Important election for EVA Air

The launch of the new iPhones, which takes place every autumn is especially important for some of the leading Taiwanese companies. Both Foxconn and TSMC are deeply involved in manufacturing of this device. Foxconn, the biggest company in Taiwan with sales of 140 billion USD is responsible for assembly of Apple phone (mainly in China), while the nation’s second largest firm TSMC (sales of 25 billion USD) along with Samsung produces CPU’s (microprocessors) which run the device. Taiwan economy is highly depended on the export (60% of the economy) of manufactured good like chemicals, plastics, machinery and consumer electronics (including iPhone’s components). It is no surprise, that 8,3 percent decline in export in August 2015 and above 5 percent fall each month from May till July is a bad sign for the country. Analysts indicate that Taiwan slept through the moment it should shift its economy from hardware components for computers or phones to more software oriented course. Additionally, China became a very difficult competitor developing own brands like Huawei or Xiaomi and having a strong support from the government. Recent decision to devaluate Yuan (RMB) helped Chinese export and hit Taiwan making its production less attractive for the foreign markets. Despite introduction of iPhone 6S, which hardware again is made by Taiwanese firms, the negative trend will continue for at least half a year more.

Hehuanshan_Flickr_Mark Kao_(CC BY 2.0)

Hehuanshan Taiwan, source: Mark Kao, Flickr, (CC BY 2.0)

Beginning of 2016 may be very important for Taiwan (formally known as Republic of China – ROC), the small 36 thousand square kilometer island and its 23 million citizen. The incoming general election may end the domination of KMT (Kuomintang) nationalistic party. Current opinion polls suggest opposing Democratic Progressive Party (DDP) and its candidate Tsai Ing-wen may win. This could change conciliatory policy towards China and complicate these difficult relations. DPP is committed proponent of Taiwan independence which conflicts with China’s peaceful unification strategy. This political shift may be especially difficult for two Taiwanese biggest international airlines, EVA Air (BR) and China Airlines (CI). Their further growth may, to a large extend, depend on transfer traffic to China which is now blocked due to political reasons. KMT leadership could lead to successful ASA (Air Service Agreement) between the countries, despite the fact the last negotiations have failed just recently. China sceptic DDP leadership may however complicate this effort even more.

2008 was a year of opening up between China and Taiwan. Since then the mutual relations have been warming up. In 2008 regular scheduled flights between the countries has been re-launched for the first time since 1949. There were around 48 flights per week across the Taiwan Strait (from Taiwan to China – in both ways) in October 2008. Currently (October 2015) there are 1380 flights and the traffic is rising remarkably fast. This impressive growth was possible due to political decisions. Taiwanese carriers look forward to tighten the connections even more, enabling Chinese transfer passenger to use them on their travels around the world. However, the prospects for this are foggy in the short term future.

EVA AIR B777-300ER_flickr_ralphpopken_(CC BY-ND 2.0

EVA Air Boeing 777-300ER source: ralphpopken/flikr CC BY-ND 2.0

EVA Air (BR) has to operate in such difficult and uncertain environment making sure the airline will remain in good shape no matter what the diplomatic talks will bring. This privately owned carrier was created by shipping conglomerate Evergreen Group in 1989. The maiden flight took place in 1991. Currently the airline has a fleet of 63 planes including 17 Airbus A321-200, 2 McDonnell Douglas MD90, 12 Airbus A330 (nine -200’s and three -300’s), 11 Boeing 747-400 and 21 Boeing 777-300ER. EVA has 4 of the latter planes in it’s current order book. Just recently the carrier signed agreement to acquire 24 brand new Boeing 787-10’s, becoming one of the launch customers for this plane. The biggest variant of Boeing newest and most modern aircraft has a range of almost 13 000 kilometers and promises 25% reduction of fuel consumption comparing to other aircrafts of similar size. The plane will be ready for deliveries in 2018, accommodating 323 passengers and offering all the impressive features of its smaller brothers. Those who are particularly interested in 787 breakthrough design I would like to recommend one of my previous articles. North America, especially USA is the most important long haul market for EVA Air. The carrier flies to 5 destinations in United States including Los Angeles (LAX) – 21 times per week, San Francisco (SFO) – 14, Seattle (SEA) – 7, New York (JFK) – 7 and Houston (IAH) -4. Concentration in this country is caused by the significant Taiwanese minority living in USA, mostly in California (around half of all its population in US). Immigrants and the strong economic ties are the main reasons of sizable air traffic between the countries. According to United States Census Bureau the export of goods from Taiwan to USA reached nearly 41 billion USD and import almost achieved 26 billion USD. This puts little island of Taiwan on the 10th place of the most important trade partner for US. Republic of China is reputed supplier of Electric Machinery, Machinery, Vehicles, Iron and Steel Products and Plastics to American economy. Houston is the newest route, established in the middle of 2015 and will be used both by leisure passengers as well as large ethnic Asian population living in the city (for example Filipinos and Vietnamese). It is also the longest long haul flight operated by EVA Air in the moment. Flight time is around 15 hours and 30 minutes in the westbound direction and the distance is almost 13 thousand kilometers. BR is planning to launch flights to Chicago in 2016, however the route will be around thousand kilometers shorter. EVA long haul routes network includes additionally three destinations in Europe (Paris-CDG, Amsterdam-AMS via Bangkok and Vienna-VIE via Bangkok) two destinations in Canada (Toronto-YYZ) and Vancouver-YVR), and one in Australia (Brisbane-BNE). So far the airline is committed to serve North America with Boeings 777-300ER’s. Dreamliners, which will start arriving in 2018 will be used on the medium to long haul routes and will substitute currently utilized Airbus A330-300’s. They will be surely deployed to South-East Asia but possibly also to Australia and maybe to Europe if it will be feasible. The position of Taiwan is potentially highly favorable for being a transfer hub both to North America (from South-East Asia and China) and Australia (China and North-East Asia). The latter could be though to a large extend depend on mainland China transfer passengers. So far Taoyuan International Airport (TPE) the main base of EVA Air is used by South East Asian nations as a stopover on their way to USA and Canada. Last year the airport handled almost 36 million passengers, being obviously the busiest in Taiwan but also 42nd in the world. It is definitely worth mentioning Taoyuan is 11th busiest airport by international traffic and what is even more remarkable 5th busiest in terms of international freight traffic. Bearing in mind that Port of Kaohsiung (located on the southwestern part of the country) is 11th busiest container port in the world, the above data confirm very clearly the unique export abilities of Taiwan, despite recent downturn in that field I described before. TPE is one of two important airports in Taipei, the capital of Taiwan, the second being Taipei Songshan Airport (TSA). TSA is much closer to the city but is significantly smaller handling only 6,1 million passengers and welcoming huge amount of charter flights.

Terminal 1, Taiwan Taoyuan Airport_flickr_rail02000_(CC BY-SA 2.0)

Taoyuan Airport source: rail02000 / Flickr CC BY-SA 2.0

Flying to Australia on the large extent makes sense only if transfer passengers from China will be allowed to use TPE as a stop on their way to this continent. Currently Australia is served most frequently from Singapore (almost 64 000 seats per week – one way), Hong Kong – HKG (32 000 seats), Kuala Lumpur – KUL (27 000 seats). Taiwan is a very big market for Chinese tourists. Due to relatively small distance between these countries as well as cultural proximity and convenience EVA Air and China Airlines may benefit from transfer traffic to Australia once the necessary permit is granted. Japan, China and Hong Kong are the most important regional markets for EVA Air. The latter as well as Macau (MFM) somehow enables airline to bypass China strict regulations regarding  Chinese transfer passenger being the important source of supply for BR long haul routes.

In 2014 EVA Air carried 8,9 million passengers and intends to exceed 9,3 million this year. It is the Star Alliance member since 2013 being considered among the safest in the world and listed on the 9th place in Skytrax’s world’s Best Airlines of 2015 ranking (5th in Asia). The airline has a good reputation and ambition for further growth. It is still significantly smaller than its main domestic rival China Airlines. CI carried more than 14 million passengers in 2014 and has a fleet 84 planes. As I indicated above, both of the carriers get into some difficulty because of the unknown political decisions and deteriorating economy. However, both invest a lot in the new, high quality product (onboard) and top notch service while using the strengths of geographical location to improve its statistics and continue its development.

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