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The Feathers Are Flying In Taiwan's Skies (Int'l Edition)


International -- Asian Business: TAIWAN

THE FEATHERS ARE FLYING IN TAIWAN'S SKIES (Int'l Edition)

Upstart carrier EVA has China Airlines fighting back

When Jack Hu plans regular business trips to Los Angeles for his Taipei computer company, he passes up such established carriers as China Airlines Ltd. (CAL) and Singapore Airlines, which have more convenient flight times and lower fares. Instead, Hu prefers Taiwan's upstart carrier, EVA Airways Corp. EVA has better service and better food, says the 46-year-old businessman. "Service is very important when you're traveling abroad."

Six years after its first flight, EVA has been able to lure millions of converts such as Hu. Using savvy marketing and a modern fleet, it is posing a tough challenge to CAL and others flying Taiwan routes. The airline has won 15% of the Taiwan passenger market and earned $17 million last year on revenues of $1.3 billion. EVA has benefited from the deep pockets and international contacts of its founder and owner, Evergreen Marine Corp., Taiwan's mammoth shipping and real estate group. It hopes to list on Taiwan's over-the-counter market perhaps next year. Yet competitors such as CAL, whose market share slipped from 34% in 1993 to 30% last year, are starting to fight back.

"SERVICE." As the new kid in town, EVA has had to make the most of its second-tier status. The airline can't match CAL's routes and time slots, and its Taiwan base is also a problem. "We understand we cannot be a very big airline because of Taiwan's size and international situation, but we can provide the best service," says EVA Junior Vice-President K.W. Nieh.

One of EVA's first savvy moves was to invent a fourth class of service--better than economy but less comfortable than business class. The result, Evergreen Deluxe, has been popular on long flights. Passengers get larger seats than in economy, with personal seat-back video screens, but don't get as good meals or as much reclining room as in full business class. Many travelers say they feel more secure with EVA's preference for hiring foreign pilots over CAL's tendency to hire from the Taiwan military.

Such tactics got EVA off to a fast start. Passengers had complained of CAL's arrogant, complacent attitude after 37 years in business, most of them as the island's monopoly carrier. "CAL was an easy target at first for competition from EVA, but it's not so easy any more," says Daniel Chen, an analyst at Capital Securities in Taipei.

That's because CAL is making a sweeping attempt to rebuild its image. The carrier has started an overhaul of everything from ticketing and in-flight meals to maintenance and flight operations. It hired Lufthansa as a safety consultant after a string of crashes earned it one of the world's worst safety records. As CAL Chairman H.I. Chiang admits, competition from EVA "provided the opportunity for CAL to take a hard look at our products and services." Other changes include streamlining management, adding new routes, and improving the attitudes of some employees. A fleet expansion and modernization calls for 30 new planes, mostly from Boeing Co., by 2003. A new logo replaces the Republic of China flag with a more politically acceptable plum blossom.

DIRECT FLIGHTS. CAL would also like to continue privatization, begun in 1993 with a small amount of shares, by finding a U.S. or European carrier to take a 16% stake. "In the new competitive environment, you have to stay on top of every situation--service, sales, marketing, everything," says CAL Vice-President Sandy Liu. Despite its problems, CAL remains profitable, earning $58 million on revenues of $1.8 billion last year.

If Taipei and Beijing ever agree to allow direct flights, it could spark an all-out fight between EVA and CAL. Both say it's premature to make detailed plans, but EVA has already set up a two-person office in Beijing.

Meanwhile, both stand to gain from growing markets in the Asia-Pacific region and the U.S., which recently signed an open-skies agreement with Taiwan. Some 10 million people went abroad from Taiwan last year, and 8% more are expected this year. EVA hopes to add new U.S. routes. Indeed, business to U.S. coastal cities is so good the carrier raised fares 10% last summer, from an average of $1,055 to $1,164. For a fledgling, that's a gutsy move. But with two carriers fighting for market share, travelers who value service first are the ultimate winners.By Jonathan Moore in Taipei, with Mark L. Clifford in Hong Kong


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