This Taiwan Airline Flew For 62 Years, But May Be Grounded Indefinitely
Far Eastern Air Transport, a six-decades-old Taiwanese airline catering to destinations within Asia, suddenly suspended its flights on December 12. The airline’s website said that as of December 13 it would cease to continue running because of unspecified “operational losses.”
On Friday, Chang Kang-wei, Far Eastern’s chairman, told a news conference that he had found new sources of investment and hoped to restart flights as soon as possible, although analysts expect more turbulence.
“Airlines such as Far Eastern are stuck in the strategic position that is unsustainable,” says John Grant, director of JG Aviation Consultants in the United Kingdom. “Neither a low-cost carrier nor a full service network airline, the carrier is challenged from all sides and unable to command a secure market position.”
Wobbly business decisions
The airline was founded in 1957 with domestic routes around Taiwan, where flights average just 30 minutes. But in 2008 it declared bankruptcy and flights stopped through early 2011. In 2007, Taiwan had launched a high-speed railway that reduced the demand for domestic flights.
Far Eastern Air Transport has struggled too because it relies heavily on McDonnell Douglas MD-82 and MD-83 aircraft, while other airlines, including the budget carriers, are buying newer planes made by Airbus and Boeing. Its fleet has a total of six aging MD-80 family aircraft and six ATR 72 turboprops.
Far Eastern Air Transport struggles too for lack of code sharing and membership in airline alliances, says Jeffrey Lowe, managing director of the Hong Kong aviation services firm Asian Sky Group. Its base at the smallish Taipei’s Songshan airport further constrained business because civil aviation authorities allow flights only to a couple dozen cities outside Taiwan, mostly in China. That base made it hard to set up connecting flights, Lowe says.
“FAT has a long history but has always struggled to survive,” Lowe says. “It has been in a financial crisis of one form or another since 2008, the last 12 years.”
Neither a budget carrier nor a full-service airline
Far Eastern Air Transport fails to fit into either of the two most viable types of airlines around Asia today, Grant says. The airline has just a 10% share of capacity for all Taiwanese airlines, he says. Four other Taiwanese carriers fly international routes and another, the ultra-high-end StarLux Airlines, will open three routes in January.
The two dominant international carriers Eva Airways and China Airlines have newer aircraft fitted with entertainment systems, while Eva focuses intently on cabin cleanliness. Budget carriers based offshore serve throngs of young, thrifty Taiwanese tourists bound for Japan, South Korea and parts of Southeast Asia. Budget travel is so popular in Southeast Asia that Kuala Lumpur and Singapore have opened budget-only terminals.
Occasionally airlines that are neither high nor low end survive because they have a “geographic niche,” Grant says. Far Eastern does not, he says.
The halt to flights on Friday affected 3,251 outbound group tourists, Taiwan’s tourism bureau says in a statement Thursday.
The airline would not say for this post how much capital its CEO had garnered but that the airline is ready to fly again if given regulatory approval. “We can’t say anything about the next few years,” an airline spokesperson said for this post. “We’re just waiting for the official approval to fly again.”
Post in: Forbes