The death of Taiwan airlines

Once again, trains are not obsolete, merely neglected:

To many in western Taiwan, the commencement of the Taiwan High Speed Rail last January ushered in a new era of fast and convenient travel between the north and south of the island. However, to local airlines, the rail service has brought unprecedented challenges that strike at the very core of their existence.

Since the high-speed railway service began, half of the air routes between Taipei City and the country’s western cities have been discontinued, with those from the capital to Taichung and Chiayi closed last year and the one to Tainan ended in August. While flights between Taipei and the southern cities of Kaohsiung, Pingtung and Hengchun–home to Kenting National Park–are still in service, operators recently stated that their future is uncertain, with reductions or cancellations being considered.
Mandarin Airlines, a subsidiary of Taiwan’s China Airlines, is the only company still running flights between Taipei and Kaohsiung–once the nation’s most lucrative domestic route that was also operated by three other local airlines, Uni Air, TransAsia Airways and Far Eastern Air Transport (FAT). Despite reducing its Taipei-Kaohsiung service to one flight per day Aug. 16, Mandarin Airlines also applied to the Civil Aeronautics Administration under the Ministry of Transportation and Communications to pull out from the route as of Sept. 1.

“Summer is supposed to be the peak season of air travel, but our passenger occupancy rate is barely over 50 percent,” said Irving Hsu, spokesman for Mandarin Airlines. “Airlines cannot survive with occupancy rates lower than 60 percent. It is increasingly difficult to maintain operations as more travelers now choose to take THSR’s trains,” Hsu explained.

In order to maintain an air service between Taipei and Kaohsiung, the CAA declined Mandarin Airlines’ application. CAA Director-General Lee Long-wen said his agency would continue to persuade the company to keep operating the route because “there is still market.”

“I conducted an inspection trip to the Kaohsiung International Airport Aug. 11 and many employees there asked us not to cancel Taipei-Kaohsiung flights altogether; otherwise the only domestic routes left for the airport will be those between Kaohsiung and the country’s offshore islands,” Lee noted.
The director-general explained that granting Mandarin Airlines additional offshore island routes or cross-strait charter flights would be one way of compensating its losses in running the Taipei-to-Kaohsiung service. Lee conceded that if the passenger volume does not improve, the route would have to be closed. “But at present we will try our best to find a solution to save it,” he said.

As a compromise, CAA has nevertheless agreed to the airlines’ reduction of flights between these two cities to one on Friday, Sunday and Monday starting Sept. 1. This will allow people to visit their families on the weekends, the administration said.

Meanwhile, Uni Air, which flies from the capital to Pingtung and Hengchun, has called on the CAA to subsidize its flights, emphasizing that though these southern cities still need the services, it cannot allow its losses to continue indefinitely. “Without the government’s assistance, we may have to end operations, and those who suffer will be residents in the south,” the company stated.

A CAA official explained subsidizing airlines would be complicated because it involves legislation and budget planning. “We have lowered the cost of an airport lease by 30 percent for these airlines, but this is unlikely to plug whatever financial gaps these companies have encountered in running domestic flights,” he added.

While FAT announced suspension of all operations in May because of financial difficulties, the official said the three other local airlines all reported losses in 2007 and for the first six months of this year. “These are hard times compounded by high fuel prices, declining market demand and the economic slowdown,” he admitted.

According to CAA statistics, the volume of domestic air passengers peaked in 1997, hitting 18 million that year. It however slumped by 60 percent to 8 million in 2006, and further dropped to 6 million last year. Airlines have predicted that the number of air passengers will barely reach 4 million this year.
A former Ministry of Transportation and Communications advisor, Professor Chang Shyue-koong from National Taiwan University’s Department of Civil Engineering noted that transportation experts cautioned the government on the effect the high-speed rail would cause local airlines a decade ago.
“But the government has not taken these warnings seriously and prepared for the changes. That’s why the nation’s airlines are now beleaguered by a host of difficulties,” he added.

The other problem remains to be addressed is how to handle the mostly empty local airports these days. One CAA official responsible for rejuvenating these facilities said the increase in cross-strait flights are expected to keep some of the airports busier in the future. “We are planning to turn part of these airports into shopping malls or recreation areas for tourists,” he said.

So trains once again prove that they can compete when the investment is made.

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