TAIPEI (REUTERS, THE CHINA POST/ASIA NEWS NETWORK) - Taiwan's Taiwan's third-largest carrier, TransAsia Airways, took aviation authorities and even some of its own employees by surprise with an announcement that it would halt all flights and wind down the company.
The struggling airline with a poor safety record said on Tuesday (Nov 22) its board had approved a move to wind down the company and that all flights would be suspended.
It released a statement on Monday evening apologizing to all 5,000 affected passengers and promising a full refund of fares within 45 days.
The Civil Aeronautics Administration (CAA) said the full-out flight halt on Tuesday was expected to affect 5,113 people.
On Monday morning, rumours that TransAsia would stop all its flights began circulating online, but were flatly denied by the airline.
In the afternoon, CAA stepped in to announce that the airline had alerted them of its plan to halt flights on Tuesday.
CAA Deputy Director-General Fang Chih-wen told reporters TransAsia had notified the administration earlier that day, but had not mentioned the reason and had not cited the airline's recent financial difficulties.
Fang said the TransAsia would face "severe" penalties for the move, which had harmed the rights of passengers.
Taiwan's Civil Aviation Law stipulates that the airline may be slapped with a fine between NT$600,000 (S$26,800) to NT$3 million.
A TransAsia pilot reportedly said company staff had not been informed of the flight halt before the news broke in the Chinese-language media.
After the news went public, the company sent a message calling all staff outside of Taiwan to return to the country.
The pilot, who asked to stay anonymous, said the company constantly told employees the firm had steady revenue growth, and had announced plans to add a route to South Korea and to beef up its aircraft fleet.
Employees were taken aback because they were given an impression that business was going well, remarked the pilot.
Labour insurance records indicate that there are 1,795 people employed by TransAsia, the Ministry of Labor stated.
"This is a very painful choice for the company," chief executive Daniel Liu told a news briefing on Tuesday. "Our communications with investors have not been successful," he said, adding that six to seven options had been discussed including restructuring and raising more capital.
TransAsia has reported losses in each of the previous six quarters up to the end of September, hurt by a downturn in business after two plane crashes in 2014 and 2015.
The carrier also said it would not be able to pay back a convertible bond due later this month due to lack of capital. Details on the bond or how much debt TransAsia has were not immediately available.
Early this year, Taiwan's aviation safety agency urged TransAsia to review its safety protocols, pilot training programme and hiring practices so as to cut "imminent risks".
Those recommendations were among 10 made by the Aviation Safety Council following its investigation into a June 2014 crash of TransAsia's flight GE222 which killed 48 of the 58 passengers and crew.
Less than a year later, another flight crashed into a river shortly after taking off from Taipei's Songshan airport.