Brent Hannon/TAIPEI
Singapore Airlines (SIA) wants to buy an equity stake of up to 30% in China Airlines (CAL), but the Taiwanese flag carrier will insist upon taking an equal share of SIA in return, according to CAL vice-president-commercial Sandy Liu.
SIA has indicated a willingness to consider the 30% equity swap, says Liu. "But it must be on a reciprocal basis. Each carrier reserves the right to participate in the other carrier's equity," says Liu.
The China Aviation Development Foundation, which owns 71% of CAL, is apparently unwilling to part with such a large chunk of equity unless it can make a reciprocal investment in another private company, preferably an airline. In August the two airlines signed a memorandum of understanding under which SIA would take an equity share of 5-10% of CAL.
Liu says the most important aspect of the strategic alliance with SIA is not safety or shared equity, but commercial cooperation. The codeshare deal will allow CAL to take SIA customers across the Pacific, while SIA will carry CAL passengers to Africa and Europe. The Taiwanese civil aviation authority has been unable to conclude an open skies agreement with Singapore, which had insisted on fifth-freedom rights from Taiwan to the USA.
After losing $45 million in the first half of 1998, CAL is implementing a strategy to reduce its fleet to just four types, with the disposal of its remaining Airbus A300B4s, Boeing 737-400s and Boeing 747SPs "as soon as possible", says Liu. No aircraft will be leased or bought as replacements, as the airline will have taken delivery of eight new 737-800s by next month, with seven more due next year. The first 737-800 was delivered at the end of October.
The airline is also close to finalising an order for either Airbus A330/A340s or Boeing 777s.
CAL, like rival EVA Air, is to convert passenger aircraft to cargo, and is also aiming to acquire new freighters. Two747-200s are set for conversion, one in October and one in January, as CAL puts more emphasis on cargo operations. The 747-400 freighter is the front runner for its next cargo aircraft order.
CAL will focus on bilateral partnerships with other airlines, not global alliances. "These so-called alliances will not prevent us from developing bilateral relationships," says Liu. "I still believe the group alliances andbilateral partnerships will coexist," he adds.
Source: Flight International
