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Taiwan Freight Transport Report Q3 2007Product Type: Market Research ReportPublished by: Business Monitor International Published: August 2007 Product Code: R302-1479 Description 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. Table of Contents
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