China Airlines Buoyed Most With Warming Taiwan-Mainland Relations: Freight
By Chinmei Sung - Nov 1, 2011
China Airlines Ltd. (2610) may gain the most of any air-cargo carrier from warming ties between China and Taiwan as the former foes dismantle barriers to their $150 billion in annual trade.
Taiwan’s biggest airline will add 18 flights to five Chinese cities by the end of this year, cementing its position as the operator of the most cross-straits flights since a six-decade ban on direct shipments was lifted in 2008. Ongoing trade talks probably will further boost the 558 planned weekly airline journeys over the 130-kilometer (80-mile) channel between the two sides, said Fubon Securities Co. analyst Ken Shih.
“Cross-straits cargo flights have gone from zero to rapid-growth, so it’s an area carriers can look to for expansion,”said Taipei-based Shih, who has an “add” recommendation on China Airlines stock. “The next round of flight-easing talks will focus on adding more stops, and that will easily double cargo revenue for airline carriers.”
Trade with China may help cushion Taiwan from any slowdown in demand from the U.S. and Europe for goods such as Acer Inc. and Asustek Computer Inc. notebooks, which are shipped by air. In addition, components made by companies such as Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, are sent to China as parts for Apple Inc. iPhones or Dell Inc. computers.
Because new flights approved across the strait are split evenly between China and Taiwan, the island’s five carriers get a bigger slice of the pie relative to the mainland’s eight airlines. Slots within each country are handed out based on fleet size, giving China Airlines an edge over Taiwanese cargo rival EVA Airways Corp. (2618)
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