A plan by Taiwan's China Airlines (CAL) to take a 25% stake in Shanghai-based China Cargo Airlines, announced in September 2001, has been held up indefinitely by the Taiwan government. An effort by Taiwanese airlines to gain first freedom rights to fly over China has also bogged down.
CAL announced in September that it had agreed to buy 25% of China Cargo from 70% owner China Eastern Airlines and 30% owner China Ocean Shipping for around 675 million yuan ($82 million). Both sides said at the time that government approvals should be secured before the end of the year.
The proposed buy-in cannot go through until Taiwan's Ministry of Economic Affairs gives its backing. Jeff Yen, a senior ministry official, says comment has been sought from different branches of the Taiwan government, but none has been received. "I really don't have any idea when it will happen," says Yen.
The stalemate is further bad news for the Asian aviation industry. The two countries remain far short of launching direct flights, a catalyst that would fuel growth in regional aviation.
Similarly, permission to overfly China, which was offered by the mainland Chinese government to a group representing four Taiwan airlines in October 2001, has also failed to materialise.
While China appears willing to allow Taiwan airlines first freedom rights, and allow them to invest in local carriers, that is not the case, say Taiwan sources.
Offers
The mainland made the offers to Taiwanese airlines, but did not discuss them with the Taiwan government. China will not negotiate with the Taiwan government until Taiwan first agrees that there is only one China, which the administration of Taiwan president Chen Shui-bian refuses to do. Talks have stopped, and further progress, let alone direct flights, remains a distant possibility.
EVA Air was similarly set to invest in China Southern Airlines, but those talks have stalled. "They welcomed us to have a cooperation in the future. But we have no solid negotiations, and there's no further information from the Taiwan government," says EVA deputy senior vice-president K W Nieh.
Taiwan's airlines have chosen prospective partners, should the stalemate end: EVA has talked with China Southern, CAL has talked with China Eastern and Shandong Airlines, domestic carrier Far Eastern Air Transport has signed a memorandum of cooperation with Shanghai Airlines, and has also had discussions with China Southern. Likewise TransAsia Airways has had discussions with Xiamen Airlines.
Catalyst
WTO entry was expected to be the catalyst that would launch direct flights between China and Taiwan, which have been banned by Taiwan since 1949. The ban on direct links is illegal under WTO rules, unless Taiwan invokes a special security exclusion, which it has not done.
Both countries joined the WTO in November 2001, yet nothing has happened. "WTO entry doesn't make too much difference, not really," says Nieh. "In the airline industry, nothing really particular was discussed by WTO. Traffic rights between mainland China and Taiwan are still a political issue, and that is separate."
The pent-up demand for direct flights is enormous. An estimated two million Taiwanese travel to the mainland each year, most of them via Hong Kong or Macau. The top destinations are Guangdong province, Fujian province, Shanghai and Beijing.
EVA is more enthusiastic than CAL about direct flights to China, because CAL derives almost 20% of its profit from the Hong Kong route, where it flies 105 times per week.
Traffic on that route would decline if direct flights began. EVA, by contrast, flies to Hong Kong 16 times per week, although it has asked for an additional 23 weekly frequencies. Negotiations are ongoing.
One bright spot is a joint investment in an air cargo terminal in Xiamen's Gaoqi International Airport. In August 2001 four companies Ð Far Eastern Air Transport, EVA Air, CAL, and a subsidiary of CAL Ð invested a combined $13 million for a 49% stake in the operation.
Source: Flight Daily News
