Industry left open-mouthed as CAL soars to greater heights

PUBLISHED : Saturday, 16 January, 1993, 12:00am
UPDATED : Saturday, 16 January, 1993, 12:00am

CHINA Airlines (CAL) was one of the surprise packages late last year when the world's most profitable airlines were announced. A surprise, that is, to many people excluding cargo chief Peter Yap and his lieutenants.

CAL moved from eighth to fourth in the league table behind British Airways (BA) Singapore Airlines (SIA) and Cathay Pacific.

It had net earnings of almost US$155 million and even this statistic hid something of a minor miracle: from 1986 to 1991 its cargo department doubled net revenue without expanding its department by a single staff member.

Much of that, since 1986 when cargo became a separate division, is down to Mr Yap.

Cargo at CAL accounts for 20 per cent of the airline's total revenue, high by any standards. Mr Yap is predicting that the division's profits will rise again this year to top US$20 million when the financial year's results are announced.

Although the industry is said to be in recession, Mr Yap's eyes light up when discussing prospects. ''The business is there; you have to go out and find it. It just makes it more challenging,'' he says.

And it works, at least for CAL. Loads were averaging between 80 and 90 per cent in December, he said. On the transpacific routes, outgoing loads averaged 85 per cent, and incoming loads 75 per cent. As for Europe, the holds were 80 per cent full going out and 75 per cent on the return leg. ''And this is the low season,'' Mr Yap adds.

What makes the statistics all the more remarkable is that the airline has done it without adding a single person to the department.

CAL's cargo division has a staff of around 150 at home and abroad, the same as it had in 1986. The airline has 25 overseas stations and just 31 people pull the strings from the head office in Taipei.

The relatively small team has made CAL the fifth largest cargo carrier in terms of tonnage carried in Asia and 18th in the world.

Two years ago control at CAL was decentralised and the various divisions were given the power to make decisions only previously taken by top management.

''This meant I could make instant decisions instead of having to wait,'' said Mr Yap.

During the Gulf War when many airlines suspended flights, Mr Yap was asked if he wanted to do the same, but he opted to fly the polar route. Eyebrows were raised because it meant 41/2 extra hours flying time and with fuel prices 20 per cent higher it represented a heavy gamble.

The cargo boss put greater emphasis on co-operation with other airlines and explained to forwarders why he was forced to raise the rate. While the faint-hearted counted the cost of grounding their aircraft, CAL made money.

It has not, however, all been good news. CAL took delivery of its third dedicated B747 freighter in 1990 only to lose one in a crash the following year.

While the airline has been steadily expanding its transpacific network, it sees the mainland as something akin to Aladdin's Cave.

Although management is reluctant to comment on what is seen as a sensitive subject, Mr Yap did say that if the air corridors were opened tomorrow, CAL would not have enough capacity to cope.

Barry Grindrod is editor of Payload Asia magazine