Direct Regular Flights: Policy Effects on Competition in the Taipei-Hong Kong Market

In the past few years, there have been significant policy changes involving Taiwan and Mainland China. Since Aug 31, 2009, regular direct flights between Taiwan and China resumed. The paper looks at whether this policy change has an impact on the air passenger service market between Taipei and Hong Kong, a major layover for people traveling from Taiwan to China prior to the policy change. At the industry level, the policy change has led to a decrease in the number of airlines, flights, passengers, total seats available, and the passenger load factor. For individual airlines, results are a mixed. A decrease in the number of flights is estimated for China Airlines. China Airlines and Eva Airways has experienced a decrease in the number of passengers. Cathay Pacific’s increased number of passengers is unexpected. China Airlines has provided less number of total seats. Cathay Pacific has experienced increased passenger load factor.