Kitty Yen's relaxed style belies tough business instincts - and EVA Air's new president will need to call upon them if she is to pull Taiwan's second carrier back into profitability
EVA Air president Kitty Yen knows how to make an entrance. A few minutes late for our interview at an office of parent Evergreen in downtown Taipei, she is profusely apologetic, making a noisy arrival as we go through introductions. She instantly gives the impression of an executive with a no-nonsense style of business, but also of one who is friendly and sincere. Yen also makes it clear that any question can be asked, in much the same way that her staff can make suggestions without fearing the consequences.
Behind the friendly and easygoing demeanour, however, Yen, 51, is an executive who knows she has her work cut out. President of EVA since January, she has taken over after Taiwan's number two airline suffered its first full-year loss in seven years, and as the industry is still trying to come to terms with the global shake-up following the 11 September terrorist attacks. Taiwan's IT-driven economy is also in the doldrums.
But Yen is an optimistic, upbeat executive who is confident she can steer the carrier back to profitability this year. The goal is ultimately to put EVA back on an expansion course similar to that seen in the 1990s, when it firmly established itself as a strong competitor to Taiwan's national carrier China Airlines (CAL).
"Things have picked up quite a bit over the past few months," she says. "You saw how much we lost last year. Even if we just break even or make a little bit of a profit this year, it will be very good for us. But it is looking much better now. We are definitely in a better position."
EVA is now in its second decade of operations, having launched services in July 1991 after a liberalisation of Taiwan's air transport sector. In the early days after its launch, the carrier was inaugurating new international routes at an average rate of one every 45 days. Its fleet grew quickly.
To set itself apart, EVA knew it had to be pioneering from the start. It introduced the world's first four-class service, for example, among other unique service offerings which Yen herself helped to develop while parent company Evergreen was working on the airline's launch. This helped it grow rapidly, although primarily on the back of market expansion, rather than by taking away market share from government-controlled CAL.
"Before EVA was here, China Airlines' market share on transpacific routes was something over 30%, but even after EVA came along they still have more," says Yen, who has been with the Evergreen shipping group for more than 25 years. "We are making the pie bigger. But it's also about creating markets."
EVA turned its first profits in 1995, and was consistently in the black until last year, when it was hit hard and forced to rationalise, with lay-offs and internal cost-cutting.
While many believe it is still too early to say the industry downturn is over, Yen predicts EVA will return to profitability this year. She says market conditions have been steadily improving, particularly for passenger services. While demand for service to the USA remains relatively weak, she says, EVA has seen solid demand for its flights to Europe and those within Asia.
"We are still suffering on our transpacific routes, but on the other sectors - the Europe routes and the Asia routes - it has stabilised," she says, adding that on some routes, such as those to Hong Kong and Macau, traffic is stronger than it was at the same time last year.
In 2001, EVA was hard hit on several fronts - but largely from a drop in air cargo exports that started at the beginning of the year, and the sharp decline in passenger travel following the terrorist attacks in the USA. Audited financial figures for the year are not yet available, but EVA's preliminary figures released at the end of January showed year-over-year revenue down 4%, contributing to a net loss of NT$3.14 billion ($90 million). This compares with a net profit of NT$2.51 billion in 2000.
The airline cut back sharply after the terrorist attacks. Staff numbers now come in at 4,200, around 1,000 less than before September. Even with 5,200 employees and 37 aircraft, the airline was run as a tight ship, but now it is even tighter, with just over 110 employees per aircraft. Yen says this is a number to be proud of and rank-and-file staff and senior management have learned to get by with less.
"As a result of the lay-offs we have become more competitive," she says. "Now people are more 'buddy-buddy' and work much more closely together than before. It is a much tighter team."
Yen says EVA is particularly upbeat on prospects for revenue growth this year as a result of expanded passenger services within Asia.
New services
New services have already been launched to Phnom Penh in Cambodia, and services to Tokyo are being greatly expanded. EVA's twice-weekly flights will increase to twice daily on 18 April, when a long-awaited second runway opens at congested Narita airport.
EVA will also be codesharing with Air Nippon, a subsidiary of All Nippon Airways, on its flights between Tokyo and Taipei. This agreement will allow the Taiwanese carrier to sell seats on seven more weekly services, lifting its overall Tokyo service pattern to three times daily.
Yen says EVA is also hopeful it will secure more rights to operate on the highly profitable Hong Kong route this year. It now operates just 16 weekly services to Hong Kong, compared with rival CAL's 105 a week. She hopes new air services arrangements giving EVA increased access can be firmed up between Hong Kong and Taiwan before June.
EVA is at the same time still studying membership of a global airline alliance and Yen says that at some point in the future, the carrier will almost certainly join one. It is not imminent, however, and Yen says there are no plans to take a decision within the next 12 months.
Cargo operations will not be neglected when it comes to growth planning, she says. The airline is no stranger to the freight transport game – not surprising given that its owner is Evergreen, one of the world's largest sea shipping groups.
EVA hopes to continue with the steady expansion of its cargo division in the coming years and is finalising schedules with Boeing to have its remaining two MD-11 passenger aircraft converted to freighters.
Yen says the aircraft should be modified early next year and enter service in June and September, respectively. The carrier's freighter fleet comprises two Boeing 747-400Fs, 10 747-400 Combis and nine MD-11Fs. One more 747-400F is to be delivered in July.
These additions to EVA's freighter fleet will allow the carrier to boost its cargo operation with new routes and additional frequencies on existing services. It has already announced it will begin dedicated cargo service to Milan later this month.
Cargo goal
An expanded freighter fleet should also help EVA find new sources of revenue to help the airline meet its long-stated goal of earning 60% of total revenue from cargo, Yen says. EVA has been steadily expanding its cargo operation since its launch, although last year saw revenue dip. In 2000, cargo accounted for 43% of total revenue, but for 2001 this contribution slipped slightly, according to the preliminary figures.
Despite the setback in 2001, Yen expects the 60% revenue target to be met within a few years. Although EVA suffered last year from lower rates caused by overcapacity in the market, yields have been improving and she is confident about prospects this year. "Surely the Asian cargo market will continue growing; there is still very much potential," she says.
"Gradually we want to reach our 60% goal. This is a kind of vision," she adds, explaining that EVA's institutional experience in maritime shipping will be a significant help. "We are so proud of our performance in cargo transport. We know quite clearly how the cargo market works, and are comfortable in this line."
Although the years ahead will again see significant fleet growth - almost like the early days when the carrier was adding aircraft at a phenomenal rate - Yen says the airline will be relatively cautious about such developments as ultra-large aircraft such as the Airbus A380. She prefers to take a "wait-and-see" attitude towards such offerings, as part of what she describes as a more conservative approach to overall fleet planning.
From next year, EVA's first Airbus aircraft will start arriving. Eight A330-200s will be taken on lease or purchase arrangements to replace Boeing 767s, while from 2005 the airline is due to start receiving Boeing 777-200LR/300ER ultra-long-range aircraft, mainly for use on US routes. "We see a lot of opportunities ahead of us," Yen says.
China is the market that holds the most potential, although politics prevent Taiwan's airlines from directly taking advantage of the huge demand for travel between the two sides. China considers Taiwan a renegade province and has prohibited direct flights for more than 50 years, forcing passengers and cargo to travel through a third point, usually Hong Kong or Macau.
Around 3 million individual trips were made between Taiwan and China last year, and forecasters conservatively predict that with direct flights the figure will swell to 5 million.
For EVA, the stakes are clearly huge, but Yen will not predict when it will happen. "It is a government matter, really," she says, "but everyone is crossing their fingers. Everybody hopes."
Airlines from both sides have been forging links over the years in anticipation of the day when direct service is allowed. EVA, for example, last year joined three other Taiwanese companies in investing in a new cargo terminal project at Xiamen's Gaoqi airport. Yen says this was an important development, but she is quick to point out that it was primarily a business move. "From a business point of view it is definitely important," she says. "Political? I'm not in a position to say, as I'm not a politician. But if the business is right we will [seek more investment in China]. It should be case by case. If we have the opportunity, we will grab it."
Lone female
Despite the challenges facing the airline industry in the wake of 11 September, Yen says she is more relaxed as president of EVA than she has been at any other job she has held with the Evergreen group.
She is now the only female head of a major airline in Asia, although not the first. That honour went to Christine Tsung, also from Taiwan, who headed CAL between the middle of 2000 and the end of January this year. Tsung left CAL to become Taiwan's Minister for Economic Affairs, but resigned from that job after seven weeks, citing a tougher-than-expected political environment.
Is it difficult for Yen as a woman in a male-dominated industry? Not at all. "I never dreamed of becoming president of EVA. But the group chairman has had a vision - to train female executives - since the beginning. I have been with this group for 26 years, so I haven't just popped up here," she says.
"From the cabin crew, the cabin service side, procurement, finance, sales, reservations or ticketing - all aspects of the business pretty much involve the girls. So I don't really see any problems being a woman - except with the maintenance side, maybe. But in this industry things have been gradually changing, and for me there is not a problem."
She adds: "Anyway, if life's too easy and you're sitting there doing nothing you don't feel you're alive. If you exercise and are perspiring then you feel good. This is how I feel right now. I love being the airline president."
Source: Airline Business
