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Boeing ( BA ) may provide compensation payments for 787 delays,

airline

chairman says

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China Airlines in middle of multi-billion dollar fleet

renewal

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Subsidiary Mandarin Airlines to get new jet aircraft too

By Ben Blanchard

TAOYUAN, Taiwan, June 24 (Reuters) - Taiwan's China

Airlines is postponing the retirement of some of its

older aircraft due to delays in getting Boeing 787-9 jets

that may result in compensation payments from the planemaker,

the carrier's newly appointed chairman said.

Taiwan's oldest airline, established in 1959, is in the

midst of a fleet renewal, last year splitting an order for new

long-haul aircraft worth almost $12 billion at list prices

between Boeing ( BA ) and European rival Airbus.

China Airlines has also ordered 24 Boeing 787s for regional

and some longer-distance routes, including 18 787-9s and six of

the stretched 787-10 variant.

But Chairman George Kao said China Airlines' fleet renewal

plan to replace ageing Airbus A330s and Boeing 737-800s with

787-9s and A321neos was being hit by delays in getting new

aircraft delivered, especially the 787-9s.

"We are at present being greatly impacted. Some aircraft

that were scheduled to be phased out, or handed back at the end

of their lease, as some are leased, will remain and have their

leases extended," he told Reuters in an interview at the

airline's headquarters in Taoyuan, home to Taiwan's main

international airport.

Boeing ( BA ) has not given China Airlines an exact timeframe for

the 787-9 delays, though it has said deliveries will "basically"

start from the end of 2025, added Kao, a pilot by training who

started out as a flight attendant and became chairman in March.

"This is written into the contract," he said, when asked

whether China Airlines would seek compensation.

"For example, if it's in the supply chain, the

responsibility is Boeing's ( BA ), and Boeing ( BA ) has to provide some

compensation. But if it's not, then there is no compensation.

It's all recorded in the contract."

Boeing ( BA ) did not respond to a request for comment.

Other airlines are facing similar issues.

International Air Transport Association (IATA) Director

General Willie Walsh, whose group represents airlines globally,

this month called predictions of aircraft delivery delays

throughout this decade "off-the-chart unacceptable".

Still, Kao was upbeat about expansion plans, pointing to the

more fuel-efficient 777-9s and A350-1000s ordered last year that

will enable more capacity to be added to routes like New York

and London, and a new third terminal at Taoyuan airport, the

first section of which is expected to open later this year.

He signalled further aircraft additions ahead for subsidiary

Mandarin Airlines, which flies almost exclusively domestic

routes with ATR-72 turboprops and is getting a revamp to focus

on regional routes from southern and central Taiwan with new jet

aircraft.

"I can talk about this with aircraft lessors," he said,

without disclosing the jet models it could add. "We have this

plan, to let Mandarin Airlines grow up."

China Airlines faces competition at home not only from

long-established rival EVA Air but also rapidly

growing Starlux Airlines, which last week placed an

order for 10 more A350s.

Kao said while the Taiwan market itself was small, transit

traffic, which all three airlines are focusing on, meant

supporting three full-service airlines was not an issue.

Seoul's Incheon airport is too big, meaning passengers can

get lost, Tokyo's landing fees are too expensive and Hong Kong

has "political issues", whereas Taoyuan airport's new terminal

will greatly improve the travel experience, he said.

"Our passengers are not all Taiwanese; many are transit.

Because Taiwan's location, connecting the Pacific to all of

Asia, is really very convenient."