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Home > Business/Finance > Diversified Services > Shipping & Logistics
Taiwan Freight Transport Report Q3 2007
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Taiwan’s China Airlines (CAL) said on April 30 that it swung to a net loss of TWD805.8mn
(US$24.2mn) in the first quarter, from a net profit of TWD385.2mn a year earlier. Before the results were
released, analysts had pointed to tough market conditions where falling cargo traffic and high fuel prices
were only partially offset by strong holiday passenger figures. Looking ahead, ‘the cargo market is likely
to remain very poor over the near term, which is of major concern given China Airlines has the highest
exposure of any airline in the region to this segment’, wrote Paul Dewberry, head of Asian Transportation
Research at Merrill Lynch, in an April report. The company earlier forecast its 2007 net profit would
exceed TWD2bn if the price of oil averages US$64 per barrel (bbl) for the year. In our newly-released
Taiwan Freight Transport Report, BMI concludes that the island’s airfreight carried is likely to grow by
a modest annual average of 3.9% in 2007-2011.
There are a number of reasons for this. There are growing signs that traffic is diverting to the mainland,
with Shanghai emerging as an important Asian hub and taking business away from Taipei. While
electronic components and equipment made in the mainland were previously exported by air via Hong
Kong and Macau to Taipei, now they are increasingly being shipped out directly via Shanghai. Taiwan’s
carriers are adapting to the new reality. EVA Airways, the number two airline on the island, has formed a
cargo joint venture with Shanghai Airlines, in which it holds a 25% minority stake. CAL has an interest
in another Shanghai-based freight company, Yangtze River Express Airlines.
The rush of business into the mainland also affects some other freight transport modes. In shipping, the
mainland boom is a factor holding back our traffic carried forecast to 4.4% per annum over the next five
years. However, we feel a number of Taiwan-based shipping lines are somewhat ahead of the game,
having established themselves as global players. Road freight traffic within the island will evolve
moderately, with average growth of 2.7%. In this area Taiwan resembles a developed economy where
traffic growth tends to trail, rather than lead, GDP expansion. We are also predicting modest rail cargo
growth at around 2.1% per annum.
BMI gives Taiwan a composite score of 41.0 (out of a potential maximum of 70) in its freight transport
business environment index. The country’s strengths are quite evenly distributed across long-term
economic and political risk, infrastructure growth, and the regulatory environment. Areas for potential
improvement include the competitive environment, freight growth and the transport intensity index - a
measure of the current and future dynamism of foreign trade.
Despite the competitive challenge from the mainland, we are still reasonably optimistic about the future
for Taiwan’s overall freight transport industry. The total value of transport and communications GDP will
rise to US$38.5bn in nominal terms by 2011, representing 7.1% of Taiwan’s GDP.
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