In the past, two-thirds of Taiwan's airline revenues came from passenger traffic and one-third from freight. But during the outbreak, ticket prices were soaring as a result of "rigid demand" since some people still had to fly, coupled with the increasing difficulty of transit. But even so, global airlines that rely heavily on airfares are struggling, except Taiwan's and South Korea's airline companies.
In the first half of this year, Korean Air reported profits of about US$3.1 billion. Taiwan's airlines were starting to be in the black. Both rely on contribution from freight revenues. According to China Airline's financial reports, China Airline's passenger traffic revenue accounts for only about 5% of total revenue, with cargo accounts for 95%. As a consequence of marine traffic congestion, air transport has become an important alternative of urgent or light goods. Demand for a variety of semiconductor-related products has been surging with about 60% of semiconductors going to China, plus Chinese IT makers bought up what the sellers could offer to hoard materials for production lines. The same situation applied to both Taiwan and South Korea. It was a unique example for the global shipping industry, where Taiwan's and South Korea's airlines relied on freight to survive the difficult pandemic era.
On the other hand, after the US eased travel restrictions for foreign nationals who have been fully inoculated in November, air ticket sales soared, which has foretold a prime time of rising volumes of both passengers and cargo seems to be approaching. How should we capitalize on the current and future business models and business opportunities?
Take a step further. We may have to face different scenarios of needs. The recent sluggish Chinese market, coupled with power restrictions and other factors, has led to a slump in cargo volume out of China. Nonetheless, with lingering port congestion problems in Europe and the US, air transport in the short term remains the major way of shipping. Airlines are likely to usher in a great leap against the plunge of sea freight. I am not sure if Taiwan's shipping industry is ready.
Furthermore, if regional production is a big trend, the deployment of the Chinese market and the guidelines for penetrating the India-Pacific markets should also be adjusted. For the old customers in the Chinese market, the supply chain system should provide more precise industry information from sources of authority to deter the spread of fake news. This is a new business opportunity for providing B2B industry information with a charging mechanism catering to the Chinese market. As for the new markets in ASEAN and South Asia, don't expect them to request supply chain adjustments or pay for the latest information. If they had done this, IT industry players of ASEAN and South Asia would have been able to compete head-to-head with their Chinese counterparts lng ago.
By the same token, Taiwan has an advanced industrial system to take the initiatives in global deployment to stay ahead of the curve. The practices of order-driven businesses were obsolete. The same scenario applied 20 years ago when Intel taught Taiwanese makers how to make servers to embrace lucrative upstream CPU businesses. We cannot expect windfall without taking the initiatives.
(Editor's note: This is part of a series of analysis of Taiwan's role in the global ICT industry.)
