Continental alliance opens up US skies to EVA Air

PUBLISHED : Wednesday, 27 August, 1997, 12:00am
UPDATED : Wednesday, 27 August, 1997, 12:00am

EVA Air has scored a breakthrough in its drive to become a global airline by signing a wide-ranging strategic alliance with the fifth-largest US-based carrier.

The pact offers to sharply expand the Taiwanese carrier's reach in the United States and Latin America and may lead to similar links with European carriers in future.

EVA Air president Richard Huang Jen-chung and Continental president and chief operating officer Gregory Brenneman signed the five-year pact, in Taipei yesterday after a six-month courtship.

The pact will come into effect on January 1, 1998.

The two firms have collaborated on trans-Pacific air cargo shipments since 1994, but talks on a passenger alliance began only in March, when Mr Huang visited Houston after the signing of the milestone US-Taiwan 'open skies' agreement in Washington on February 28, a pact which should be finalised by the end of the year.

Under the alliance, EVA and Continental will link networks and share carrier designator codes.

This will allow EVA's five trans-Pacific routes (now entering the US in Los Angeles, San Francisco, Seattle, Hawaii and New York-Newark) to connect with 22 Continental routes, including the US carrier's Newark, Cleveland and Houston hubs, and grant Continental access to EVA's Taiwan hub and Southeast Asian network.

It will also allow both carries to freely sell seats on the code-share flights and gain direct computer access to both reservation systems and check-in services.

The pact will link frequent flyer programmes, share VIP lounges, launch joint marketing campaigns and mutually co-ordinate schedules to make connections more convenient and prompt.

The two firms will also discuss ways to make mutual use of existing ground facilities, extension of new routes, joint procurement of fuel and supplies, and possible entry into Continental's other alliances with Virgin Airlines, Air France and Air Italia.

Mr Huang said that 'even though the 'open skies' pact will allow us to gain approval to fly anywhere in the US, load factors to places such as Washington D.C. still do not justify direct flights'.

Mr Huang said EVA would still be able to re-evaluate its position and open new direct services if demand permitted under the pact.

Besides expansion into new US markets with few additional overheads, EVA will gain opportunities to boost load factors by channelling more passengers in both directions by offering faster and more convenient connections and achieve more efficient use of its huge investments in ground facilities and ancillary services.

EVA's first major alliance 'will also enhance our image by showing that a leading international carrier acknowledges our capabilities after only six years in operation', said public affairs and advertising senior vice-president Chiu Ket-tair.

Mr Huang said the link could lift EVA's earnings 5 per cent annually, an estimate which Mr Brenneman said was 'conservative', based on potential gains from joint marketing of better and more timely services in other alliances.

'EVA hopes to gain a place on the over-the-counter [OTC] market by the end of next year, but its profits still suffer from its huge investment in fleet and facilities despite the rapid expansion of its route network, especially since margins on the intensely competitive domestic routes are so fierce,' a local securities analyst said.

'A 5 per cent boost in profits would be most welcome.'