Bloomberg News

Chinese, Taiwan Airlines to Challenge Cathay in Alliance

January 03, 2013

China Southern Airlines Co. (1055) is among four carriers from China and Taiwan to form a regional alliance to challenge Cathay Pacific Airways Ltd. (293) as warmer cross-strait ties spur demand for direct flights.

Frequent travelers of any alliance member can redeem miles for tickets and enjoy rewards such as free use of business lounges from any of the four carriers, according to a joint statement by the airlines. The grouping also includes China Eastern Airlines Corp., the nation’s largest carrier by passenger numbers after China Southern, Taoyuan, Taiwan-based China Airlines Ltd. (2610) and Xiamen, China-based Xiamen Airlines Co.

Closer business and political ties between China and the island has spurred travel demand, prompting airlines across the strait to add more capacity in the high-yielding market, according to the CAPA Centre for Aviation, which advises airlines. The regional alliance would also challenge Hong Kong- based carriers such as Cathay Pacific in the cross-strait market, the consultant said.

The alliance will account for half of the capacity directly between China and Taiwan by offering more than 270 round-trip flights every week, according to the statement. It also offers 280 cross-strait round-trip flights via Hong Kong every week.

Cathay Pacific and its Hong Kong Dragon Airlines Ltd. unit offer about 128 flights from Hong Kong to Taipei every week, according to the carrier’s website.

For China’s three biggest airlines, yields for flights to Hong Kong, Taiwan and Macau are higher than domestic and international routes, according to CAPA.

Taiwan has been ruled separately from China since 1949 when members of the Kuomintang party fled to the island after a civil war with Communist forces. Relations between Taiwan and China reached their warmest in more than six decades after Taiwan President Ma Ying-jeou took office in May 2008. He focused on economic ties and dropped the pro-independence stance of his predecessor.

The airlines in the new alliance are all SkyTeam members. Cathay Pacific is a member of the Oneworld alliance.

To contact the reporters on this story: Jasmine Wang in Hong Kong at Jwang513@bloomberg.net; Argin Chang in Taipei at achang153@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net


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