What do New Aviation Routes Mean For Taiwan?

Amid shifting global aviation dynamics and economic changes, Taiwan emerges as a pivotal hub. But slow upgrades might keep it from reaching its full potential.

Navigating the skies over Asia in 2024 requires updated pilots’ aeronautical charts. The global aviation map has changed dramatically in recent years, notably with Russia’s war in Ukraine altering flight paths amid a significant economic pivot from China to Southeast Asia.  

Taiwan, with its leading semiconductor industry, has become increasingly central to many global supply chains, propelling Taiwan Taoyuan International Airport into the limelight as one of the world’s busiest terminals. International freight carriers like FedEx and DHL are plying new routes from tech company headquarters in Hsinchu (close to Taoyuan) to chip foundries and auto manufacturing hubs springing up in the southwestern United States.  

That’s now creating space for some carriers serving the United States through Taiwan, such as Starlux Airlines, a Taiwanese long-haul luxury carrier that launched flights to Los Angeles and San Francisco last year, and incumbents like Delta Air Lines, which is banking on increased travel across the Pacific. More Taiwan-U.S. routes are expected during 2024, including nonstop Seattle-Taipei flights, which by August will be offered by Delta Air Lines, China Airlines, and Starlux. Currently, only Taiwanese carrier EVA Air flies this route.  

Starlux has quickly risen among Taiwanese airlines, despite some early stumbles and an inauspicious start to business operations – its maiden flight to Macau arrived the same day that the city reported its first confirmed case of Covid-19.  

“Taiwan has certainly witnessed a relatively good recovery in long-haul markets post-pandemic, especially in the transpacific market,” says Dennis Lau, consultancy services director at Asian Sky Group, an aviation transaction and consultancy firm. “Frequencies have largely recovered to pre-pandemic levels, and Taiwanese carriers are offering attractive airfares for connecting passengers, compared to some of the nonstop options from the rest of Asia, including hubs such as Hong Kong and Singapore.” Starlux played a prominent role in intensifying the competition, he adds.  

But it’s not all tailwinds for international airlines. The war in Ukraine has created challenges for carriers, with many countries banning their airlines from entering Russian airspace in response to international sanctions. Many long-haul flights are now forced to fly more circuitous routes through the Middle East, which may require burning jet fuel for an additional two or three hours. 

“For many European carriers, it adds a lot of extra flight time, and when you have additional flying time, you’re burning more fuel,” says Mayur Patel, head of Asia at OAG Aviation, a UK-based global travel data provider.  

Hardest hit was Finnair, which was forced to add up to two-and-a-half hours in each direction, creating challenges ranging from engine maintenance to reduced maximum take-off weight. “From one day to the other, you went from running a profit to running a loss,” Patel says. “Cargo yields came down as well.” 

But after a few years of war and pandemic-induced industry bruising, at least one aspect of travel has returned to normal – air traffic between Taipei and Hong Kong has rebounded to rank once more as the world’s busiest international passenger route. The TPE-HKG corridor has now recovered, with 586,454 available seats per month as of March, according to OAG. 

But Taiwan must also bear in mind competition from Hong Kong as the city’s government makes up for lost time and seeks to turn around its diminishing status as an aviation hub. Even as China’s economy sputters and expatriate bankers relocate, passenger traffic has recovered rapidly during 2023, and Hong Kong remains the world’s busiest cargo terminal.  

“For passenger flights and routes in the region, the scale of recovery since the pandemic has been varied,” says Asian Sky Group’s Lau. “Mainland China has been one of the last major markets to recover, especially on transpacific routes, mainly caused by limitations on frequencies and routes imposed by the Chinese authorities.” 

Chinese airlines have in general returned to competition after the end of the country’s zero-Covid policy, with friendlier relations between Moscow and Beijing allowing the opportunity for carriers to fly shorter routes to Europe over Russia. A significant advantage for these airlines is cost savings on jet fuel. While demand for crude plunged during the pandemic, oil prices have trended higher as Russia’s war in Ukraine and fears of spillover effects from Israel’s war with Hamas have raised worries about supply. 

“Hong Kong and China were a bit late to recovery from the reopening from the Covid policy, and it’s been interesting to see how quickly Hong Kong-Taipei has come back to the number-one spot from Q4,” says Patel. “It’s been back for several months, and it’s a big gap with second place.”  

One of the hardest hit carriers during the pandemic was Hong Kong’s Cathay Pacific, which was hobbled by the city’s stringent quarantine requirements for flight crew and the lack of a domestic market to support its operations. It has since seen its fortunes revived, in 2023 reporting its first annual profit after three consecutive years of losses. The airline is now seeking to benefit from efforts to expand business activity in the Greater Bay Area region, encompassing Hong Kong, Shenzhen, Guangzhou, and Macau.  

Still, the number of routes between Hong Kong and across the Pacific Ocean remains below pre-pandemic levels and is unlikely to bounce back for the next two to three years, says Lau. For example, American Airlines is not expected to resume services to Hong Kong from Dallas and Los Angeles, which were canceled during the pandemic. 

Data indicate that Hong Kong International Airport also has more room to grow than some of its regional rivals. As of April, it has recovered 79% of its pre-pandemic seat capacity, notes Patel. That compares to 94% for Singapore Changi and 91% for Seoul Incheon airports.  

Meanwhile, Changi has also benefited from growing investor interest in India and Southeast Asia, becoming the only Asian airport to crack the world’s top three for international travelers as of March 2024, according to OAG data. Incheon was close behind in fourth place. 

Shipped with possibilities  

Experts say there is still plenty of room for airport upgrades in Taiwan that could boost its competitiveness. Expanded airport runways and terminals would help, as would improving flight transfer procedures and baggage connections at each terminal, in addition to greater use of AI to speed up passenger entry and exit clearance. 

Taiwan is due to complete substantial upgrades to airport capacity in the next few years. Taoyuan Airport, which serves the entire northern region, is slated to open a third terminal in 2026, able to accommodate 45 million passengers annually. However, the project has been severely delayed from the originally planned opening date of 2020, and previous plans for a fourth terminal have been halted.  

Taiwan lags behind the many Asian countries that took advantage of the pandemic downtime to overhaul their airport service offerings. Hong Kong, which opened a new runway in 2022, is on track to begin operating a three-runway system this year, allowing it to further boost capacity. 

Whether these industry and government efforts will be enough to help passenger air traffic surpass pre-pandemic levels is yet to be determined. The shift to remote working during the pandemic means that some business travel is not coming back. Many companies are replacing in-person meetings and dramatically scaling back travel, a trend that analysts and airlines say is unlikely to be reversed. One airline industry representative notes that while a company in the past might dispatch three separate teams to visit offices in Shanghai, Shenzhen, and Beijing, the same company might now send a single team to all three. 

UPS is diversifying trade lanes and suppliers in addition to increasing automation to bolster its competitiveness, but the company notes that Taiwan needs to build a resilient supply chain ecosystem to solidify its status as a logistics hub.

But an area with increasing growth possibilities is logistics. In the post-pandemic world, new opportunities for cargo airlines are emerging from the growth of China’s fast fashion behemoths, catering to the insatiable demand from Western teenagers for express deliveries of trending styles. “Temu and Shein are contributing significant yield on overnight cargo packages, especially for Cathay, through the Hong Kong logistics hub,” says OAG’s Patel. 

The air freight industry saw a smaller drop-off in demand during the pandemic than passenger traffic, but the supply chain snarl-ups that choked freight demand and boosted inflation are largely a thing of the past.  

In the new economic environment, competition among cargo lines in Taiwan is heating up. In March, U.S. logistics company UPS announced it would increase the frequency of shipments to Taiwan to four days a week for companies in Europe. UPS says it’s diversifying trade lanes and suppliers, in addition to increasing automation and transparency.  

“We’re helping customers re-imagine their supply chains, including setting up additional manufacturing sites in places like Vietnam and Mexico by leveraging our full suite of multi-model transportation modes and cross-border trade solutions,” a company spokesperson says.  

As for bolstering Taiwan’s competitiveness in logistics, UPS considers building a resilient supply chain ecosystem to be a key component. “Today, a large part of the supply chain is still manual,” the spokesperson says. “By leveraging Taiwan’s already leading position in the high-tech sector, the adoption of advanced technologies such as AI, IoT, and blockchain can also help position Taiwan as a leader in technological innovation for logistics.” 

Industry sources stress that due to “global uncertainties,” customers are now prioritizing delivery reliability and visibility over speed. Another focus area is sustainability. “Customers are becoming more particular about the environmental impact of shipping internationally,” the UPS spokesperson says. To meet these needs, the company is reducing its carbon footprint through deploying alternative fuel and electric vehicles, implementing energy-saving technologies in facilities, and offering sustainable shipping solutions.  

But for Taiwan to cement its place as a transit hub in the Asia Pacific, more government efforts will be needed, since industry upgrades can only do so much, the spokesperson notes.  

“Strong public-private partnerships create a conducive environment for policymaking that can help businesses navigate complex trade regulations and allow global trade to flourish,” says UPS. To succeed with this, “establishing common rules and protocols for region-wide predictability is essential. So is the need to accelerate digitization, ensure the stability of logistics infrastructure, and streamline customs clearance at ports to reduce bottlenecks and enhance the flow of goods.”