24 October 2016
China Airlines has 50 percent share of the Taiwan market, but it lags far behind its rivals in revenue passenger miles. Photo: Wikimedia
China Airlines has 50 percent share of the Taiwan market, but it lags far behind its rivals in revenue passenger miles. Photo: Wikimedia

China Airlines faces turbulence as union goes on strike

I’m a frequent visitor to Taiwan both for business trips and holidays.

I’m so impressed with the good services of Taiwan’s China Airlines, particularly the fragrant Pu-erh tea the stewardesses serve on their flights.

However, I might not be able to enjoy them for the time being as nearly 80 percent of the flag carrier’s flight attendants are staging the largest labor strike on the island starting from midnight.

The issue doesn’t only involve the passengers and labor rights of the crew members, but also reflects the difficult situation faced by this state-owned company in an increasingly competitive world.

Strikes by flight attendants are not rare, at least in Asia. For example, flight attendants in Hong Kong threaten to go on strike almost every year.

In 1993, crew members of Cathay Pacific Airways launched a 17-day strike. But since then, the labor union has never staged a major strike.

In a crew-only vote conducted by China Airlines’ employees union, 2,535 out of 2,638 members voted in support of the strike, representing 96 percent. And 79 percent of the flight attendants also agreed to join the strike.

The union also to start the strike earlier than expected in order to give no time for management to arrange short-term staff during the emergency.

China Airlines has a 50 percent market share in Taiwan, and so the strike is expected to affect the island’s travel and tourism sector.

The strike was triggered by a new requirement by the airline.

Starting this month, flight attendants have to report for work at the company’s headquarters in Taoyuan, the main international airport and nearly an hour’s drive from Taipei, while they were previously allowed to report at the local airport in the capital.

According to the flight attendants, the new requirement would reduce their rest period between flights and cut their paid hours by 80 minutes.

The employees’ union also said the new rule would force flight attendants to work more hours.

It’s quite obvious the flight attendants have become so furious this time after enduring long working hours and reductions in their benefits for years.

To be sure, the entire airline industry is struggling with the same situation.

Flight attendants at Cathay Pacific staged a protest at the airport for two days last year after the company cut their allowances and extended working hours.

The airline business has been disrupted by the rise of budget airlines and the sluggish global economic growth.

However, Cathay Pacific still managed to make a profit of HK$6 billion and granted a 4 percent wage increase for its flight attendants last year.

By contrast, China Airlines has been suffering much more.

It’s been reported by local media that it hired consultancy firm McKinsey years ago to look at its operation and find ways to turn around the company.

In fact, China Airlines and Philippine Airlines are the only two carriers in Asia that have been reporting operating losses every year since 1979.

As a regular passenger of China Airlines, I’m fairly happy with its services. The carrier still dominates the Taiwan market.

And as McKinsey points out, the airline is losing not because it fails to attract passengers but because of its low internal operation efficiency.

China Airlines was founded by a retired air force officer under the order of the late president Chiang Ching-kuo in 1959.

It is one of the oldest state-owned companies in Taiwan, and as such, its chairman, general manager or other senior executives are appointed by the government.

As a result, China Airlines has developed a redundant and bureaucratic company structure like in many other state-owned companies.

The company is able to compete with other major players in Asia in terms of passenger traffic and gross revenue.

However, it lags far behind its rivals in revenue passenger miles. Some of its flights still lose money even if the seats are fully occupied.

Also, the company has failed to enjoy any preferential policy or protection from the government, as Taiwan has adopted an open-door policy for the civil aviation market.

China Airlines has to compete with a number of carriers, including Cathay Pacific, Singapore Airlines and a host of budget airlines.

This article appeared in the Hong Kong Economic Journal on June 24.

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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