The era of joint venture cargo outfits took another step to the exit as China Airlines followed the lead of Lufthansa and Korean Air and divested itself of its stake in an all-cargo outfit based in mainland China. In addition to the Taiwanese carrier selling its 25-percent holding in Yangtze River Express, Taiwan-based shipping firms Yang Ming Marine and Wan Hai Lines, which had stakes of 12 and 6 percent respectively in the Shanghai-based airline, also sold their stakes. With parent HNA Group taking over these stakes, Yangtze River is now fully owned by the Chinese airline group.
Besides the confirmation that joint venture cargo airlines in China did not turn out to be the bonanzas that international airline boards had envisaged, the transaction also marked a reflection that the needs of Taiwan’s large airlines have changed. Back in 2006, when it bought into Yangtze River, CAL needed a vehicle to tap into the mainland market, which was blocked to Taiwanese carriers at the time. By the same token, EVA Air had bought into Shanghai Airlines and, by extension, took a stake in the carrier’s cargo business.
With the access rules for Taiwanese carriers loosened, they no longer need a mainland-based organization on the other side of the Taiwan Strait and can now drive their own destiny. For EVA, a major focus in the near future is the expansion of its flights to the mainland, as company chairman Chang Kuo-wei recently declared.
This priority extends to the carrier’s cargo division.
“We expect to establish new freighter points in mainland China and will continue to increase our cross-strait business,” K.W. Nieh, a spokesman for EVA, says.
Not surprisingly in this business climate, this mindset will not translate into an expansion of EVA’s freighter fleet, which is comprised of 15 wide-body aircraft – nine B747-400Fs and six MD-11Fs. Both aircraft types are marked for gradual withdrawal from the fleet, to be replaced with newer equipment.
The departure of the 747 freighters is part of a broader move to eliminate the aircraft type from EVA’s fleet. Besides the freighters, the airline has three 747-400s and three 747-400 combis in service. Chang indicated that the 747 contingent would be phased out over three years to be replaced with B777s, eventually pushing the number of 777s in its livery to 35 units. The tally stands at 15 777-300ERs in EVA colors and seven more on order.
With some 777s already in service on the passenger side, bringing in more would be in line with recent strategy. According to Nieh, the 777 is one of several contenders that management has under scrutiny for the cargo fleet, but no final decision has been made. In light of earlier comments by Chang about weaker than expected cargo business, it seems unlikely that EVA management would embrace the 747-8F. An A330-200F would be viable in the cross-straits arena, but not really suited to the airline’s long-haul network.
Like the 747s, EVA’s MD-11 contingent is also going to disappear from the scene.
“We will gradually phase out all of our MD-11 freighters and replace them with newer, more economic and efficient aircraft,” Nieh says.
There have been suggestions that EVA’s freighter fleet could shrink from 15 to 10 wide-bodies. At this point, it is not decided how many freighters the carrier will field in the long run, Nieh reveals.
“The cargo business landscape has changed significantly and the outlook for future conditions is not clear,” he explains.
Last year, EVA sold off two MD-11Fs and one 747-400 combi. In terms of capacity, the 777-300ER would not lag the latter, but the exit of the combis will likely result in some reduction of main-deck space. Nieh indicates that EVA’s mix of freighters and belly capacity should give it enough flexibility to meet the needs of its customers.
In 2012, EVA’s cargo business in terms of FTKs declined 8.4 percent, with revenues down 6.05 percent. Rival CAL suffered a 12 percent drop in cargo revenue, with FTKs falling 14.9 percent.
CAL, whose freighter fleet is down to 19 units after it parked a couple of 747-400 freighters, is seeking to boost its yield through a greater haul of pharmaceutical traffic. This summer, management signed an agreement with Envirotainer, which serves as the foundation for a temperature-controlled service aimed at the medical and pharmaceutical industries. Initially, this will cover four major gateways in Asia, two in Europe, and San Francisco and Los Angeles in North America.
There have been suggestions that electronics, the main engine of Taiwan’s exports, might be flagging in a migration of production to locations elsewhere in China. But recent statistics do not support this. In June, the island’s exports climbed 8.6 percent, fuelled by double-digit increases in shipments of electronics and minerals. The value of electronics shipped was the third-highest amount ever in a single month. That should have filled a few freighters.