EVA's Shift

Taiwan's second carrier changes freighter mix, opens
new destinations; direct China links remain elusive

By Ian Putzger

hey say everything in Texas is jumbo size, so it's no wonder EVA Air decided to field a 747-400 freighter for its new Houston service instead of an MD-11, which has been the workhorse of the airline's cargo fleet. Since Nov. Taiwan's, second largest airline flies the freighter twice a week from its Taipei base through Anchorage to Houston, lured largely by the U.S. city's producers of machinery and specialized equipment for foundry processes used by Taiwan's semiconductor makers.

The Taiwanese chip manufacturers, an engine for the country's export economy, have done rather well.

This year their production capacity is expected to account for 18 percent of the total global output, which means they are surpassing the United States to take second place in the world behind Japan. However, like Taiwanese producers in other industries, they are looking increasingly to China - with far-reaching ramifications for the air cargo market in Taiwan. Ron Mathison, director and general manager of cargo at Cathay Pacific, predicts an erosion of air freight flows between the island and China as production continues to migrate to the mainland.

EVA's recent cargo results are a far cry from the double-digit growth that characterized developments prior to 2005.

Last year's cargo revenue advanced a modest 3.6 percent, while tonnage slipped 2.4 percent as capacity shrunk 2.9 percent. Over the first nine months of this year, tonnage was down 6.2 percent, while traffic, measured in freight tonne kilometers, fell 8.7 percent. Yield was down 1 percent in the first nine months of the year, although that decline had stabilized after sharp drops in cargo yield in the first half of the year.

Cargo is hardly a mere incremental concern for EVA, making up nearly 40 percent of the airline's overall revenue. K.W.Nieh, executive vice president, attributed this year's decline in tonnage largely to the return of two MD-11 freighters to the lessor.

"Taipei air freight warehousing statistics also showed downward trends in cargo volume during the first quarter due to slowing demand. Air freight volumes in other areas of Southeast Asia showed similar slowdowns," he said.

Straits Times

Unlike their Asian rivals, EVA and China Airlines cannot operate scheduled flights to China.

An agreement to allow some charters provided an opening for the bigger national carrier, but EVA still is barred from direct flights. This means it has not been able to tap into the network of joint venture partner Shanghai Airlines through gateways on the mainland.

The pair continue to interline freight over Macau, which both serve with daily 747 freighter flights.

If EVA were to gain access to Shanghai, this would expand the interline potential exponentially. For now, however, the Taiwanese carrier must remain content with the results generated by the joint venture without a mainland interface.

"The joint venture is thriving. Shanghai Airlines Cargo is also steadily adding more gateways in mainland China, giving us an exceptionally wide-reaching network within the region that few other carriers can come close to matching," Nieh said.

EVA's second avenue into the China market has been through its Southern China Cargo Center in Hong Kong, which opened its doors in the spring of 2006. According to Nieh, this now produces as much as 30 percent of the airline's total cargo revenue.

Pacific View

Elsewhere EVA is tweaking its cargo network. It is launching the Houston service and introducing freighter flights to Paris next January, following the suspension of passenger flights to the French capital.

According to Nieh, the carrier's intra-Asian network has worked well, necessitating few changes.

Nieh reports strong growth in Vietnam, Indonesia and India and he also is upbeat on the European market in the year ahead.

His expectations for EVA's trans-Pacific business are more low-key. "The U.S. market is expected to hold steady through 2008 and is not likely to show much growth until year-end or the first quarter of 2009," he said, pointing to the housing downturn and related economic fallout. Hence there are no plans for major changes in the trans-Pacific schedule.

Bellyhold capacity to North America is going up, though.

The 777-300 extended-range aircraft freed by the suspension of the Paris route will be redeployed to the Taipei-Los Angeles sector, boosting EVA's frequency there from 17 to 20 weekly flights.

As more 777-300ERs enter the airline's passenger fleet, EVA will add 747 freighters to its line-up, Nieh said.

EVA has taken delivery this year of two converted 747-400 freighters, which were put on the Houston and Los Angeles sectors. The plan is to serve North America and Asia with a mix of 747 and MD-11 freighters, while Europe will be covered exclusively with MD-11s. Three converted 747-400 freighters are due to come on stream next year, and another three in 2009.

Over the past year, there have been rumors that EVA had placed an order for 777 freighters or was planning to do so, a scenario that Nieh refuted. "We do not have plans to add 777 freighters or any other freighters at this time," he declared.

… Briefly

Freight traffic for Asia-Pacific carriers grew 3.6 percent in October, while capacity increased 4 percent, the Association of Asia Pacific Airlines reported. … Japan opened its 23 regional airports to international flights by foreign carriers, a move to get more traffic from business within Asia. … Korean Air's net profit grew 3.9 percent in the third quarter ending Sept. 30, helped by a 6.3 percent gain in cargo revenue, to $695.1 million. … Singapore Airlines started weekly 747-400 flights between Singapore and Hanoi through Shanghai. The airline's cargo traffic grew 3.3 percent in September on a 6.3 percent gain in capacity, the sharpest growth in SIA's cargo capacity since last December. … International cargo traffic for Japan Airlines fell 2 percent in the airline's second quarter ending Sept. 30. … Asiana Airlines started weekly passenger flights between Beijing and the Korean city of Cheongju. … China Southern Airlines plans to buy 55 737 passenger aircraft, to be delivered between 2011 and 2013. … India and Chile signed an aviation agreement that gives air freight operators unlimited access to both countries. … Hong Kong Air Cargo Terminals handled 228,077 tonnes of cargo in August, 8.4 percent more than the year before. … Royal Jordanian will start three-times weekly A310 passenger flights between Amman and Hong Kong through Bangkok. … EVA Air started twice-weekly MD-11 freighter service between Taipei and Frankfurt. … Cargolux started Luxembourg to Ho Chi Minh City service, with a stopover in Dubai. … DHL Global Mail opened a new domestic terminal in Singapore near Changi Airport, which reportedly can handle over five million pieces of mail per month. … Forwarder STL opened a station at Singapore Changi Airport, extending an expansion that has included new sites in China, India and Iran over the past year.