IN DENIAL:When people unable to book tickets with TransAsia began to suspect serious problems, the airline at first refused to admit it was planning to suspend flights
By Shelley Shan / Staff reporter
Aircraft stand outside a TransAsia Airways hangar at Taipei International Airport (Songshan airport) yesterday.
The Civil Aeronautics Administration (CAA) yesterday confirmed that TransAsia Airways (復興航空) is to suspend services for one day today, adding that the airline could be fined up to NT$3 million (US$93,750) for halting flights without seeking prior approval.
CAA Deputy Director-General Fang Chih-wen (方志文) said that the administration had not known that TransAsia planned to suspend services until it received a telephone call from the airline yesterday afternoon, adding that the company had not submitted an application requesting the cessation.
The company also did not explain during the phone conversation with the administration why it had taken the decision, he said.
This is probably the first time that a domestic airline has halted flights without the CAA’s approval, he said, adding that the company has contravened the Civil Aviation Act (民用航空法).
“We have officially notified the airline that it needs to address the situation, or it will be fined between NT$600,000 and NT$3 million,” he said, adding that the airline has also been told to properly handle the refunds of tickets for today’s flights.
Agency statistics show that TransAsia’s unexpected move is estimated to affect more than 5,000 passengers on 56 domestic flights, 12 international flights and 16 cross-strait flights.
Far Eastern Air Transport (遠航) also suspended flights to Cambodia without giving notification, the agency said.
The Tourism Bureau said that TransAsia’s move would affect 3,000 tour group travelers, both those scheduled to return home and those planning to travel abroad.
The CAA official met with the representatives of other Taiwanese airlines yesterday to request their assistance in taking on passengers previously booked to fly with TransAsia, Fang said.
Asked whether TransAsia’s suspension of services would continue, Fang said that it would depend on the results of a board meeting today.
TransAsia yesterday morning at first denied public suspicions that it would suspend services, following multiple reports from members of the public that they were unable to book tickets with the airline, saying its ticketing system was not working.
Founded in 1951, TransAsia has been struggling to stay in the black after two crashes, in July 2014 and February last year.
The company is estimated to have paid close to NT$1.2 billion in settlements to the victims of those accidents and their families.
TransAsia in August announced that its subsidiary, low-cost carrier V Air (威航), would suspend operations from Oct. 4 through Oct. 3 next year.
The Taiwan Stock Exchange approved TransAsia’s request to suspend share trading ahead of material information disclosure.
TranAsia would need to complete an application and approval procedures to resume trading, the exchange said.
The bourse fined the company NT$1 million for breaking rules governing material information disclosure after it canceled a news conference scheduled for yesterday evening and instead issued a statement.
TransAsia shares yesterday fell 7.14 percent to NT$5.2 in Taipei trading, with the sell-off quickening in pace toward noon. Turnover surged to 10.74 million shares, compared with 398,000 shares in the previous session.
TransAsia shuts down
COMPANY CRASHES:The firm’s chairman blamed the declining number of Chinese visitors, rising fuel prices and a strengthening US dollar for its steep losses
By Ted Chen and Chen Wei-han / Staff reporters
Left to right, TransAsia Airways chief executive officer Liu Tung-ming, chairman Vincent Lin and spokesman Liu Chung-chi bow at a news conference in Taipei yesterday as they apologize for the company’s collapse.
TransAsia Airways (復興航空) yesterday said it is to dissolve the company after its attempts to keep it afloat failed.
The company looked at options, including a sale, restructuring and capital injections, during three meetings between its board of directors and industry experts, TransAsia Airways chief executive officer Liu Tung-ming (劉東明) told a news conference at the Taiwan Stock Exchange.
“Despite our best efforts to devise a new business model, the company could not produce an effective turnaround plan to repair its deteriorating finances,” Liu said.
The airline said it is unable to repay US$75 million in European convertible bonds due on Tuesday next week.
The company’s net worth was estimated at about NT$5.44 billion (US$170.29 million), or a book value of NT$7.17 per share, as of the end of last month, TransAsia vice president Chen I-chieh (陳逸潔) said.
The airline operated 27 routes in Taiwan, China and the rest of Asia, each representing about a third of total sales, Chen said.
In the first three quarters, the company racked up losses of NT$2.2 billion, Liu said.
TransAsia chairman Vincent Lin (林明昇) blamed the declining number of Chinese visitors, as well as rising fuel prices and a strengthening US dollar, for the company’s steep losses.
TransAsia’s load factor had fallen to about 60 percent, which was well below its domestic peers’ and unsustainable, Lin said.
TransAsia shares are to resume trading today following yesterday’s suspension, but trading would be conducted on a full-cash delivery basis, the Financial Supervisory Commission (FSC) said.
At a news conference held jointly with the heads of government agencies yesterday, the Cabinet said that the impact of the airline’s closure would be limited and the company has enough cash to refund customers and cover severance pay.
An estimated 100,000 travelers are affected by the unexpected folding of the nation’s first commercial airline, but other carriers have capacity to take on passengers booked to fly with TransAsia as it is the off-season, Civil Aeronautics Administration (CAA) Air Transport Division director Han Chen-hua (韓振華) said.
TransAsia has created a trust fund to ensure that customers get a full refund on booked flights, and the company will not dismiss ticketing and customer service staff until Dec. 20, so that they can assist in the transfer of passengers to other airlines, the firm said.
The CAA formed a special task force immediately after TransAsia announced a temporary suspension of operations on Monday to ensure that travelers’ rights are protected, Fan said.
The CAA is to impose a fine of between NT$600,000 and NT$3 million on TransAsia for halting flights without seeking prior approval.
The CAA has conducted regular financial inspections on TransAsia, and the company still holds more than NT$1 billion in cash and is not facing an immediate financial crisis, Han said.
TransAsia has 1,735 employees and they are covered by labor insurance, while there is NT$310 million in the company’s pension fund account, Deputy Minister of Labor Kuo Kuo-wen (郭國文) said.
“The money is more than enough to pay employees’ pensions and the remaining amount can be used to cover severance pay,” Kuo said.
The FSC and prosecutors have launched an inspection into possible insider trading in the company’s shares, and it has yet to be determined whether company executives were involved, commission vice chairman Huang Tien-mu (黃天牧) said.
The Taiwan Stock Exchange on Aug. 15 listed TransAsia as financially unstable, to warn investors of the risk involved in trading the company’s shares, Huang said.