As the manoeuvring over direct cross-straits flights continues between Beijing and Taipei, Cathay Pacific denies direct flights will damage its business as speculation grows that the transfer of Hong Kong's sovereignty to China next July will emerge as the watershed for links.
That view is shared by Cathay Pacific managing director Rod Eddington, who says direct flights are 'a fair bet' in the 12 months after Hong Kong comes under Chinese rule. 'There will be direct links,' Eddington maintains, adding that the only question is when. 'Whenever I've asked our people in Taiwan some have said tomorrow afternoon, others have said after 1997. The second group look to be calling the running.'
Eddington, whose airline relies on Taiwan-Hong Kong traffic - much of it bound for China - for 15 to 20 per cent of its revenue, also refuses to be pessimistic about any possible loss from direct flights.
Most analysts believe Cathay will suffer a significant revenue drop as Taiwanese shun Hong Kong in favour of direct services. But Eddington says 'there won't suddenly be flights from Taiwan to 20 different Chinese cities three times a day. It is going to take time to drip feed this in.'
He points out Cathay not only operates a dozen daily flights to Taiwan, but beyond Taipei daily to Seoul, Fukuoka, Nagoya, Osaka, and Tokyo. 'I don't see any of that changing. Clearly with direct links some of our HK-Taipei flights may not be necessary but once there are direct links it will mean an improvement in the cross-straits relationship and that can only be positive.
'At the moment all the trade is one way; it's Taiwanese going to the mainland. The day is out there not so far away when men and women from the mainland will go to Taiwan. Our slice of the pie might be thinner but the pie is going to get quite a bit bigger.'
The opening of direct links will certainly have a significant effect on the strategies of two of Taiwan's airlines, which are currently struggling to compete for Taiwan-China O&D traffic on their services to Macau.
EVA and TransAsia are both trying to compensate for the lack of route authority from Macau on to China, which handicaps them in competing with Air Macau. Air Macau can carry Taiwanese into China after a Macau stopover on the same aircraft it flies on the Taiwan-Macau sector. EVA faces this same problem with its new Hong Kong route. It competes with Dragonair on the Taiwan-Hong Kong sector, but cannot match Dragonair's rights into China from Hong Kong. In both cases, Taiwanese passengers bound for China find it more convenient to fly EVA's rival.
To reduce these problems, TransAsia has entered an interline agreement with Xiamen Airlines, a Chinese carrier that recently launched flights to Macau. TransAsia's alliance with Xiamen Airlines has been described as a codeshare agreement, but there is no indication that either carrier has that authority on routes to the other's country.
EVA has already entered into a block-seat purchase and codeshare with Air Macau between Kaohsiung and Macau, but that does not extend to Air Macau's flights into China. EVA is now studying a possible equity stake in Air Macau as the best way to capitalise on the Taiwan-China O&D traffic over Macau. The question is whether direct Taiwan-China flights are still far enough off to make such an investment worthwhile.
T Ballantyne/D Knibb
Source: Airline Business
