by Brian Hioe
Photo Credit: Laurent Errerra
QUESTIONS OF the relationship between the state and private sector are behind political controversy about flight operator TransAsia going out of business. TransAsia is not bankrupt, but its management has decided to shut down operations, citing the inability to turn business around.
After a series of high profile airplane crashes in 2016 that raised questions about aeronautics safety in Taiwan, TransAsia profits suffered a steep decline. Some suggested that this was the free market punishing the flight operator in a way that government regulators could not. Nevertheless, what will become of TransAsia’s 1,700 employees remains to be seen, and they may join other flight operators. At least 200 TransAsia employees protested outside the Ministry of Labor on November 24th, demanding that the government intervene to act as a mediator to resolve the situation.
Stocks for TransAsia have seen a crash after news of its shutting operations. The news came with little prior notice apart from a sudden announcement by the airline that it would be terminating all flights on November 22nd. TransAsia’s management cited a desire to dissolve the company, while investors have urged management to restructure the company and continue flying. A government investigation is currently being conducted into insider trading by members of TransAsia’s management, who may have known ahead of time that the company would be stopping operations. A list of suspects has been drawn up and company executives summoned for questioning. Company chairman Vincent Lin was also detained as a suspect by government prosecutors before being released on bail.
In the meantime, other flight operators have taken up TransAsia’s previous flights, with China Airlines assuming responsibility. China Airlines and EVA have expressed interest in taking up TransAsia’s routes in the future, as well as possibly hiring company pilots, with EVA in particular having a shortage of qualified pilots after an expansion of its fleet. As a result, EVA would host an information session for pilots, which was attended by close to half of TransAsia’s about 170 pilots. Some have called on peer airlines as China Airlines and EVA to aid in the restructuring of TransAsia and suggested that demonstrating TransAsia employees should appeal to China Airlines and EVA to hire them instead of demonstrating against TransAsia’s management.
TransAsia’s flying rights have been revoked by the Civil Aeronautics Administration, after the airline was fined 3 million NT for its sudden shutting down without advance warning. TransAsia’s rights and flight routes may be assigned to other airlines in the future. Nevertheless, there remains a lack of transparency about why TransAsia’s management wished to dissolve the company rather than restructure it when the company still had assets, with many suspecting wrongdoing. What will be done about TransAsia going forward is still up in the air.
Comments by Taiwanese government officials suggested that the government was briefly considering taking control of TransAsia. However, the government was forced to backtrack on such comments because Taiwanese law states that the government can take control of insolvent financial institutions, but not private transportation operators such as TransAsia.
Nevertheless, state-run Mega Bank is the largest creditor of TransAsia, and other creditors include the Hua Nan Commercial Bank, the Bank of Taiwan, and Chang Hwa Commercial Bank, which alongside Mega Bank exist in a category between private and state-run banks in Taiwan as they are formerly state-run banks, with the majority stakeholder still being the Taiwanese government in the present. China Airlines, which assumed primary responsibility for TransAsia’s flights, is primarily owned by the Ministry of Transportation and Communications. Among those who have expressed interest in acquiring TransAsia and trying to turn the flight operator’s fortunes around include former Civil Aeronautics Administration director-general Billy Chang, though this was later withdrawn after TransAsia was stripped of its flight routes. Questions abound about whether Chang’s move was intended to influence the performance of TransAsia’s stocks.
As such, questions about the future of TransAsia are only in part about whether the Taiwanese government will seek to “bail out” the failing airline, seeing as transportation is a vital conduit for Taiwan to conduct international business and trade. Much of the present controversy is over the murky relationship between the Taiwanese government and partially state-owned enterprises, including not only airlines such as TransAsia, but a number of Taiwanese financial institutions—and how they often prove to be interrelated.