When TransAsia Airways placed its first order for the Airbus A330-300 in 2010, it was on a growth path looking to capitalise on booming cross-straits traffic and to expand its network internationally.
Two fatal turboprop crashes in the space of seven months between 2014 and 2015 have however thrown a spanner in the works, with 2016 proving to be a year of difficult decisions. On 20 June, the full-service carrier announced that it will cut all four A330s from its fleet by the end of 2016, and pursue what it calls a "hybrid" business model.
The Taiwan Stock Exchange-listed carrier will also issue 125 million new shares in an attempt to raise NT$1 billion($31 million) of working capital. To stem losses, it will suspend services to Macau, Okinawa and Guiyang from 30 October.
HOPES FOR HYBRID
It is unclear how the Taiwanese carrier intends to transform its business into a hybrid model – a move its chairman Vincent Lin is hoping will meet passenger demands, open new business opportunities and allow it to achieve a “competitive niche”. The only pointer it gave was that the model would strike a balance between a traditional carrier and a budget airline.
Flightglobal's Fleets Analyzer shows that TransAsia operates 19 aircraft : four Airbus A320s, four A321s, four A330s and nine ATR 72s. All its jets, except some A321s, have some business class seats.
Nowhere in its new business plan, did it talk about its low-cost subsidiary V Air, which has been in operation for less than two years. V Air operates A320 family jets( two A321s and two A320s) to five points in Japan, Busan, Chiang Mai, Bangkok and Manila.
Some of V Air’s network, such as services to Osaka and Tokyo, already overlaps with TransAsia’s. Any attempts by the mainline to lower its fares or service levels in its bid to became a hybrid carrier, could cause brand dilution and confusion, as well as further cannibalise market share.
TransAsia already lacks the premium traffic enjoyed by peers China Airlines and EVA Airways, with their considerably larger international networks, alliance affiliations, and recognised service levels.
Becoming a hybrid carrier, which while takes it out of direct competition with the two dominant local airlines and possibly help lower costs, could make its low-cost brand redundant.
Richard Wu, a senior lecturer at the University of New South Wales’ school of aviation believes that TransAsia's best chance for survival is to convert into a low-cost operation, merging with V Air.
“It has been proven that if you want to become successful, you either move up to the premium end or down to the low-cost end. There is very little in between that you can actually get," he adds.
By the end of the year, TransAsia’s already small fleet will shrink further as its four A330s are sold, subleased, or in the worst case - simply parked. The airline elaborates that services to Japan, where its A330s are predominantly deployed, have been hit by a surge in supply as well as lower demand due to the strengthening of the Yen.
FlightMaps Analytics shows the type is currently used to Shanghai, as well as five points in Japan – Tokyo, Osaka, Hakodate, Sapporo and Asahikawa.
Its network will not be immediately affected by the removal of the widebodies, since its A320s have the legs to do the job. It could however lose the loads on some routes, and find it difficult to put on more frequencies considering slot constraints at Taipei Taoyuan International airport.
FlightMaps Analytics shows that the majority of TransAsia’s network is focused on cross-strait services to eastern China. Its only international services are to six points in Japan, Jeju and Siem Reap. Its top routes are from Taipei and Kaohsiung to Magong in Penghu, and between Taipei and Osaka.
With the A330s gone, the airline says the A321s and A320s will be used on international and cross-straits services, while the ATR turboprops will form its domestic fleet.
SURVIVAL OF THE FITTEST
TransAsia was also quick to point out its emphasis on improving the airline’s safety culture. In the first quarter of this year, all 2,000 of its staff have undergone a safety management system training.
Nonetheless, the privately-owned carrier is still barred from increasing operations both at home and abroad until the Taiwanese regulator validates the effectiveness of mitigating measures it has undertaken, in the wake of the turboprop accidents.
The global economic slowdown, and China’s reduction of the tourist quota into Taiwan following the election of a pro-independence president, only make working conditions tougher for the ailing airline.
The airline industry is a good example of how the fittest survive, and at this point, TransAsia is huffing and puffing as it attempts to fly through a turbulent period.
Source: Cirium Dashboard