Approval for the combination of UNI Airways Corporation, Great China Airlines, Ltd., and Taiwan Airways Corporation
Chinese Taipei
Case:
Approval for the combination of UNI Airways Corporation, Great China Airlines, Ltd., and Taiwan Airways Corporation
Key words:
combination, economic benefits, restrict competition
Reference:
Fair Trade Commission Decision of June 3, 1998 (the 343rd Commission Meeting); Decision (87) Kung Chieh Tzu No. 361
Industry:
Civil Aeronautics Transportation Industry (6131)
Relevant Laws:
Summary:
UNI Airways Corporation (UNI), Great China Airlines Ltd.(GCA), and Taiwan Airways Corporation (TAC) planned to merge. The merger circumstances fit the "merges with another enterprise" as provided in Article 6(1)(i) of the Fair Trade Law. UNI's sales for the preceding fiscal year (1997) totaled NT$3,339,990,000 and GCA's sales for the same fiscal year totaled NT$2,060,660,000. Article 11(1)(iii) provides: "If any of the following circumstances shall exist in respect of a combination of enterprises, an application for the approval thereof shall be filed with the central competent authority: ..." The amount of sales in the preceding fiscal year of an enterprise participating in the combination exceeds the amount publicly announced by the central competent authority (i.e. NT$2 billion)". Accordingly, the three companies submitted an application for approval of their combination.
On April 21, 1998 the Ministry of Transportation and Communications [MOTC] sent the Fair Trade Commission Letter Ref. Chiao Hang 87 Tzu No. 022205 with the information regarding the flight schedules, numbers of available seats, numbers of passengers, and occupancy percentages of the various routes provided by the domestic airlines. According to the said MOTC Letter, there were nine airlines operating 39 routes. The number of flights was 286,170, an increase of 1,421 (0.5%) over the same period of the previous year; the number of available seats was 27,979,835, an increase of 952,070 (3.40%) over the same period of the previous year; the number of passengers was 18,606,508, an increase of 1,042,809 (5.6%); and the occupancy percentage was 66.5%, an increase of 1.52% over the same period of the previous year.
Various airlines' estimated market shares in accordance with the above information:
(1) In terms of market supply, based on the number of available seats, the airlines' respective market shares were: China Airlines 4.77%, Far Eastern 27.46%, UNI 11.21%, Evergreen 3.12%, Formosa 10.71%, TAC 1.12%, Fu Hsing 24.51%, GCA 11.81%, U-Land Airlines 5.28%. UNI's estimated post-merger market share (also after Evergreen's withdrawal from the domestic flight business) was about 27.26%.
(2) In terms of market demand, based on the number of passengers, the airlines' respective market shares were: China Airlines 4.86%, Far Eastern 29.04%, UNI 11.48%, Evergreen 3.26%, Formosa 11.51%, TAC 1.22%, Fu Hsing 21.64%, GCA 10.89%, U-Land Airlines 6.11%. UNI's estimated post-merger market share (also after Evergreen's withdrawal from the domestic flight business) was about 26.85%.
On May 11, 1998 the MOTC sent the Fair Trade Commission Letter Ref. Chiao Hang 87 Tzu No. 024349 stating, "Regarding the matter of the merger of [those comparatively] small and badly operated airlines, because the matter involves the rights, interests and intentions of the various airlines concerned, if the airlines consider it beneficial to their operation and flight safety management, and with the principles that the merger would not violate the related provisions of the FTL, [hinder] free competition in the market and affect the consumers' rights and interests, the MOTC would be pleased with the merger."
Evaluation of the combination in view of the economic benefits and the detriments of restricting competition:
(1) Economic benefits
The aircraft and flight schedules originally managed by the respective airlines could now be planned and managed as an entirety, which could complete the network of routes and provide the passengers with more options and convenience. The airlines could share and make the best use of the existing equipment, resources and facilities at the airport, such as the reservation system, communications equipment, communications network, ticket administration, hardware equipment, information and service counter, maintenance area, coordination and training of flight attendants and pilots, maintenance management, human resources and technology. The service quality and technical energy could be upgraded, and the limited civil aeronautics resources could be put to their full use.
(2) Detriments of restricting competition
Evergreen planned to purchase 51% of UNI's shares and to join the election for multiple seats on UNI's Board of Directors. In addition, Evergreen planned to purchase 40% of TAC's shares. The Commission approved Evergreen's said two purchases in its 202nd and 243rd Commission Meetings and made Permission Decisions with (84) Kung Chieh Tzu No. 275 and (85) Kung Chieh Tzu No. 155, respectively. Now UNI, GCA and TAC decide to merge. UNI would remain, while the other two companies would be extinguished. Only a limited number of routes overlapped as a result of the combination. There was no substantial change to the domestic flight market as a whole.
In conclusion, the combination in this case will bring economic benefits and should not patently restrict the competition on the market. The Fair Trade Commission thus approved the combination in its 343rd Commission Meeting in accordance with Article 12 of the Fair Trade Law.
Summarized by Yang Hsiao-yun
Supervised by Hsin Chih-chung
Appendix:
UNI Airways Corporation' s Uniform Invoice No.: 22958771
Great China Airlines, Ltd.' s Uniform Invoice No.: 11059203
Taiwan Airways Corporation' s Uniform Invoice No.: 11914306