TAIPEI: Money-losing China Airlines said yesterday it expects to break even this year after suffering consecutive quarterly losses. The optimistic outlook emerges from an improvement in the Taiwan-based airline's cargo figures and closer cross-Straits ties.

The airline also plans to set up a branch on the mainland, making it the first Taiwanese airline to do so. The announcement comes before the anticipated commencement of regular, direct cross-Straits flights in August.

"Our cargo figures were extremely weak last year, and if there's a rebound there we should be able to break even," China Airlines spokesman Bruce Chen told Reuters on the sidelines of a company event. "Direct flights are also helping, and we'll have a branch in Beijing very soon."

All flights between Taiwan and the mainland previously had to stop at a third city, usually Hong Kong. Economic links have grown under the year-old Ma Ying-jeou administration.

China Airlines recorded a loss of NT$2.96 billion ($90 million) in the first quarter of this year, hit by a plunge in international travel arising from the global economic slowdown.

Chen also said he hoped jet fuel prices will remain at current levels after a difficult 2008, when airlines around the world were hit by surging oil prices, forcing them to suffer massive losses or impose hefty fuel surcharges.

Chen's comments stand in stark contrast to larger Asian rivals such as Singapore Airlines and Cathay Pacific, which are suffering from declining load factors and falling profits, and have been wary of predicting a turnaround.

It also comes amid a rally in Taiwan's stock market, where investors in the island's many technology firms have been betting that closer ties with the mainland will be good for business.

Investors have been less bullish on Taiwan's airline industry so far. Shares of China Airlines are up 15 percent this year and its smaller rival EVA Airways advanced about 18 percent during the same period, compared to a 46 percent gain in the benchmark TAIEX share index.

The International Air Transport Association said in late June the world's airlines lost more than $3 billion in the first quarter of this year.

Reuters

(HK Edition 07/16/2009 page2)