05.28.2001
Lucrative Taipei-Hong Kong air link up for grabs

• The Hong Kong-Taiwan Air Service Agreement is to be renewed in June 2001. China Airlines (CAL, 2610 'Hua Hang'), EVA Airways (EVA, 5606 'Chang Rong Hang') and Hong Kong's Cathay Pacific and DragonAir are involved in the negotiations.

• EVA has reportedly requested more frequent flights between Taipei and Hong Kong. DragonAir, which is currently only permitted to fly the Taipei-Kaohsiung route, may also win access to the Taipei-Hong Kong air link.

• Lack of frequency has been a big constraint on EVA's Taipei-Hong Kong flights, so it will benefit from the likely opening up of the route. Meanwhile, as DragonAir flies into China, it is best positioned to win market share on routes heading for China via Hong Kong.

• VB Primasia Opinion: DragonAir could prove to be the biggest winner under the new air service agreement. Conversely, CAL could be the biggest loser if EVA obtains more frequency and DragonAir gets into the Taipei-Hong Kong route. Moreover, new players tend to compete for market share with price cutting. The route between Taipei and Hong Kong is a lucrative one and we are yet to see price erosion under the new air service agreement.

LindaLiu@Primasia.com +886-[0]2-2547-8867