Starlux Airlines is poised to capitalize on strong global demand in passenger and cargo markets, projecting growth through 2025. The airline, which has been operating for six years, is set to list on the stock exchange in October 2024, with Chairman Chang Kuo-wei and top executives outlining the company's outlook and strategy during a pre-listing performance briefing on September 25.
Passenger demand surpassing pre-pandemic levels
Starlux reported that global passenger traffic in the first half of 2024 had already surpassed pre-pandemic levels. Glenn Chai, the airline's CEO, referenced data from the International Air Transport Association (IATA), forecasting annual growth in global passenger volumes through 2027, with the Asia-Pacific region leading the way.
However, Chai noted that Taoyuan International Airport, Taiwan's main hub, has not fully restored its capacity, operating at 90% of 2019 levels. He expects the airport to exceed pre-pandemic volumes by 2025, with further growth anticipated once Terminal 3 opens in 2027.
Cargo growth driven by AI and e-commerce
Starlux's cargo operations have also seen significant growth, with revenues reaching NT$1.76 billion (US$54.7 million) as of August 2024, an 83% increase compared to 2023. This growth has outpaced passenger revenue, which rose by 62% during the same period. Chai highlighted the evolving cargo landscape, driven by demand from Taiwan's AI and server industries.
He pointed out that many high-value server products are now manufactured in Taiwan and shipped directly to global markets, increasing cargo demand.
Despite these gains, Starlux currently faces challenges due to a global shortage of aircraft components, which has delayed the delivery of new cargo planes. The airline is currently relying on the belly cargo capacity of its passenger aircraft but expects to strengthen its fleet with the introduction of five A350F freighters.
It also plans to convert five additional A350F options into firm orders, bringing its dedicated cargo fleet to 10 aircraft. Chai is optimistic that demand, fueled by AI supply chains and e-commerce, will remain strong through late 2024 and into 2025.
Targeting the Asia-Pacific hub market
Starlux's primary focus remains on tapping into Taiwan's potential as a key transit hub for passenger and cargo traffic in the Asia-Pacific region. Chairman Chang noted that Taiwan's geographic location makes it an ideal transshipment point for routes connecting Southeast Asia with North America.
He stressed that the airline was founded to transform Taiwan into a major transport hub, rather than the sole purpose of serving the local market.
Starlux currently operates 31 routes to 27 destinations, with plans to further expand its network. The airline's fleet, consisting of Airbus aircraft such as the A350-900 and A350-1000, is capable of flying directly to major cities in Europe and North America, with a range of 8,000 nautical miles.
For routes within Asia, flights to key cities take less than five hours from Taipei.
Chang also pointed out that while new-generation aircraft offer greater range, routes from North America to Southeast Asia still face limitations, as they can typically only reach as far as Hong Kong without requiring a stop. He emphasized that Taiwan serves as the best transfer point for connecting these markets.
Room for growth in passenger and cargo operations
Chai compared Taiwan's aviation potential with that of regional competitors such as Hong Kong's Chek Lap Kok and Singapore's Changi airports. Despite Taiwan having a population two to three times larger than these cities, its passenger traffic only reaches 40-80% of their levels.
Additionally, Taiwan's transfer passenger rate is only 11%, compared to 30% in Hong Kong and 27% in Singapore. In cargo, Taiwan handles only a fraction of what Hong Kong does, indicating significant room for expansion.
As Starlux prepares for its IPO in October, Chang reflected on the airline's challenging journey. Launched just two months before the onset of the pandemic, Starlux only began full-scale operations in 2023. The airline broke even last year, and Chang expects 2024 to be a year of substantial growth.
For the first half of the year, Starlux reported NT$16.33 billion (US$506 million) in revenue, a 65% year-on-year increase, with post-tax profits rising by 172% to NT$900 million (US$28 million). The airline has maintained a load factor of over 80%, supported by the recovery in global travel demand and strong ticket prices.
Looking ahead, Chang is confident that Starlux will continue to grow rapidly, driven by its strategic focus on both passenger and cargo markets, along with its ambitions to position Taiwan as a key hub for the Asia-Pacific region.
