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Talk of the Day -- Should Taiwan launch budget carrier?

2012/09/10 22:58:27

The Center for Asia Pacific Aviation (CAPA) held a forum on development of low-cost carriers and new aviation services in Macau Sept. 5.

The Ministry of Transportation and Communications's Institute of Transportation, EVA Airways and TransAsian Airways sent representatives to attended the meeting.

TransAsia Airways Chairman Vincent Lin said after the meeting that the government should assist local airlines to jointly operate a low-cost carrier (LCC) to cash in on a low-cost travel boom in the Asia-Pacific area.

Otherwise, Lin said, Taiwan's civil aviation industry and even the country's overall economy may take a beating over its failure to edge into the budget carrier market.

Chang Chia-chu, chairman of China Airlines (CAL), Taiwan's largest carrier, however, took a different view of the LCC market outlook.

Citing a CAL research report, Chang said Taiwan's aviation market is not yet ripe for budget carrier operations.

The following are excerpts from a special report in the Monday edition of the Commercial Times:

Lin said Singapore Airlines' low-cost offshoot Scoot and All Nippon Airways-backed Peach Aviation will enter the Taiwan market later this month. China's budget carrier Spring Airlines is also applying to fly into Taiwan late this year.

Altogether 11 budget carriers will operate flight services on Taiwan routes.

Lin said the government should help the three major local carriers pool resources to form a budget carrier to compete with foreign LCCs. Otherwise, Lin said he is afraid that the local civil aviation industry will lose competitive edges.

According to CAPA tally, budget carriers already secure a 24 percent market share in the Asia-Pacific area and their market share in Southeast Asia has even hit 51.2 percent.

Three low-cost carriers have been launched in Japan alone this year.

CAL Chairman Chang Chia-chu said the company once studied the feasibility of setting up a budget carrier.

"Our study concludes that the time is not yet ripe for Taiwan to develop LCC business," Chang said in an interview.

For one thing, he said, Taiwan does not have an airport for budget carriers.

Second, local people are not very receptive to low-cost flight services.

With fuel accounting for 40 to 50 percent of budget carriers' operating costs, Chang said, the business is not expected to be lucrative.

To his knowledge, Chang said several South Korean budget carriers are struggling to make ends meet. Some of them are even mired in financial troubles, he noted.

If the company would edge into the LCC market in the future, he added, CAL will have its subsidiary Mandarin Airlines to operate low-cost flight service.

"We believe this is the most feasible way for us to enter low-end aviation market," Chang said, adding that having the country's three major carriers to form a joint-venture budget carrier is not feasible due to difficulties in management and flight route arrangements.

Some travel industry executives said that over the past decade, low-cost carriers have thrived in the Asia-Pacific area.

While there were some flops, many others have emerged as successful aviation giants. The trend has inspired an increasing number of foreign premium airlines, including those in Asia, to enter the LCC market, industry sources said. (Sept. 10, 2012).

(By Sofia Wu)