China Airlines close to a decision on LCC plan

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Taiwan's China Airlines is close to a decision on its plans for a new low-cost carrier, as it moves to take on rising competition from such budget operators.

"We're looking at how to do it [launch a LCC] and when. It's not about whether to do it or not, it's about when," says its president Sun HH in an interview with Flightglobal Pro in Taipei.

He adds that the airline is now "close to a decision" and will likely announce plans by the end of the year, or in early 2014.

In March, the flag carrier said it has set up a "special team" to evaluate the possibility of launching a low-cost carrier - the closest indication yet that a Taiwanese carrier could set up a homegrown low-cost arm.

Taiwanese carriers have over the years faced increasing competition from foreign low-cost carriers. Eleven low-cost carriers now operate services to Taiwan, mainly concentrated at Taipei's Taoyuan International airport, taking up about 4% marketshare. Last year, the airport handled 1 million passengers who travelled with LCCs, 10% more than in 2011. This year, the number is expected to grow by at least another 10%.

Local carriers have, however, been reluctant to set up a low-cost unit because of the country's relatively small domestic market compared with countries such as Indonesia and Malaysia, and also because Taiwan has a high-speed rail network that has greatly cut into demand for domestic flights.

Sun adds that "travel rights are not so open in Taiwan", and that there is congestion at Taoyuan International airport as well as night curfews at some other airports, which could limit aircraft utilisation.

"Although the conditions in Taiwan are not so ideal for the setting up of an LCC or its growth, we feel that this can slowly be developed. We need to do this, but now we need to decide when to do it, how to do it. We're looking at it very positively," says Sun.

He would not say whether China Airlines is planning to partner with an established low-cost carrier in the venture, or if it is planning to convert its regional subsidiary Mandarin Airlines to fit the role.

Meanwhile, rival Eva Air says it is monitoring the situation closely, but that given the existing market conditions, it will not be setting up a low-cost arm just yet.

"To run an LCC is easy, but it has to make money, it must survive, that's the tough part," says its president Austin Cheng.