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Travel industry news

08 Feb 2018

BY Edward Robertson


China Airlines on succeeding in a competitive market

In launching its fifth service to Europe at London Gatwick Airport, China Airlines is further strengthening its presence in a region known for its mature aviation market.


Interview with China Airlines' chairman Nuan-hsuan Ho

Although there are more than 300 airlines in Europe, many of these are such small regional carriers they are scarcely known outside the few airports they operate between. Indeed, when it comes to widely recognised brands aviation trade body Airlines For Europe estimates there are around 50, following various consolidations. And with three major airline collapses in Europe this year, including Monarch Airlines, Air Berlin and Alitalia, we can expect fewer larger airlines, much as can be seen in the US.


China Airlines chairman Nuan-hsuan Ho believes that a similar process of consolidation will soon occur in Asia too. He says: “Asia is a very competitive market. At the moment there are 148 Asian carriers operating in Asia and with the LCCs [low-cost carriers] in Asia becoming competitors, that also gives us big competitive problems.”


Luckily for him, Ho believes it is the LCCs that are most at risk of financial collapse thanks to a number of issues. He argues many Asian countries have little time for the sector and the slots they are granted are usually the least practical ones, remaining unattractive to consumers. Furthermore, by competing on price LCCs have left themselves with such small margins Ho adds they are vulnerable to any shocks in the market.


He adds: “If you can easily set up a LCC you can easily collapse too. In Asia the scheduled airlines are very protective of their own business so it is not always easy for an LCC to be operating in these conditions.


“Obviously that [further consolidation] will probably be the trend as there’s too many of those LCCs competing on price margins that are too tight.”


Despite the issues apparent in dealing with the LCCs, Ho refuses to cheapen China Airlines’ proposition. Instead, he said the airline set up a new joint venture with Tigerair to form the LCC Tigerair Taiwan to beat rival LCCs at their own game.


He believes the venture has been popular too, adding profits with the airline, which operates 10 aircraft to 16 destinations, have grown 125% since its creation in 2013. More importantly, Ho argues this has been done without compromising the integrity of the core brand China Airlines. “The strategy is we don’t want to always slash the price [on China Airlines], that’s the reason we also created the LCC,” he adds.


“Instead we give more choices to the public but we are not looking at reducing the price [of our scheduled fares]. “It is very difficult to compete with the Asian LCCs.” He also believes code-sharing with other airlines, including KLM, Garuda Indonesia, Malaysia Airlines, China Eastern and China Southern, gives his airline a further advantage against local low-cost rivals.


A unique service
However, one place the airline will not have to compete with the no-frills services is on its new route from Taipei to London Gatwick Airport, which was the only non-stop service between the two islands when it was introduced at the beginning of December. The four-times-weekly service is being operated on an Airbus A350-900 with 243 economy seats, 32 premium business class seats and 31 in premium economy.


It will upgrade to five times a week in March, 2018. The route has been previously operated by the airline between 2010 and 2012 but was scrapped as the A340 used to operate it had too high running costs. The A350 is expected to be about 20% cheaper to fly Ho says: “It didn’t really work out as an economical route for us so we stopped and waited for the development of new aircraft. It was disappointing and we felt it was a great pity so we always wanted to reintroduce the route again as London is one of the most popular destinations.”


European touchpoints
He is confident that while the A350 will prove more economical, there is also a strong market that the airline can tap into. He adds IATA data shows the UK accounted for 11% of all travel between Taiwan and Europe, with the number of trips growing 10% year-on-year to 150,000 in 2016. This figure has then grown a further 27% in the first eight months of 2017.


Ho adds: “China Airlines had existing routes in Europe to Frankfurt, Amsterdam, Vienna and Rome, and so we’re adding the UK with London. The purpose of that is to create a full range of big European cities. We will not be using Gatwick as a transfer hub. It is point-to-point and more convenient for all. “It is a very unique product at the moment; we are the only carrier to
offer direct flights as it saves so much flight time.”


He says the route has attracted financial support and marketing from tourist boards in both countries, further ensuring its success. “We feel very much supported by both countries and governments, and the local tourist agencies,” Ho says. “There’s a great expectation for us to run this route for a perfect outcome.”


The route will mean China Airlines is operating 22 weekly flights between Europe and Taiwan and while Ho believes Taiwan is a destination worth visiting in its own right, travellers can use it as a hub for further Asian connections. With this in mind he added the Taipei-Sydney route is now being operated twice daily, while the Taipei-Brisbane-Auckland route has been upgraded to a daily service. However, when it comes to the rest of the world, Ho is largely keeping quiet as to where other routes might be introduced.


He admits both Asia and North America are on the radar and in the US he singles out Los Angeles’ second airport, Ontario International Airport, as a potential future partner. While Ho might be hard to pin down on where China Airlines could introduce new routes, he knows exactly what he is looking for from an airport looking for new business.


“Obviously we would like to be offered good and suitable slots and airports need to provide us with first-class facilities,” Ho says. “We will take all that into consideration and what else they can provide for us and our passengers.


“It is a very competitive market and we need to be very proactive and take advantage of any opportunities that come along to expand the services and create new ones.” Whether these opportunities present themselves in Asia, thanks to the consolidation which Ho predicts, or further afield, will be of interest to all.

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