Plans by the government and private shareholders to sell off 80% of Sino Swearingen Aircraft Corporation (SSAC) for just $150m to a venture company in the United Arab Emirates have been given a bumpy ride by the opposition.
While the announcement of plans to sell off its controlling stake in SSAC could be seen as poorly timed politically, with presidential elections called for March 22, the government felt that it had little option, given the precarious state of the company.
Since being founded in 1995, SSAC has focused on developing the SJ30, which the company claims is the world’s fastest executive jet and which has a range of 4500km, better than any similar aircraft on the market.
While the company, which is based in San Antonio, Texas, says it has orders for 300 of the seven-seater planes on its books, worth a total of $1.65bn, deliveries are well behind schedule and SSAC is in the red.
A ministry of economic affairs report released on February 26 said SSAC had negative net assets of $60m and needed an immediate injection of $10m to keep afloat for the next three months, with the company having sufficient operational capital for only one month.
However, according to Lai Shyh-bao, a parliamentary deputy for the opposition Kuomintang, the situation does not warrant putting the company up for sale, especially at a bargain basement price.
The government had invested more than $10bn in SSAC since 2000 and should not sell it off just as the company was in a position to benefit from technologies it has accessed, he said.
Though the government says its investments in SSAC are much lower, it is reluctant to pour in more funds and is also bound by a parliamentary vote preventing it from providing further assistance to the firm.
However, the ministry did appear to bend to the outcry over the proposed sale, announcing on February 27 that it would not deal with the issue until after the presidential ballot and following the tabling of a full report on the company’s situation to the parliament.
At the other end of the industry, there are also concerns being raised as to the future. Taiwan’s airlines have been having a hard time lately, facing higher costs due to the rising price of fuel and losing domestic passengers to the country’s railways.
Taiwan’s domestic carriers have seen their share of the local passenger market shrink drastically over the past decade. From a high of 37m seats filled in 1997, just 19m tickets were sold in 2006. With the launch of high-speed rail links across the country last year, domestic ticket sales have plummeted even further with just 12m passengers taking to the skies in 2006, according to media reports.
Taiwan’s China Airlines has already announced that higher fuel costs will force it to hike ticket prices by 10%. Other carriers are expected to announce similar increases soon.
The carrier seen to be experiencing the greatest difficulties is the Far East Air Transport Corporation (FAT), which has been forced to cut two domestic routes among other services and is struggling to meet its wages and fuel bills.
On March 4, the airline was able to pay 80% of back salaries owed to staff, but was not in a position to clear the remaining 20% or the 2007 year-end bonuses promised to its employees.
The same day the payments were made, the local press reported that Civil Aeronautics Administration officials had warned FAT could have all of its flights grounded if it could not overcome its financial difficulties soon.
One answer for the airline’s woes is seen as granting it access to routes to mainland China, currently closed.
There may be some cause for Taiwan’s airlines to hold out hope on this issue, with Chinese Premier Wen Jiabao acknowledging the need to open air routes to the mainland.
On March 2, during an address to the National People’s Congress, Wen said that while Beijing would not tolerate any moves by Taiwan to promote independence, there should be an expansion of economic exchanges. In particular, along with calling for more investment in the mainland, he cited aviation links and direct trade as being essential.
