While the opening up of the China-Taiwan market to direct scheduled passenger flights is creating new opportunities and benefits for Chinese and Taiwanese operators, there is a flip side of needing to re-adjust for the markets which had until now benefitted from carrying the majority of traffic between the two.
Airports and airlines in Hong Kong and Macau are affected by the increasing number of direct flights between Taiwan and China, but Macau is feeling the bite a bit more as it also struggles to deal with the economic crisis and Chinese visa restrictions.
Both islands were the key transit points between China and Taiwan, which did not allow direct flights between their cities after 1949. Passengers had to stop at a third city, and around 60% of this was in Hong Kong. A further 30% went via Macau.
That began to change as China and Taiwan started to allow a few chartered flights in 2003, when a new arrangement came into force. The trickle slowly became a flood, culminating in the recent restoration of direct scheduled services for the first time in 60 years. This increased the number of weekly non-stop passenger flights between China and Taiwan to 270 from 108 and monthly cargo flights to 112 from 60. These will be formed from a mix of scheduled and charter services.
Analysts believe this is still not sufficient to cater for existing demandwhich means there will still be a role for the transit points. However, taken together with the economic crisis, which has also led to a greater fall in passenger and cargo numbers than expected, the timing could not have been worse for Macau.
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In the second quarter of the year, Macau International Airport's passenger traffic fell a quarter to 1.03 million and cargo traffic plummeted by 61.2% to 11,877 tonnes. Aircraft movements fell by 21.2% to 10,369. Macau has 139 flights a week to Taiwan, but this - traditionally big contributor to traffic - has been falling.
The island itself received 10.3 million visitors in the first half of 2009, 11.4% fewer than a year before. In the first quarter, the number of passengers from Taiwan fell by 20% and the numbers from China were 29% lower. For the full six months, the number of visitors from China fell by 17.3% and those from Taiwan fell 8.1%.
The airport has been trying to diversify its revenue sources by developing new markets and enticing airlines from other countries. It is also working with the local authorities to attract tourists to Macau. However, it admits that the rest of the year will continue to be "extremely difficult".
"Taking account of the prolonged economic recession, the flu pandemic, as well as the increase on direct cross-strait flights, the months ahead will continue to be extremely difficult for the Macau aviation sector and demand continuous effort from several partners in the industry and support from the Macau society and government," says Macau International Airport.
Flag carrier Air Macau has also been badly affected over the last year by the direct cross-straits flights, especially since almost 70% of its revenues traditionally came from transit passengers from Taiwan and China.
CAPITAL INJECTION
The airline, which had been suffering losses for several years, saw its net asset value decline to negative 107.3 million Macau pataca ($13.2 million) at the end of 2008. It received a capital injection of 507.3 million Macau pataca in June from its shareholders. The only other option, according to Air China which owns 51% of the airline, was to wind the carrier up.
Air Macau, which also flies to destinations in Thailand, Japan and the Philippines, could try to find new destinations and is trying to move away from its dependence on China and Taiwan. But it is hard to compete against low-cost rival Viva Macau, which does not serve Taiwan and China but has established itself on routes to many parts of Asia from Macau.
Hong Kong, on the other hand, is coping better. It is a major financial hub and a key transit point for travellers from around the world. Unlike Macau, which is overly dependent on the China-Taiwan transit and casino businesses, Hong Kong's air travel market is well diversified.
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For the first half of 2009, Hong Kong International Airport handled a total of 22.4 million passengers, 1.5 million tonnes of air cargo and 138,290 aircraft movements. This was a drop of 8.2%, 19.8% and 7.7% respectively from a year before. While those falls were partly due to the cross-straits flights, it is mainly because of the economic crisis and fears over the H1N1 flu, says HKIA.
There are 313 flights per week to Taiwan from Hong Kong, but this represents only a small percentage of its total flights. It is estimated that around one million Taiwanese went to China from Hong Kong in 2007, but that represented only 3.5% of the island's total tourist numbers. Overall, the impact is much smaller.
Similarly, Cathay Pacific operates 108 scheduled flights to Taipei every week, while its Dragonairsubsidiary operates 28 scheduled weekly flights to Taipei and 28 weekly flights to Kaohsiung. But flight services to Taiwan account for about 4% of its total capacity, and mainland China routes about 8%. The latter may be affected, but China is still a key and busy market out of Hong Kong due to the island's position as a finance market.
GROWTH POTENTIAL
Cathay says that while there has been ad hoc cancellation of flights to and from Taipei in response to changing market demands, it has no plans to reduce its scheduled flights to Taipei permanently.
"We are seeing a reduction of our cross-strait passenger traffic from Taiwan to the mainland via Hong Kong. The introduction of cross-strait direct freighter services late last year has also adversely affected cargo volumes to and from Taiwan and mainland China," says Cathay.
"We believe that as cross-strait traffic grows, the triangular mainland [China]-Hong Kong-Taiwan traffic will also grow with the role of Hong Kong as the centre for trade, commerce and finance gaining further importance."
Source: Flight Daily News
