Taiwanese airline sector faces challenges this year

TAIPEI, Taiwan – EVA Airways Corp saw its consolidated sales for last year hit a record level, but analysts said the Taiwanese airline sector faces challenges this year, including continued weak cargo

TAIPEI, Taiwan – EVA Airways Corp saw its consolidated sales for last year hit a record level, but analysts said the Taiwanese airline sector faces challenges this year, including continued weak cargo demand and increased competition from budget airlines.

On Friday, the nationโ€™s second-largest carrier reported its consolidated revenue for last month rose 0.69 percent year-on-year and 0.58 percent month-on-month to NT$10.33 billion (US$341.92 million), citing strong performance in passenger business.

That brought its consolidated sales for last year to an annual increase of 3.33 percent to NT$124.16 billion, marking the highest-ever level.

The companyโ€™s financial data showed that passenger business was the major sales driver, with revenue increasing 8 percent from a year earlier to NT$71.1 billion.

CARGO BUSINESS

In contrast, cargo business contracted by 6.7 percent to NT$32.03 billion, affected by weak export momentum amid a lackluster global economy and increased competition from rivals in the region.

However, Citigroup Global Market Inc analyst Timothy Chen said the rise of low-cost carriers (LCC) could pose a potential challenge for EVA.

IDEAL LOCATION

โ€œTaiwan is in an ideal location for low-cost carriers because the flight time to most destinations in Southeast and Northeast Asia is within four hours,โ€ Chen said in a client note on Thursday.

โ€œAlthough LCCโ€™s presence in Taiwan is still small with total seats from budget carriers accounting for only 4 percent of total international flights from Taiwan, the rapid share gains by the carriers since 2009 raises concerns on increased competition in the future,โ€ he said.

CHINA AIRLINES DOWN

Compared with EVA, China Airlines, the nationโ€™s largest carrier, reported a slight decrease in sales for last year due to poor cargo traffic.

Consolidated revenue inched down 0.24 percent last year to NT$140.25 billion from a year ago, the company said in its stock exchange filing on Friday.

Last month alone, sales grew 8.1 percent month-on-month, but declined 0.79 percent year-on-year to NT$11.35 billion, the filing showed.

CAL has not yet released its latest sales breakdown for passenger and cargo business.

In the first 11 months of last year, passenger sales stood at NT$84.17 billion, rising 6.3 percent year-on-year, while revenue from its cargo business slid 4 percent to NT$35.79 billion, according to the companyโ€™s data.

MORE FLIGHTS?

SinoPac Securities Investment Service said CAL may see consolidated sales for this year return to growth on the back of the companyโ€™s plans to either open new routes or raise flight frequency to China, Japan and Canada.

Meanwhile, TransAsia Airways Corp โ€” which focuses on regional passenger business โ€” said on Friday that sales totaled NT$864.04 million last month, down 0.36 percent and 11.35 percent from a year and a month earlier respectively.

For the whole of last year, the carrierโ€™s revenue hit a record level of NT$12.13 billion, up 20.88 percent from 2012, the company said in a statement.

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Linda Hohnholz

Editor in chief for eTurboNews based in the eTN HQ.

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