China Airlines feels pain of doubts


China Airlines will likely see business rebound rapidly for travelers heading to the mainland

By Alex Frew McMillan

HONG KONG, China (CNN) -- Last Saturday's crash of Flight CI 611 to Hong Kong has already hurt China Airlines financially.

But the damage to the airline will mount while uncertainty remains about the crash, experts tell CNN.

Its stock tumbled 7 percent on Tuesday, hitting the limit for a one-day drop in Taipei for the second day.

Meantime, competitor Eva Airways is "limit up" for the second straight time, investors figuring it will gain from its competitor's distress.

All 225 aboard the flight are now assumed dead.

'Find the cause quickly'

"The solution for China Airlines is to find the cause as quickly as possible and get the information out to people," one industry analyst told CNN. "As long as it's not dealt with, it's a problem."

The Boeing 747-200 jumbo jet disintegrated on Saturday afternoon. Investigators said they found the signals of the two black boxes on Monday.

But strong ocean currents have frustrated salvage efforts. Officials admitted Tuesday they were unsure if the beacons they tracked were the boxes. The boxes may also shift on the tides (full story).

For the airline, the crash already means higher insurance costs and payouts to families. The longer the cause is unsure, the greater the damage to its brand (full story).

With five fatal crashes in the last 11 years, China Airlines did not have a good image on safety (full story). But it is difficult for an airline to become branded as "dangerous," experts say.

A vital profitable route

This crash came on a vital route and at a vital time, amid efforts to modernize the airline. Hong Kong-Taiwan is the busiest and most profitable route in Asia.

Planes were 76 percent full for China Airlines, prior to the crash.

"They will have a slump in load factors, and I think Eva will gain some of the traffic," one investment bank analyst told CNN. He declined to be identified.

But Eva Airlines is not much better regarded.

"Fifty percent of Eva [business] comes from freight, so it's really known more as a cargo airline with passengers attached, more than anything else," another industry analyst said.

He asked not to be identified because his company works for air carriers.

But China Airlines will likely bounce back on travel to China, expert say. China just surpassed the United States as the largest trading partner for Taiwan.

Delta scraps plan

With no direct air links between Taiwan and China since 1949, goods or people typically fly via Hong Kong or Macau. Competition is tough.

Hong Kong carrier Cathay Pacific recently lowered its fares to Taipei to bring them closer to its Taiwanese rivals.

"The main market for China Airlines is really serving China," the industry analyst explained. "I don't think that'll be affected greatly."

But internationally, the crash could leave the carrier in the near-isolation it suffers now.

Delta Air Lines said Monday it would delay indefinitely its plan to offer code-share flights with China Airlines. That could have led to integration into Delta's SkyTeam partnership with Air France and others.

Delta recently revived code share links with Korean Air Lines, which itself suffered from a poor safety record.

"There have been problems from time to time in terms of reputation, and it is fair to say that Korean Air Lines suffered," the industry analyst said. Small Russian and African carriers still suffer.

Korean Air Lines rebounded. It remains to be seen how long that process now takes for China Airlines.