CHINA AIRLINES PRESIDENT WEI BECOMES CHAIRMAN

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 004573 SIPDIS DEPT FOR EAP/TC DEPT PASS AIT/W E.O. 12958: DECL: 11/09/2015 TAGS: EAIR ECON TW SUBJECT: CHINA AIRLINES PRESIDENT WEI BECOMES CHAIRMAN REF: A. TAIPEI 4125 ¶B. TAIPEI 4292 ¶C. TAIPEI 4439 Classified By: AIT Director Douglas H. Paal, Reason 1.4 d Summary -------------- ¶1. (C) China Airlines (CAL) President Philip Wei was named the airline's next Chairman on November 11, and press reports indicate he will be replaced as president by Mandarin Airlines President Ringo K.S. Chao. Boeing's office in Taipei told AIT that the firm is pleased by Wei's appointment. The change in leadership at CAL could be part of a larger shuffle that could end with a new Minister at the Ministry of Transportation and Communications (MOTC) after Taiwan's December 3 local elections. End summary. Wei Moves Up, Zhao Moves In -------------- ¶2. (U) On November 11, Taiwan Premier Frank Hsieh announced that CAL President Philip Wei (Hsing-hsiung) would move up to become the airline's new chairman. Wei replaces Chiang Yao-chung, who was confirmed November 14 as the new chairman of China Steel Corporation (CSC). Media reports also indicate that Wei will be replaced as president of CAL by Ringo K.S. Chao (pinyin Zhao Guo- shuai). ¶3. (U) Wei is a true CAL insider. He started with the firm in 1971. Immediately prior to becoming president, Wei was vice president for the airline's Americas Division. He has also headed the Finance Division, the Passenger Sales Division and the Europe regional office. ¶4. (U) Chao is currently the president of Mandarin Airlines, a wholly-owned affiliate of CAL. Prior to becoming president at Mandarin in July 2005, Zhao was president of Taiwan Television Enterprises Ltd. Chao has over 19 years experience in the aviation industry, mostly with EVA Air, where he headed its American and later its European operations. He got his start in the industry with CAL as director of cargo operations at Taipei's Chiang Kai-shek International Airport. The chairman of CAL's employee union has publicly criticized Chao's appointment as politically motivated, pointing out that more qualified candidates exist within CAL. Boeing Is Pleased -------------- ¶5. (C) Boeing Commercial Airplane Taiwan Chief Representative Paul Fang told AIT/T that Boeing was pleased with the announcement that Wei would become chairman at CAL. Although Fang said that Boeing had not yet "figured out where he stands" on Boeing aircraft purchases, it's good to have a known quantity leading CAL and management continuity at the airline. In 2002, Wei had supported the purchase of Airbus planes over Boeing. However, Wei appears to support a recent proposal from Boeing to sell CAL its new 747 Advanced aircraft under special terms as a launch customer (ref C). Fang also added that Boeing had already begun building relations with Chao, who as president of Mandarin attended a Boeing conference for Asia-Pacific airlines held recently in Hawaii. Part of a Larger Shuffle? -------------- ¶6. (C) Chiang's move to CSC and Wei's promotion at CAL might be part of a larger shuffle of senior positions in government and state-owned enterprises that, as Premier Hsieh has publicly intimated, will occur following Taiwan's December 3 local elections. Such a shuffle would at least in part be a product of a series of scandals that have tarnished the image of the DPP. Chiang replaced Lin Wen-yuan at CSC, who was forced to resign October 15 because of a controversial NT$ 44 million stock bonus he received while head of the state- owned firm. When Premier Hsieh announced Chiang's appointment, he also commented to the press that the government was considering personnel changes at the Kaohsiung Rapid Transit Corporation (KRTC),which has been plagued by scandals that emerged after the August 21 riot by Thai laborers working on the project (ref B). Hsieh's linking of personnel issues at the two firms and Chiang's previous experience as head of the Taipei Rapid Transit Department and Taiwan's Public Construction Commission have led some observers to speculate that Chiang may also have a role at KRTC in the future, possibly as a member of the board of directors. Some media reports have even speculated that Chiang will simultaneously serve as chairman of both KRTC and CSC. ¶7. (C) Immediately after the announcement that Chiang would move to CSC, press speculation about his replacement focused on Public Construction Commission Chairman Kuo Yan-chi. However, some AIT sources have told us that Kuo might become the next Minister of Transportation and Communications after the elections. MOTC has run into several difficulties over the past few months. The KRTC scandal touched MOTC directly last week when Vice Minister Chou Li-liang was forced to resign and was kicked out of the ruling Democratic Progressive Part (DPP) because he accepted a "research fee" from KRTC while he was Director of the Kaohsiung Department of Rapid Transit Systems. In addition, the severe disruption of train traffic in northern Taiwan that followed a cargo train derailment on October 24, led to the resignation of the Director of the MOTC's Taiwan Railway Reconstruction Bureau and a public apology from MOTC's current Minister Lin Ling-san. MOTC has also been criticized for poor oversight of the high-speed rail project. The Taiwan High-Speed Rail Corporation announced September 8 that it would push back the railway's inauguration date one year to October 2006. In early October, the China Aviation Development Foundation (CADF),the major shareholder of China Airlines, and the CTCI Foundation, both Taiwan government entities, announced that they would purchase a total of NTD 7.5 billion worth of preferred stock in THSRC to bail out the financially troubled enterprise (ref A). Paal