Brent Hannon/TAIPEI
Taiwan's two biggest airlines have experienced a politically-inspired reversal of fortune in the last few months which could see EVA Air, founded in 1991, threaten the dominance of 40-year-old flag-carrier China Airlines (CAL).
Both airlines are comfortably profitable. But while EVA finds itself in favour with the new Taiwanese Government and president Chen Shui-ban (a former lawyer with EVA's owner the Evergreen Group), CAL has seen its management team deposed because of its close links with the previous Nationalist government.
With Chen using EVA for foreign trips and still close to Evergreen chairman Chang Yung-fa, who he visited just days after his election, EVA, Taiwan's number two airline, suddenly has a hotline to the top. CAL, meanwhile, is struggling to find its feet under new president Christine Tsung, who lacks an airline background.
Under Tsung, plans to sell a stake in CAL to a foreign carrier have been delayed, threatening its aim of joining a global alliance. A contract with US consultants Salomon Smith Barney, hired to oversee the sale, has expired, while Tsung confirms that the issue has not yet been raised with the China Aviation Development Board (CADF), which control's Taipei's 71% stake in CAL and which itself had a new board appointed in June.
Singapore Airlines (SIA) had planned to invest in CAL, but the deal collapsed after SIA rejected a CADF scheme to take a reciprocal holding. A planned sale to Northwest Airlines fell through in February when a price could not be agreed.
The real test of EVA's political connections could come when it tries to gain increased access to the lucrative Hong Kong and Tokyo routes. CAL flies to Hong Kong 77 times a week, exploiting the former UK colony's status as a gateway to China. Taiwan's status, in Beijing's eyes, as a rebel province, means it cannot fly there directly.
EVA flies to Hong Kong 16 times a week, and wants more frequencies, while an air agreement with Hong Kong is due for renewal next June. There is a similar imbalance on the Tokyo Haneda Airport route, which CAL flies 21 times a week, against EVA's twice.
While EVA ranked behind CAL in financial terms last year, with a turnover of around $1.5 billion against the latter's $1.9 billion, around 20% of CAL's passenger sales are generated by the Hong Kong route alone, so that a redistribution of frequencies could have a major impact. CAL projects a pre-tax profit of NT$2.3 billion (US$74 million) for 2000, and EVA, which unlike its rival has been profitable for the last three years, one of NT$2.0 billion.
Tsung's lack of experience might also affect CAL's ability to fight off a buoyant EVA. Appointed in July, she was previously a consultant on Kaohsiung's rapid transit system, and recently betrayed her lack of aviation experience in failing to answer questions on several key issues: the expansion of operations in China; plans to sell 50% of subsidiary Mandarin Airlines; global alliance plans; a move to a new terminal at CKS International and the possible resumption of flights to the Philippines and Korea.
CAL's poor safety record is also a major challenge for US-trained Tsung, who has stressed the need to change the autocratic culture among its 9,000 staff. CAL has suffered four crashes, causing 469 deaths, since 1993, plus a fifth by subsidiary Formosa Airlines that killed another 13, although Tsung hints that she believes some responsibility lies with the aircraft manufacturers.
"Sometimes a safety record has something to do with purchasing as well," she says. "It's not just the pilot. How you negotiate the contract with the manufacturers is also an important factor. In the past I felt there were things CAL swallowed which it shouldn't have."
Investigations into recent CAL accidents have placed no blame on airframers, however, although a Boeing 747 freighter crash in 1991 was found to have been caused by an engine mounting design fault.
Safety will be overseen by CAL chairman Lee Yun-ling, former pilot and vice president of Taiwan's largest domestic carrier, Far Eastern Air Transport, while VP of operations Alfred Kupferschmied, formerly of Lufthansa Technik, will have direct responsibility.
CAL is reviewing last year's order for 13 Boeing 747-400 freighters and seven Airbus A340-300s, although Tsung does not expect the order to be reduced.
Source: Flight International
