Taiwan Today

Taiwan’s aviation industry is gaining momentum thanks to government initiatives, service quality upgrades and strategic alliances

The launch of direct flight services between Taipei Songshan Airport and Seoul’s Gimpo International Airport on April 30 this year completed the last piece of an air transportation network planned by the Republic of China’s government. Dubbed the Northeast Asian Golden Aviation Circle, the scheme links Songshan Airport to counterparts in Seoul, Shanghai and Tokyo, making travel in the region more convenient. Nonstop services from Taipei to Shanghai Hongqiao International Airport and to Tokyo’s Haneda Airport both started in 2010.

“The realization of the Golden Aviation Circle enables Taipei to be better connected to major Northeast Asian cities and furthers tourism, trade and cultural exchanges with them,” says Yin Chen-pong (尹承蓬), who retired as director-general of the Civil Aeronautics Administration (CAA) under the Ministry of Transportation and Communications in July this year. “It also facilitates Taipei Songshan Airport’s transformation into a regional air transport hub.”

The direct aviation services have proved popular, Yin says, citing high seat occupancy rates for Taipei-Hongqiao and Taipei-Haneda flights, which average 85 percent and 78.5 percent, respectively. Airlines can usually turn a profit with seat occupancy of at least 60 percent, he says.

All the same, air transportation links between Taiwan and mainland China have been built in a step-by-step manner. Regular cross-strait charter flights on weekends were inaugurated in July 2008 and expanded to weekday services in December 2008. Scheduled flights across the Taiwan Strait commenced in August 2009. The number of cross-strait flights has since increased to 558 a week, with an average passenger load of 77.6 percent.

Meanwhile, passenger traffic at Taiwan’s airports in 2011 totaled 41.39 million, a five-year high. Cargo amounted to 1.74 million metric tons. The 2011 figure for cargo fell 6.9 percent from a peak recorded in 2010, but represents the second highest figure in 10 years.

Yin attributes the substantial growth in passenger traffic to the government’s endeavors to promote cross-strait exchanges as well as international tourism. Moreover, Taiwan has signed aviation agreements with 50 countries and regions to date, he says. In the last two years, the government has either signed, renewed or revised aviation accords with Hong Kong, Japan, Singapore, South Korea, Vietnam and the United Kingdom to increase flight destinations and frequencies. Yin says the decline in cargo volume was primarily caused by Europe’s lingering debt crisis and the slow economic recovery in the United States.

At present, eight Taiwanese civil aviation companies are in operation, with most of them serving domestic routes including outlying islands or destinations within Asia. China Airlines (CAL), Taiwan’s state-backed airline and its largest carrier, and EVA Airways, the country’s second-largest airline, are the only two Taiwanese airlines flying extensive worldwide routes. Meanwhile, 52 foreign airlines, including 13 from mainland China, have set up operations in Taiwan. They serve 165 passenger routes and 93 cargo routes in total, connecting to approximately 110 cities in 33 countries and regions.

Volatile Environment

CAL chairman Chang Chia-juch (張家祝) says the aviation industry on the whole has operated in a harsh, volatile environment over the past 18 months. This is due to the earthquake, tsunami and nuclear disaster in Japan in March 2011 and months of flooding in Thailand that began in July that year, as well as political unrest in the Middle East, the European debt crisis, which has dampened the global economy, and high oil prices, he says.

In the face of these difficulties, Chang says, his company aims to develop its niche in the rapidly expanding cross-strait market. In addition to the establishment of direct air links across the Taiwan Strait, mainland Chinese tourists have been permitted to visit Taiwan individually since June 2011 rather than as members of a tour group. The new rule has created more demand for cross-strait flights, he says.

The CAL chairman says the open skies agreement signed between Taiwan and Japan in November 2011 has helped his company expand its foothold in the region. The air transport pact allows an unlimited number of carriers from Taiwan and Japan to operate scheduled flights between the two countries, as well as an unlimited number of flights between Taiwan and Japanese destinations except for Tokyo. It also gives each side “beyond rights,” which allow Taiwanese airlines to pick up passengers in Japan on the way to a final destination in a third country.

In addition, more Taiwanese citizens are making long-haul overseas trips since European Union (EU) nations and a number of other countries started offering visa-free entry, Chang says. He expects the upcoming inclusion of Taiwan in the US visa-waiver program to spur passenger growth. Currently, 128 countries and regions worldwide allow Taiwanese travelers to enter without a visa or with a landing visa.

CAL has benefitted from these government efforts, as seen in consistent increases in the number of its destinations, flights and passengers in recent years, Chang says. Passenger numbers, for example, grew from 9.86 million in 2007 to 11.42 million in 2011, while cargo rose from 844,668 metric tons to 864,998 metric tons during the same period.

Founded in 1959, CAL currently operates 71 planes, including 51 passenger jets and 20 freighters, with an average age of 9 years. To meet rising demand, the company plans to lease more than 10 aircraft in the next three years to boost its fleet, and is studying the feasibility of ordering new long-haul jets. CAL flies to 111 destinations in 28 countries in Asia, Europe, North America and Oceania.

Nieh Kuo-wei (聶國維), group executive officer of public relations at the Evergreen Group, the Taiwan-based operator of EVA Airways, also lauds the visa-free travel arrangements with select countries and breakthrough aviation agreements with mainland China, Japan and South Korea for their positive impact on the air transport market.

More Passengers, Less Cargo

EVA Airways has seen a steady climb in passenger numbers in recent years. Occupancy for EVA flights to mainland China rose 100 percent in 2009, 170 percent in 2010, 209 percent in 2011 and is projected to grow 251 percent this year. The growth rate for the carrier’s flights to Japan was 100 percent, 114 percent, 112 percent and 154 percent; for flights to South Korea the rate was 100 percent, 93 percent, 99 percent and 121 percent during the same period.

“[Overall, however,] it’s been a challenging year, especially for air cargo transport since demand has weakened amid the slowdown in Europe and mainland China,” Nieh says. “Still, Taiwan’s aviation industry is fortunate in being able to keep growing due to cross-strait routes. We’re grateful to the government for its exertions in cementing exchanges in all fields with mainland China.” Cross-strait flight services now account for 15 percent of EVA’s overall revenue. 

The group executive officer hopes that negotiations will continue with mainland China so as to increase flight services from Taiwan to mainland Chinese cities, in particular larger cities like Beijing and Shanghai. He also hopes that Taipei will grant transit rights to mainland Chinese travelers via Taiwan Taoyuan International Airport (TTIA), Taiwan’s largest airport. These efforts would boost Taiwan’s potential as a transshipment hub in the Asia-Pacific region, Nieh says.

EVA was established in 1989 as Taiwan’s first privately owned international airline. It serves 23 countries and regions via 63 destinations, 17 of which are in mainland China. The airline operates 59 Boeing, McDonnell Douglas and Airbus aircraft, with 42 passenger jets and 17 freighters. Another 12 Airbus 321-200 jets and seven Boeing 777-300ER planes are on order, with deliveries expected to begin in October this year and be completed by 2016.

The new planes will replace older jets, which Nieh says will add to a high level of flight safety and service quality, as well as fuel efficiency. The long-range 777-300ER planes, for example, are known for conserving fuel.

Nieh says EVA has made regular cabin upgrades a priority since the airline launched. It was the world’s first carrier to introduce a “premium economy” service, which falls between business and economy classes, in 1992. As the name suggests, the service offers better amenities, larger seats and more legroom compared with economy class, and typically costs about 25 percent more. The innovation has since been adopted by many airlines around the world, he adds.

EVA introduced Premium Laurel Class, its new-generation business class, with fixed-shell seats and individual on-demand entertainment systems in 2003 and more  recently, invested US$100 million to upgrade business-class cabins on all its 777-300ER jets. The enhanced cabins were unveiled in May this year while all upgrades are expected to be completed by 2013.

The company has also sought creative ways to add value to its services, Nieh says, such as by partnering with Japan’s Sanrio Co. to introduce its first Hello Kitty-themed jet in 2005. EVA has thus far launched five Hello Kitty jets serving Guam, Hong Kong, Japan, Seoul and Shanghai. The planes feature a specially painted fuselage and more than 100 in-flight service items, such as cups, headrest covers and tableware, bearing the image of the cartoon character.

Likewise, CAL has conducted several retrofits and introduced advanced safety management systems. Its latest project—the refurbishment of nine Boeing 747-400 cabins with new interiors including seats with personal multimedia entertainment systems—began in 2011 and will be completed in October this year. The airline has also worked to raise the quality of in-flight meals by cooperating with renowned restaurants in Taiwan and inviting a Michelin-star chef to create the menus.

Sun Huang-hsiang (孫洪祥), president of CAL, says in its drive to expand operations, his company has signed codeshare or interline agreements with major American and European airlines. Codesharing refers to a practice through which a flight operated by one airline is jointly marketed as a flight by one or more other airlines. Interline partnerships allow two or more airlines to issue tickets on behalf of each other.

After 10 years of effort, CAL joined the SkyTeam Alliance, a group of international airlines, in September 2011 as SkyTeam’s 15th member. “SkyTeam membership is a significant feat for CAL as it represents the global aviation industry’s recognition of CAL’s overall operational performance,” Sun says. “We believe that the enhanced partnerships with other international airlines will reduce our operating costs while raising our revenue in the years to come.”

The SkyTeam Alliance’s global network offers 14,700 flights daily to some 950 destinations in 173 countries. Alliance customers can earn frequent flyer mileage for travel on member airlines and use lounges operated by any member carrier.

Similarly, EVA was accepted as a member of the Star Alliance, another global carrier group, in March this year and is currently in the process of integration into the organization. The Taiwanese airline is scheduled to become a formal member in 2013. The Star Alliance’s network of 30 airlines (including 26 formal members and four memberships pending) offers more than 22,000 flights daily to 1,345 destinations in 191 countries.

“Joining the Star Alliance helps elevate our corporate management practices, operational systems and services to international standards. It is also a long-term development strategy for us to become more internationalized and competitive,” Nieh says. “Through close cooperation with other international airlines, we’ll be able to offer our customers access to a global network, making their travel easier, faster and cheaper.”

Former CAA Director-General Yin says to meet the anticipated growth in passenger traffic and promote Taiwan as a key transport hub in East Asia, the government is striving to improve aviation infrastructure. One such project is the expansion of TTIA including the construction of a new terminal and runway, enlarging cargo and free trade areas, and renovating the airport’s two existing terminals.

Wong Jinn-tsai (汪進財), a professor at the Institute of Traffic and Transportation of National Chiao Tung University, says the increase in passenger traffic at TTIA from 23 million in 2007 to 25 million in 2011 was mainly driven by direct cross-strait transport links. The number of transit passengers decreased from 2.57 million to 1.81 million during the same period, however.

The decline in transit traffic at TTIA, Wong believes, is due to the emergence of airports in Beijing, Hong Kong, Seoul, Shanghai and Tokyo as major transit hubs. In recent years, these airports have become gateways for travel to and from North America and Europe, meaning that TTIA faces an uphill battle competing with its counterparts in the region.

Looking for a Niche

“Taiwan itself—being a beautiful island and a high-tech center—is a competitive advantage,” Wong says. “The government would do well to focus on this niche and think about how to market Taiwan to draw more tourists and create economic opportunities in order to attract business travelers.” Singapore actively promotes tourism and the convention and exhibition industries among other sectors, for example, and has thus attracted large numbers of visitors, he adds.

Yeh Wen-chien (葉文健), director of the Department of Air Transportation at Kainan University in Taoyuan, northern Taiwan, says Taiwan could learn from other airports in the region. He touts the examples of Hong Kong International Airport, South Korea’s Incheon International Airport and Singapore Changi Airport in particular, all of which launched aggressive expansion projects several years ago and now play important roles in transshipment. In comparison, airports in Taiwan got a late start, putting the country at a disadvantage, despite its good geographical location.

Given that the prospects of the aviation industry are closely linked with economic trends, Yeh says it is essential that the government attempts to stimulate the domestic economy to create larger demand for tourism and cargo shipping services.

Still, Taiwan’s aviation industry has remained fairly stable in the face of adverse macroeconomic conditions worldwide, a situation he attributes to the growth of cross-strait flights.

For CAL and EVA, the endeavors to upgrade operations and service quality have paid off in several awards and honors granted by industry experts and travelers. The US-based Aviation Week magazine ranked CAL as the world’s 10th mainline carrier in its 2011 Top-Performing Airlines study. EVA was voted one of the world’s 10 best airlines by readers of the New York-based Travel + Leisure magazine in 2010, and has been rated as one of the top 10 safest airlines in the world by Germany’s Aero International magazine every year since 2004.

“The many international awards and certifications that we’ve received for our cargo, passenger and maintenance services demonstrate our strong competitiveness,” Nieh says of EVA. “There’re also our upcoming membership in the world’s largest airline partnership, and the government’s ongoing efforts to expand cross-strait flights and negotiate new air transport and visa-waiver agreements with foreign nations. We’re hopeful of taking success to new heights as there will be new demand, new clients and new opportunities.”

Write to Kelly Her at kher@mofa.gov.tw