Troubles of HK Airlines and Taiwan's Far Eastern Air Transport

Taiwanese carrier Far Eastern Air Transport (FAT) suddenly ceased operations on Friday.

Founded in 1957, FAT was the first carrier in Taiwan. It continued to control over half of the island’s domestic market even after China Airlines and EVA Air were established in 1959 and 1991 respectively.

But following the death of its founder, fights among family members took a heavy toll on the company, which failed to take advantage of Taiwan’s economic growth to expand into international routes.

The airline has suffered badly from heavy reliance on domestic and cross-strait routes in recent years.

Taiwan’s high-speed railway started to operate in 2007, and it only take 90 minutes to travel from Taipei to Kaohsiung. As a result, FAT was forced to cut most domestic flights.

Beijing’s ban on individual tourists to Taiwan created another crisis for FAT. Competition from budget airlines also hurt.

Elsewhere, a Hong Kong-based carrier, Hong Kong Airlines, is also experiencing a tough time.

The company narrowly survived a crisis last week when its major shareholder HNA Group obtained a 4.4 billion yuan loan from eight state-owned banks at last minute.

The cash-strapped carrier had to delay salary payment last month.

But the fund injection won't address the challenging operating issues the company is facing, and the firm's long-term survival remains uncertain.

Hong Kong Airlines posted a loss of nearly HK$1 billion last year. It has a debt pile of nearly HK$30 billion, out of which HK$18.4 billion constitute current liabilities.

Hong Kong Airlines has a fleet of over 40 aircraft and employs more than 3,000 people. It offers flights for over 30 routes. Hopefully, the carrier can ride through the storm. Otherwise, a collapse could deal a heavy blow to Hong Kong's airline sector and the local job market.

This article appeared in the Hong Kong Economic Journal on Dec 13

Translation by Julie Zhu

[Chinese version 中文版]

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