Air Macau left with few routes to reinvent itself

PUBLISHED : Monday, 21 July, 2008, 12:00am
UPDATED : Monday, 21 July, 2008, 12:00am

The first regular direct flights between Taiwan and five major cities on the mainland got under way this month, presenting a major threat to revenues earned by Air Macau from providing a cross-strait transit link when direct connections were outlawed.

The 51 per cent-owned subsidiary of the mainland's flag carrier, Air China, now faces the prospect of sharply lower revenues, say airline watchers. Of about 2.4 million passengers carried by Air Macau last year, 40 to 50 per cent were travelling between Taiwan and the mainland, said a transport analyst.

'Some 86 per cent of these travellers did not stay overnight, indicating they were purely transiting Macau,' the analyst said, adding that Air Macau now stands to lose 34 per cent to 43 per cent of these transiting passengers once the direct links operate at full strength. It is expected that the frequency of direct flight will increase to 144 per week from each side in September from 18 per week currently and will be upgraded to a daily schedule service next year.

The clouded outlook for the airline will undoubtedly be discussed when the Air Macau board meets this month to discuss whether to dissolve the carrier or inject further capital. The airline has lost half of its registered capital, 200 million patacas, and says it may be obliged to dissolve if shareholders cannot replenish the shortfall in capital on time.

Although fares offered by Air Macau were very competitive, most Taiwanese travellers would prefer to avoid the delays associated with transiting in the territory on their way between the mainland and the island, said Kelvin Lau, a transport analyst at Daiwa Institute of Research.

The Air Macau links were also too infrequent to qualify Macau as a regular transit hub, added analysts. For example, it offered just three to four daily flights to Shanghai and nine to 10 daily flights to Taipei compared with Hong Kong which has also served as a cross-strait transit hub and has more than 30 flights a day to Shanghai alone.

Air Macau could hang on by developing destination-oriented tourists and outbound traffic. But this would not be easy, said Mr Lau.

'The development of a base carrier relies so much on the base city's economy,' he said. 'Macau's population is just one-tenth of Hong Kong's and the income per capita is much lower and this is a limit to demand for outbound traffic.'

The proximity of Macau airport to Zhuhai airport also prevents its further network development on the mainland since the severely underused Zhuhai airport competes directly with Macau for mainland travellers. An option could be to redeploy its fleet to Southeast or South Asia, added Mr Lau, but competition would be fierce as AirAsia, Cebu Pacific Air, Malaysia Airlines and Tiger Airways operate out of Macau.