REUTERS - Even after two deadly crashes in seven months, TransAsia Airways Corp 6702.TW will likely rebound quickly as insurance covers any financial losses and its coveted routes through Taipei’s downtown airport keep it popular with business travellers.
Airline analysts said the carrier may have to offer discounts to lure back passengers after Flight GE235 ended in at least 31 fatalities on Wednesday. Amateur video from a car dashboard camera showed the plane clipped a taxi and a bridge before smashing upside down in a shallow river.
“Songshan (airport) is in downtown Taipei... so their flights are valuable, especially for the corporate guys,” said Marc Wang, manager at KGI Securities in Taiwan. “I don’t think they will give up the business.”
TransAsia operates about 22 daily flights from Songshan, mainly to domestic destinations but also to a few Chinese cities, including Shanghai.
The larger Taoyuan Airport is about an hour from central Taipei by road and handles the majority of international flights, channelling almost 36 million passengers in 2014 compared with just over 6 million for Songshan.
Taiwan Fire & Marine Insurance Co Ltd (2832.TW) said it had underwritten TransAsia’s aviation hull and passenger liability insurance and estimated its maximum retained loss at $225,000, which it said would have no significant impact on its business.
Wednesday’s crash and another fatal accident in July mean TransAsia is suspended from opening new routes, which will set back its ambition to grow as a regional carrier, said Michael Lee, Taiwan airlines analyst at Primasia Securities in Taipei.
“It’s a problem for TransAsia because for the last two or three years, TransAsia has been working pretty hard to shift its focus from the domestic market to the regional market,” Lee said. “The margin of the domestic routes is much lower than the regional routes.”
TransAsia bounced back quickly from the July crash. Revenue passenger kilometres - a measure of an airline’s traffic - dropped 64 percent in July from June, but rebounded in August, JihSun Securities Investment wrote in a research note. Insurance covered all compensation claims, it said.
The airline is part of conglomerate Goldsun Group, which has businesses ranging from concrete to telecommunications. TransAsia accounted for about 39 percent of the group’s total revenue in 2013, according to an annual report from subsidiary Goldsun Development & Construction Company Ltd (2504.TW).
“We hope the market can have some faith in us,” said Tu Pei Chun, a spokeswoman for Goldsun. “There will be some confidence issues in the market in the short term, and it’s understandable, but in the longer term, our flight business is quite good and we have the top-level staff.”
KGI’s Wang said steep discounts could help restore consumer confidence. “People forget bad things quickly.”
Reporting by Yimou Lee and Clare Baldwin in HONG KONG; Additional reporting by Ben Blanchard and Twinnie Siu; Writing by Emily Kaiser; Editing by Christopher Cushing