The clearing of the aeropolitical clouds over Hong Kong may be having a downwind effect in Taiwan, where direct air links with China (PRC) are moving from political rhetoric to actual preparation.
Wang Guixiang, chairman of China National Aviation Corporation and new chairman of Dragonair, was the first of several Chinese aviation officials who recently made ground breaking visits to Taiwan. Wang's arrival came shortly before the launch of Dragonair's new flights to Kaohsiung, but the other mainland visitors from the Civil Aviation Administration of China, China Eastern, and China Southern Airlines, clearly had other agendas.
No one directly involved will say what they covered during lengthy sessions inside China Airlines' headquarters, but talks apparently focused on both the specifics of cross-strait flights and the prospect that mainland Chinese interests might buy a stake in China Airlines. 'A deal is in the making,' predicts Nicholas Chen, a Taipei-based US lawyer heavily involved in cross-strait aviation issues.
Speculation is widespread about the destination of 17 per cent of China Airlines' equity in a planned private placement. Taiwan's Council of Economic Planning and Development is debating whether to allow a 20 per cent limit for PRC investment in Taiwan firms. Chen notes that Taipei attitudes on such mainland stakes have softened since PRC-controlled airlines, notably Air Macau and Dragon- air, now trade in Taiwan.
Chen says that a PRC stake in China Airlines would alleviate several concerns. It would help both Taiwan and PRC authorities define the cross-strait route as a domestic route operated by 'domestic' carriers. It would also hedge against the perennial mainland fear that passengers given a choice between local and foreign airlines will pick the latter, and it would soften the economic impact on those PRC-controlled carriers which now profit from ferrying Taiwan passengers to and from China via Hong Kong or Macau.
'A China Airlines stake would help insure that mainland aviation entities offset losses caused by direct flights that would divert revenue away from the Cathay-Dragonair-Air Macau routes in which PRC groups now have financial interests,' says Chen.
In a separate development that may point the same way, EVA Air has partly retreated from Macau, opting instead to codeshare with Air Macau on the Kaohsiung-Macau route it launched last December. This is the first ever codeshare between a Taiwanese and PRC-owned airline. EVA found it hard to compete with Air Macau, since Macau is not the final destination for most Taiwanese on the route, and EVA lacked fifth freedom rights to fly them on to China. EVA may also foresee a further fall in Macau traffic following the launch of direct Taiwan-PRC flights.
David Knibb
Source: Airline Business
