EVA Airways Corporation

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EVA Airways Corporation

EVA Air Building
376 Hsin-Nan Road, Section 1
Luchu Hsiang, Taoyuan Hsien
Taiwan
Telephone: (+886) 3 351-5151
Fax: (+886) 2 2501-2099
Web site: http://www.evaair.com

Public Company
Incorporateci: 1989
Employees: 4,552
Sales: NT$52.45 billion ($1.53 billion) (2001)
Stock Exchanges: Taiwan
Ticker Symbol: 2618
NAIC: 481111 Scheduled Passenger Air Transportation; 481112 Scheduled Freight Air Transportation; 481212 Nonscheduled Chartered Freight Air Transportation; 481211 Nonscheduled Chartered Passenger Air Transportation

EVA Airways Corporation, or EVA Air, is Taiwan’s second largest airline. It was founded by the Evergreen shipping group. (There is no relation to Oregon’s Evergreen International Aviation.) EVA flies passengers and freight as far as Milan, Italy, on a fleet of mostly widebody aircraft. EVA also owns an interest in domestic carrier UNI Air. The company had about a 60/40 mix of passenger and cargo revenues in 2001, a ratio that, in contrast to other airlines, it hoped to reverse. EVA was also unique in eschewing global airline alliances in favor of making its own way through the world’s skies.

Launched in 1991

It was not enough for Chang Yung-fa to build Evergreen Marine Corporation, one of the largest container shipping lines in the world. He looked to the skies to build another empire. The name of choice was already being used by Oregon’s Evergreen International Airlines, so the new airline was called EVA Airways Corporation, or EVA Air. It was incorporated on March 8, 1989; start-up capital was $400 million. Chang spent two years laying the groundwork for the first flight, including placing orders and options for 28 aircraft worth $3.6 billion.

Company president Frank Hsu had been in charge of Evergreen’s U.S. container business for eleven years. Alitalia, the Italian flag carrier, was contracted to initially handle pilot training and aircraft maintenance.

EVA Air began flying on July 1, 1991. The airline’s first destinations were Singapore, Bangkok, Kuala Lumpur, Jakarta, Penang, and Seoul; by the end of the year, the company had added a few other stops in east Asia and as well as Vienna, Austria. First year revenues were $40 million.

Growth was brisk in EVA’s early years, as EVA expanded the market through unique offerings such as the world’s first four-class service. The Evergreen Deluxe class, introduced in 1991, was a step up from economy, with personal seatback video screens.

EVA Enters the U.S. Market in 1992

EVA entered the U.S. market in December 1992 with a nonstop route between Taipei and Los Angeles. A Taipei-Seattle-Newark service was added in June. This was the only direct service connecting Seattle to Taiwan; EVA was the first Asian carrier to serve the Newark Airport, which had recently lured Federal Express Corp. from John F. Kennedy International. EVA was carrying cargo in the bellies of the Boeing 747s used on these flights.

EVA began flying to London’s Heathrow Airport via Vienna and Bangkok in March 1993. At the same time, complicated negotiations with mainland China allowed a specially created subsidiary of British Airways called British Asia Airways to begin flying to Taiwan via Hong Kong. In order for the service to begin, Britain’s aviation minister had to publicly acknowledge the People’s Republic as “the sole legal government of China,” including Taiwan.

Y.F. Chang relinquished the chairmanship of EVA Airways to former vice-chairman Cheng Shen-Chih in autumn 1995, while company president Frank Hsu became the new vice-chairman. Richard Huang, head of the U.S. operations, became EVA’s new president.

By 1995, the company was operating 20 aircraft with an average age of less than a year—an impressive fleet for a carrier that began flying only four years earlier. Its route network now stretched to London and Paris. The airline carried more than three million passengers a year, and cargo was accounting for 30 percent of revenues.

Profitable in 1995

Revenues were $800 million in 1994. In 1995, EVA posted its first profit, $7.2 million, on revenues of $1.05 billion, up 45 percent from the previous year. The company broke even a year ahead of schedule. Another important milestone was the start of cargo operations. The company’s new MD-11 freighter connected Taipei, Singapore, Penang, San Francisco, New York, and Los Angeles on a weekly run beginning in April. Four more cargo aircraft were added to the line in June 1995. Cargo traffic would grow at a rate of 50 percent a year for the next five years, accounting for $665 million in revenues in 1999. Deliveries of three Boeing 747 freighters began in 2000.

EVA Air had begun investing in domestic airlines. It acquired 20 percent of Great China Airlines and Makung Airlines in 1995. It also bought shares in Taiwan Airlines, raising its stake from 30 to 40 percent in 1996. Unlike its rival China Airlines, EVA preferred not to get heavily involved in the management of its regional affiliates.

Though most of these small airlines were profitable, by 1997 overcapacity in the domestic market was becoming apparent. Taiwan had gone from four to 17 carriers in ten years. A series of crashes at China Airlines and its domestic unit hurt Taiwan’s air travel market as a whole. In July 1998, EVA merged Great China Airlines and Taiwan Airways into another holding, UNI Air. The domestic market would continue to get more difficult in the next three years as passenger counts dropped.

EVA continued to expand its cargo operations in the late 1990s in spite of the Asian financial crisis. The demand for time-sensitive freight, such as computer and telecommunications components, remained high on both sides of the Pacific, though the demand for U.S.-made consumer goods did fall about 20 percent. Taiwan’s economy was among the least affected in the region. The instability of South Korea’s currency prompted buyers in the west to shift orders to Taiwanese manufacturers.

A new combination passenger/freight service from Kaohsiung to Los Angeles was launched in April 1998 via Boeing 747. However, this route was temporarily suspended seven months later due to the regional slowdown. Profits were down sharply in 1998, and EVA posted a loss in the first half of the year. Plans to buy a dozen Airbus passenger jets were also scrapped.

By the end of 1999, EVA had all-cargo flights extending as far as the Persian Gulf and Atlanta, Georgia. Other cargo destinations included Amsterdam, Brussels, London, Mumbai (Bombay), and Manila. Like rival China Airlines, it was expanding its cargo fleet in anticipation of a boom in freight upon the Asian economy’s recovery. By this time, EVA had invested $4 billion in new aircraft since its founding.

A complex diplomatic and economic clash between Taiwan and the Philippines had consequences for EVA. Manila scrapped its aviation agreement with Taipei in September 1999, claiming EVA and China Airlines exceeded pre-determined passenger quotas to the detriment of Philippine Airlines (PAL).

Public in 1999

In the same month, earthquakes knocked out power to some Taiwanese electronics firms, disrupting shipments. This may not have been the best introduction to an initial public offering, but EVA pressed on with plans to go public on October 27, 1999. One percent of EVA’s shares were designated for this over-the-counter offering. The parent company, Evergreen Marine Corporation, owned a quarter of the airline’s shares and EVA employees owned another 25 percent. The company’s listing moved to the Taiwan Stock Exchange in September 2001.

EVA placed $3 billion worth of orders and options for fifteen new long-range Boeing 777 aircraft worth $3 billion in June 2000. Delivery of three Boeing 747 super freighters, each with a capacity of 100 tons, began in August 2000. A slowdown in Taiwan’s high-tech economy soon hurt cargo volume, however, while the same recession, plus the aftermath of the September 11 attacks on the United States, cut into passenger traffic.

Company Perspectives:

Like a majestic bird, the Evergreen Group has taken flight. It stepped from the seas to land. Then, with EVA Air as the embodiment of the best of this great transportation heritage, it soared into the wide-open skies. The Evergreen Group steadily transformed itself as a transportation giant on the world stage. From the wellspring of its Taiwanese heritage, it built on strengths of its culture and created “EVA Air-the Wings of Taiwan.”

Key Dates:

1991:: Evergreen Marine founder Chang Yung-fa launches EVA Air.
1992:: EVA begins service to Los Angeles, Seattle, and Newark.
1995:: EVA Air posts its first annual profit and begins cargo operations.
1999:: The company goes public.

EVA posted a net loss of NT$3.17 billion ($91 million) for 2001, its first full-year loss in several years. Layoffs and other cost-cutting measures followed. Transpacific routes were the hardest hit, while European and Asian routes rebounded fairly quickly. UNI Air, in which EVA held an 18 percent shareholding, was also losing money, burdened by high interest rates.

Kitty Yen, a 25-year veteran of the Evergreen shipping group, was made president of EVA in January 2002. She had been president of Evergreen Sky Catering since 1999; before that, she held a variety of posts at Evergreen International and Evergreen Marine.

EVA forecast a NT$1.25 billion ($36 million) profit for the year 2002, with revenues rising ten percent to NT$57.7 billion. A bright spot on the horizon for EVA and other local carriers was the possibility of direct flights between Taiwan and Mainland China, as both countries were joining the World Trade Organization.

Principal Subsidiaries

Evergreen Air Cargo Service Co. (55.8%); Evergreen Airline Services Corp (56.33%); Evergreen Airways Service (Macau) Ltd. (99%); Evergreen Aviation Technologies Co., Ltd. (79.8%); Evergreen Security Co., Ltd. (31.25%); Evergreen Sky Catering Corp. (49.8%); Evervoyage Transport Corp. (43.67%); Green Siam Air Services Co., Ltd. (Thailand; 51%); Hsiang-Li Investment Corp. (99.99%); RTW Air Service(s) Pte. Ltd. (Singapore; 51%); UNI Airways Corp. (18.43%).

Principal Competitors

Cathay Pacific Airways Ltd.; China Airlines; Delta Air Lines; Far East Air Transport; Singapore Airlines Ltd.; TransAsia Airways; United Airlines Inc.