Makalot to expand its business in Vietnam

Makalot Industrial Co (TPE: 1477), a Taiwanese diversified garment manufacturer for brand names and major clothing retailers, announced on Dec. 16 a three-year plan of an investment between US$10 million and US$15 million per year in Vietnam, where the company is planning to build new textile plants.

Frank Chou (周理平), chairman for Makalot, said during an investors’ conference that the company has its eye on the potential zero-tariff benefits brought by Vietnam’s free-trade talks with the EU and its involvement in the proposed Trans-Pacific Partnership.

“As of November, Vietnam has surpassed Indonesia to become Makalot’s largest production area, accounting for 32% of the company’s total capacity,” he said.

Indonesia accounted for 30% of the firm’s total capacity, while Cambodia accounted for 24% and China and The Philippines accounted for 6% each, Chou said.

Between January and last month, Makalot posted a revenue of US$615.4 million, up 15.9% from a year earlier. With full-year sales expected to top US$666 million, Chou said that its employees can be expecting an annual bonus of more than 12 months.

V Air to launch eight to 10 new routes next year

V Air, TransAsia Airways Group’s budget carrier, said that another eight to 10 new flights will be launched in 2015, while it launched its maiden flight from Taipei to Bangkok on Dec. 16.

In addition, V Air is also planning to launch a chartered flight service to Siem Reap in Cambodia since Jan. 6, and begin to operate its second regular route to Thailand on Jan. 7, which will fly from Taipei to Chiang Mai.

“Aside from our service network, we also plan to expand our fleet. We aim to have five aircraft covering eight to 10 routes by the end of next year,” said Vincent Lin (林明昇), chairman for V Air.

He said that flights to Northeast Asia, such as major cities in Japan and South Korea, are V Air’s next potential market, with the company seeking to launch flights to destinations in that area in the first half of 2015.

Lin said that the expansion plan is aimed at helping V Air reach economies of scale and allow the airline to break even and start generating profit in 2016.

Tencent to stream Sony Music artists in China

Tencent (HKG: 0700) signed an agreement with Sony Music Entertainment on Dec. 16 to exclusively manage online distribution of Sony’s music library in China.

The alliance came on the heels of Tencent’s announcing other distribution deals with Warner Music Group and HBO, as Tencent sought to build up its entertainment portfolio to compete with online rivals Alibaba (NYSE: BABA) and Baidu (NASDAQ: BIDU) in using entertainment as a hook to attract more than 600 million internet users in China.

Honda to recall more than half million vehicles in China due to air bag malfunction

Honda (TYO: 7267) said on Dec. 16 that it will recall 569,769 cars it sold in China due to potentially defective air bags that were made by Japan’s Takata Corp (TYO: 7312).

China’s General Administration of Quality Supervision, Inspection and Quarantine said in a statement that the damaged airbags could cause “shell fragments to fly” that may hurt passengers.

Almost 20 million vehicles have been recalled globally since 2008 due to defective Takata inflators, which have been linked to five deaths.

A Beijing-based Honda spokesman said that there had been no injuries or malfunctions reported in China so far.

Taiwan’s Academia Sinica raises GDP growth forecast to 3.42%

The Academia Sinica raised its GDP growth forecast for this year to 3.42% on Dec. 16, from the 3.31% estimated in July.

“The pace might decelerate to 3.38% next year, as China’s economic slowdown could dampen external demand and government spending is set to contract further from this year,” said Ray Chou (周雨田), a Academia Sinica research fellow.

China, however, may not see aggressive economic growth in the future because of an increasingly large base and continued economic reform, although it accounts for approximately 40% of Taiwan’s exports, Chou said.

“The trend, together with disappointing showings in Europe and Japan, is unfavorable for Taiwan’s export-reliant economy,” Chou said.

Uncertainty emerged last quarter and has become more evident this quarter, with GDP growth likely ebbing to 2.83%, weaker than the 3.64% expansion in the first three quarters of the year, the research institute’s semiannual report said.

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As the China Airlines (CAL)(TPE: 2610) recently introduced its new fleet of Boeing 777-300ER jetliners to its Pacific services, the aircraft itself and the twist of decision making on plane purchases between the airlines and its rival EVA Airways (EVA)(TPE: 2618) became highlighted.

CAL possesses 10 Boeing 777-300ERs, while four of them leased from GE Capital Aviation Services and another six were purchased as brand new aircraft from Boeing Commercial Airplanes (NYSE: BA). CAL plans to commission these new 777s for flights over the Pacific Ocean and destinations between Taipei and European cities.

“This is an important milestone for us because it will increase our business and elevate our flight services,” said Sun Hung-hsiang (孫洪祥), chairman for CAL.

CAL’s new 777-300ER has 40 seats in the business cabin, 62 premium economic seats and 256 economic seats with the new “family couch” design. A total of 358 passengers can be hosted at the same time onboard the new jetliner.

The family couch targeted towards families on the go. (Photo: China Airlines)

The “family couch” occupies a total of 30 economic seats within 10 rows. These seats can be adjusted to be flat sofa beds.

Sun said that the new 777-300ERs were planed to be commissioned for flights between Taipei and Los Angeles since Dec. 1, joined by Taipei-New York flights next February, Taipei-San Francisco next September and Taipei-Frankfurt next November.

The Boeing 777 series are regarded as one of the successful two-engine aircraft for long-distance flights. To compare with its competitors, including MD-11, A330-300, A340-300 and A350, the maximum weight for a 777 is 11% less, the total amount of CO2 that would be generated per flight is 22% less, while a 777 eats at least 20% less of the fuel than a 747.

Catching up to the competition

Local rival EVA Airways (TPE: 2618) also has the same plane in its fleet. EVA’s first four 777-300ERs were purchased in 2000 and the airline possesses a total of 18 of them today. Meanwhile, CAL decided to purchase 747-400s in 2003 to replace older 747s they bought between 1991 and 1994, while the airlines also bought a number of A340-300s and A330-300s. Although EVA relied on relatively more economic aircraft for business, the airlines has also suffered from the massive increases in the price of oil over a short period of time and lost $61.2 million in 2007,  as the average price for gas increased 34% between 2007 and 2008. In August 2008, EVA made public its latest financial report which said that the company lost more than $1.6 billion during the second quarter in that year.

China Airlines’ new business class. (Photo: China Airlines)

During the same period, CAL reportedly to lose approximately US$7 million during the fourth quarter of 2008, while most of the cost came from expenses on fuel and related maintenance projects for the fleet, which also became an important trigger for CAL to re-consider its policy for purchasing its next generation aircraft.

In addition to decreasing regular flights and increasing ticket prices, EVA also dismissed half of its staff members in Los Angeles in 2008, while newly-recruited cabin crews were told to postpone their boarding date.

Choices for the sky

A former CAL technician who wished to remain anonymous said that CAL decided to purchase four-engine aircraft for long-distance flights instead of the two-engine 777s because the decision makers were not confident on the performances of two-engine models for long-distance flights such as the Pacific, but the reason was never confirmed.

The former CAL technician said that in addition to 777s, there is still a great chance for CAL to continue its procurement on Boeing’s next generation 747-8I.

“It is a tough choice for CAL between 777s and 747s because to compare with them, 747 is a gas guzzler but hosts more passengers onboard, while 777 is a lot newer, gas efficient, and easy to maintain,” he said.

In the long-run, he said, CAL is planning to replace 747s with 777s while A350s will replace A340s. A330s and Boeing 737s will remain in services for those flights that are shorter than six hours.

The latest statistics showed that CAL hosted an average amount of 15 million passengers a year, which is ranked 18^th among global competitors. Approximately 29.59% of its annual income came from its cargo business, while the total volume of its cargo is ranked 5^th among other competitors.

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