Taiwan flag-carrier faces challenge as EVA Air and Dragonair ramp up competition

China Airlines (CAL) is expecting to sustain damage to its lucrative Hong Kong and Tokyo services as rivals gain more access to the routes.

CAL's services from Taipei to Tokyo Haneda airport and Taipei-Hong Kong are its most profitable passenger routes. It has a near-monopoly on the former and dominates the high-yield Hong Kong route with Cathay Pacific, which accounts for almost 20% of CAL's profit. However, rival EVA Air is poised to ramp up its presence on Taipei-Tokyo, and is set to infiltrate the Hong Kong route along with Dragonair. A CAL source says that the increased competition will result in the Taiwanese flag carrier losing more than $50 million in annual revenue.

CAL switches its Tokyo flights from Haneda to Narita next month when the new runway opens, and will boost its weekly flights to the city from 21 to 22.

However, EVA, which serves Tokyo (through Haneda) from Taipei just twice weekly, will also move to Narita and increase frequencies to twice-daily. It will operate a third daily rotation through a codeshare with All Nippon Airways subsidiary ANK.

EVA will also gain more access to Hong Kong, which it only serves 16 times a week compared to CAL's 77 weekly flights. The bilateral air agreement has expired and been extended twice, and a new one is now being finalised. This is expected to allow between 45 and 49 more weekly flights to be operated - up to 35 of which will be flown by EVA.

Hong Kong-based Dragonair will also gain access to the Hong Kong-Taipei route through the new agreement, further eroding CAL's position. Dragonair passengers can fly to mainland China on the same aircraft, with a change of flight numbers in Hong Kong, a great convenience for the two million Taiwanese who travel to China each year.

Dragonair has dominated the Kaohsiung-Hong Kong route with this strategy. Taiwanese carriers and Cathay do not fly to China.

CAL still forecasts a profitable 2002 due to a rebound in cargo loads and yields, and in trans-Pacific traffic. Strong January and February revenues put CAL on course to exceed $100 million in net profit in 2002.

Without the changes to the Tokyo and Hong Kong routes, CAL would be confident of forecasting a $100 million-plus net profit for 2002, says the source.

Source: Flight International