of all seats for the present week while its smaller carriers represent a further 22% of total capacity, giving Taiwanese carriers a 52% share on the route.
Airlines serving mainland China and Taiwan by seats: 16-Jan-2012 to 22-Jan-2012
|3||MU||China Eastern Airlines||15,099|
|5||CZ||China Southern Airlines||9,142|
|15||FE||Far Eastern Air Transport||1,859|
CAL’s SkyTeam membership expands the importance of cross-straits liberalisation, as Sky Team entrenches its north Asian position
In the wider scheme of north Asian expansion one of the beneficiaries of renewed stability in Taiwan is SkyTeam. As China Airlines joined the SkyTeam alliance on 28-Sep-2011, the group took another step forward in cementing its place in that fast-growing aviation market.
Taiwan’s largest carrier and the world's seventh largest cargo carrier (by international scheduled FTKs, or eighth largest by total system FTKs). China Airlines' entry came just three months after China Eastern Airlines and Shanghai Airlines joined the grouping in Jun-2011. China Airlines became the first Taiwanese carrier to join a global alliance, with rival EVA Air confirming in Dec-2011 its intention to join Star Alliance.
See related analysis: Star poised to boost presence in North Asian market with addition of EVA