China Airlines safety record in the spotlight
HONG, KONG, China -- The cause of the China Airlines' tragedy on May 25 is not yet known, but the company's fifth fatal crash in eleven years has put its safety record back in the spotlight.
In recent years, the airline has tried to shed its reputation as one of the most dangerous carriers in the world, but the latest tragedy is a serious blow to those efforts.
"In 1998, after an accident killed 264 people, Taiwan's flagship carrier began to overhaul its operations, reshuffling its board and putting a heavy emphasis on safety," says Barry Grindrod of Orient Aviation.
However, three months ago, China Airlines newly-appointed president and former long-standing pilot Y.L. Lee was confident the carrier's troubles were in the past.
"Safety starts from the chairman's office. I discuss with our pilots, maintenance forces, and the service people, to try to make everybody aware safety is the first goal in the airline," says Lee.
The price of tragedy
Now the airline is facing an uncertain future.
"We will definitely see that the load factor will go down again, at least in the six to 12 months." Pierre Wong of CSC Securities told CNN.
"When the load factor goes down with the same fixed costs then the profitability of China Airlines will deteriorate," he reiterated.
Yet the costs may in fact be significantly higher -- insurance payments could rise to $70 million next year from $50 million this year.
China Airlines said it canceled a ceremony scheduled for Friday, May 24 to announce an agreement with U.S. carrier Delta Air lines to link reservations systems.
And China Airlines' shares, which soared some 75 percent since last October, fell by seven percent after news of the crash.
"Investors will dump China Airlines in the next few weeks, I would anticipate at least more than ten percent downside in the next few days," Wong told CNN.
"Longer term I think the share price may under perform the whole industry," he reiterated.
The latest crash is likely to delay commercial talks to expand air services between Taiwan and Hong Kong, as the tragedy happened just a few days after a meeting between aviation officials.
Depending on the outcome of the investigations, the disaster could affect the number of flights allotted to China Airlines, on the most traveled route in the region.
China Airlines plane crashes
May 25, 2002
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