China Airlines Ltd (CAL, 中華航空) yesterday reappointed former chairman Philip Wei (魏幸雄) as head of the nation’s largest air carrier, replacing Ringo Chao (趙國帥) who tendered his resignation on Monday.
In an open letter to employees yesterday following his appointment, Wei said the airline industry was facing a dire economic situation, in part because of the lingering US subprime mortgage crisis, sky-rocketing oil prices and the impact of global inflation.
Wei told a press conference the situation was significantly worse than the periods after the Sept. 11 terrorist attacks in the US and the SARS outbreak.
Many airlines have declared bankruptcy and CAL saw a record loss of NT$3 billion (US$98.6 million) in first quarter of this year alone, Wei said, adding that he was not expecting an improvement in the second quarter.
CAL’s leverage situation is a major concern, Wei said, saying that “1997 was the last time CAL had positive cash on its balance sheet.”
“Since then, CAL has purchased more than 64 new aircraft for a total cost of NT$245.1 billion. Much of that was financed by long term debt issued by various financial institutions,” Wei said.
The industry veteran said the company would present a turn-around plan early next month, but did not elaborate.
Stone Lin (林溢錤), an airline industry analyst from Yuanta Securities Corp (元大證券), was unmoved by Wei’s appointment yesterday.
“Any appointment is not really a surprise for anyone,” Lin said. “CAL shares have remained the same today [Thursday] which goes to show that investors are not really moved by this appointment.”
CAL shares closed 0.42 percent lower at NT$11.75 yesterday on the Taiwan Stock Exchange. The stock has declined 19.25 percent since the beginning of the year, underperforming the benchmark TAIEX’s 16.82-percent decline over the same period.
Wei served as president of CAL from March 2002 to November 2005 and as chairman from November 2005 to last October, when he resigned from the chairmanship following an explosion on one of the company’s planes at Okinawa’s Naha Airport on Aug. 20.
Wei did not promise a swift turn around at CAL, but said he was committed to doing his best to put the firm back on track to profit.
Lin said CAL could expect to save an average of NT$200 million a month if the company dropped non-profitable routes, such as long distance routes, which are fuel intensive and cost more than they bring in.
While there is speculation that the company may have to reduce salaries or lay off employees to improve its financial situation, the labor union is reportedly only willing to consider small adjustments to salaries and unpaid holidays.
“If any human resources changes happen, it will most likely affect management positions rather than regular staff positions,” Lin said.
While raising prices should be the top priority for Taiwanese carriers such as CAL, launching regular cross-strait flights will also be key, Lin said.
“Statistics show that at 55 percent of [a plane’s] capacity, airlines break-even on these [cross-strait] flights. We’re looking at 90 to 95 percent right now, which is really great news for the airlines,” Lin said.
In addition, regular cross-strait cargo flights could become another key source of profit, Lin said.
“Companies such as CAL should really take full advantage of it,” he said.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
RSS