CHINA AIRLINES (CAL) has reported a sharp cut in 1994 profits following the crash of an Airbus A300-600R a year ago and the slump in the number of Taiwanese tourists visiting China.
The airline's 1994 pre-tax profit plunged to NT$642 million ($25 million), down from NT$3.4 billion. CAL forecasts that profits will dip further this year as it tackles rising operating costs.
CAL blames 1994's performance on depressed travel figures which followed the A300 crash at Nagoya in April 1994 and the aftermath of the Qiandao Lake incident in March when 24 Taiwanese tourists were murdered at the Chinese holiday resort.
The Qiando murders and the subsequent tourist boycott of China had a severe impact on CAL's passenger traffic to the Chinese gateway of Hong Kong. There are no direct flights between Taiwan and China, forcing most tourists to travel via Hong Kong. The route accounts for some 15% of CAL's revenues.
Overall passenger numbers declined by 9.3%, but this was partially offset by growth from the cargo business, where revenues grew by nearly 20%, to NT$11 billion. The result was that group sales edged down only marginally, to around NT$45 billion.
CAL is projecting a modest 6% improvement in turnover during 1995 and profits of around NT$550 million. Most financial analysts believe that the estimate is extremely cautious, however, predicting that the airline's recovery could be much sharper, with sales growth of more than 10% and a possible rebound in profitability.
The airline is planning a $4 billion expansion over the next ten years, increasing CAL's fleet from 37 to 67 aircraft (Flight International, 21 December, 1994-3 January 1995). The plan, however, has not yet been approved by the company's board.
CAL is scheduled to take delivery of a new A300-600R in May and a Boeing 747-400 in June, for use by its subsidiary Mandarin Airlines. The carrier is due to launch flights to Switzerland and Italy this year and has applied to fly charter services to North Korea.
Source: Flight International