TransAsia Airways closes its doors in Taiwan

Taiwanese carrier TransAsia Airways suspended all operations this week after what was originally expected to be just a one day shutdown turned into the permanent closure of the carrier, which has found it difficult to recover from two high-profile accidents in less than a year at a time of cooling relations with China and a reduction in cross-strait demand.

The sudden nature of the airline’s closure is thought to have driven by the need to pay back a convertible bond that was due to be paid by the end of this month and had surprised many, including some of the airline’s backers apparently, as deals had only recently been completed to raise funds through a sale-and-leaseback transaction with Dubai Aerospace Enterprise for six ATR 72-600 turboprops, while a brand new Airbus A330 only arrived in Taiwan this past weekend.

Speaking at a press conference in Taipei, the airline’s chairman Vincent Lin said that ongoing efforts to restructure the company and secure additional capital from alternative investors had not proved successful and that the closure and liquidation of the business was the only path now available to the company.

TransAsia reported a net loss of NT$2.09 billion ($65.7 million) for the first nine months of the year, up from a loss of NT$538 million a year ago. In fact the carrier reported losses in each of the previous six quarters up to the end of September 2016. “After two days of meeting, the board has no choice but to make the painful decision of shutting the airline,” said Lin.

It has been a difficult couple of years for TransAsia as a once profitable business has fallen apart as it has tried to recover from two deadly air crashes. In July 2014, 48 people died when an ATR 72 crashed on the island of Penghu while attempting to land in bad weather. Just over six months later in February 2015, another ATR 72 crashed into Taipei’s Keelung River shortly after departure from Taipei’s downtown Songshan Airport after clipping an elevated highway, with the loss of 43 lives.

This has all been happening against a backdrop of declining demand from China, the airline’s principal international market, since the Democratic Progressive Party [DPP] gained power in Taiwan and has delivered policies that have cooled cross-strait relations.

The rival Chinese Nationalist Party (KMT) says the number of Chinese tourist visiting Taiwan was down 15 per cent year-on-year in July, growing to 33 per cent in August and 38 per cent in September and predicted that in the latter month alone, a 100,000 tourist shortfall would have a NT$900 million impact on the nation’s tourist industry.

TransAsia was particularly vulnerable to this significant decline in demand as a large proportion of its capacity was deployed in the cross-strait market. It operated a fleet of Airbus single-aisle and widebodied types as well as ATR turboprops on regional routes. It had also served the growing low-cost market in Asia through a dedicated subsidiary V Air, albeit that business was closed in October as it failed to compete with international rivals.

The TransAsia network encompassed almost 30 domestic and international markets. It faced competition on around two thirds of its network, mainly from China Airlines and EVA Air and their partner brands, but exclusively served 16 city pair markets. These included domestic markets such as Taipei Songshan – Hualien and Magong – Kinmen, but also international routes such as Taipei Songshan – Hangzhou, Taipei Taoyuan – Jeju and many other regional international connections from the capital, Kaohsiung and Taichung.

Across TransAsia’s former network, its competitors are likely to upgauge equipment to meet the demand, while a government spokesman says China Airlines will also likely takeover those monopoly routes vacated by TransAsia’s collapse as Civil Aviation Act policy stipulates that commercial airlines are obliged to increase the number of flights or operate different routes at the government’s request in an emergency.

The Taiwanese Civil Aeronautics Administration is not so confident all these routes will be backfilled, but confirmed that domestic flights on the Taipei - Hualien and Taichung – Hualien will be resurrected by China Airlines through its Mandarin Airlines subsidiary from December 1, 2016.

Richard Maslen

Richard Maslen has travelled across the globe to report on developments in the aviation sector as airlines and airports have continued to evolve and…