“There is potential for us to swing from loss [this year] to profit next year if the international economy continues improving,” CAL Chairman Philip Wei said Dec. 16 during a celebration of the airline’s 50th anniversary.
On the global front, oil price hikes, the financial tsunami and the outbreak of the influenza A (H1N1) pandemic weighed down the industry in the last two years. The International Air Transport Association, whose 230-some member airlines represent 93 percent of scheduled international air traffic, forecast worldwide losses of US$11 billion for the aviation industry in 2009. CAL alone suffered a net loss of NT$4.99 billion (US$154 million) in the first nine months of the year.
While CAL has not been immune to the industry’s recent downturn, the firm is pinning its hopes on fundamental improvements going forward. “Improving economic prospects will spur demand for travel,” said company Senior Vice President Roger Han, adding that “rising demand could also bolster ticket prices.”
Sun Huang-hsiang, president of the airline, shared a similar vision: “The worst has passed.”
Recent monthly statistics have convinced the management of a rosy picture for the coming year. The firm posted a profit of around NT$150 million in October, which surged to NT$900 million in November thanks to increased direct cross-strait flights and better-than-expected recovery in the cargo business. “We hope for a profitable 2010,” Sun said.
Passenger and cargo transportation across the Taiwan Strait could serve as a catalyst for company revenue next year, too. Cross-strait passenger services contributed to 13 percent of company revenue in the first 11 months of 2009 while cargo business accounted for 7 percent of the company’s accumulated NT$102.46 billion in consolidated revenue during the period.
“Airlines will benefit from rising demand if both sides forge closer air links,” John Chang, vice president with CAL, said Dec. 16.
Taipei and Beijing resumed institutional negotiations via quasi-official representatives after ROC President Ma Ying-jeou took office last year. In the first three rounds of talks since June 2008, Taiwan’s Straits Exchange Foundation and mainland China’s Association for Relations Across the Taiwan Strait have succeeded in bringing more mainland tourists to the island. Charter flights have been upgraded to direct flights while more flights and airports have been opened to serve travelers.
Local airlines are seeking consensus among negotiators in the latest cross-strait talks and the next so that air traffic can be expanded from the current 270 round-trip flights per week to around 400 flights in March or April before a further boost to 540 flights. ARATS Chairman Chen Yunlin met with SEF Chairman Chiang Pin-kung in Taichung City, central Taiwan for the fourth round of talks from Dec. 21 to Dec. 25.
Cross-strait air services could get another lift if mainlanders are allowed to visit the island as individual travelers and not only as members of tour groups, according to Chang. “Cargo transshipment services could be another appealing factor in the future,” he noted.
Meanwhile, a new air accord between Taiwan and Japan should boost airline business. Taipei and Tokyo signed an agreement Dec. 11 to expand the number of their destinations and flights, as well as fifth-freedom rights (the right to pick up passengers in a foreign country and carry them on to a third country). Under the pact, each side will operate four round-trip flights daily between Taipei Songshan Airport and Tokyo International Airport from October 2010, according to Taiwan’s Ministry of Foreign Affairs. China Airlines sees the company flying two flights a day to the new destination.
To accommodate traffic needs and enhance competitiveness in the future, CAL will lease one Airbus 330 jet in 2010, Chang said. It has ordered 14 new planes which will be delivered during the 2015-2018 period. It now owns a fleet of 68 airplanes in total, including 21 freighters, connecting 84 destinations in 27 countries around the globe.
In addition to its core air transport business, CAL last month opened a hotel in its Taoyuan Aviation Park near Taoyuan International Airport. “The Novotel Hotel is expected to begin showing a profit after three years in operation,” Wei said.
More measures will be implemented to save costs. The firm’s headquarters and training center will be relocated from Taipei City to the aviation park early next year, saving around NT$30 million annually in leases currently paid to the government. Meanwhile, with its own headquarters building CAL could collect rent income of NT$40 million per year, Chang estimated.
Sun said his company is also seeking a formal presence in SkyTeam, a global airline alliance. “We hope to participate in SkyTeam next year to be more internationalized.”
Riding on economic recovery and warmer cross-strait relations, CAL is committed to safety, efficient operations, quality service and cost reductions in order to fly high. “Following on our remarkable achievements over the past 50 years,” as Sun put it, “we not only have confidence for 2010, but also for the next five decades.” (THN)
Write to Adela Lin at adela2009@mail.gio.gov.tw