A little known airline today announced an order for 17 A350s (12 A35K and five A350-900). Taiwan-based Starlux is an airline startup. The A350s come after an earlier order for 10 A321neos set for delivery in 2019. The airline plans to start service in 2020.
This struck us an an ambitous move. The airline’s PR at the event noted it has $1bn in authorized capital and $20m in paid up capital. Given the cost of the fleet plan alone, this seemed very light and more than a little risky.
The airline is run by K.W. Chang. This is where it becomes interesting. KW is the son of Yung-fa Chang. Chang the elder was the founder of Evergreen Marine, Evergreen Group, and EVA Airways. KW was previously Chair of EVA until 2013. Moreover, KW has been a certified pilot since 2006. He earned his 777-300ER rating in 2010 and became a captain in 2013.
In 2018 KW formed Starlux. The fleet plan is for 50 aircraft by 2030. Given the background of the founder, Starlux does not look like another airline startup. An Airbus official at the Farnbourough show explained the airline is indeed well capitalized despite the numbers provided. The combination of industry experience, family corporate heft and access to capital mean this is a low risk deal for Airbus.
Moreover, located in the fastest growing air travel market almost ensures the airline will attract traffic. So despite the ambitious plans, Starlux is quite likely to succeed and grow.
The way the industry works is really interesting. There is the obvious high risk of the business. But then there are the small things. The relationships and connections that make deals look high risk, but are actually much lower risk. Just like every other business, commercial aviation runs on relationships. One can see it if one chooses to look and pay attention.
Here is an example of how crucial personal relationships are to ensure deals work. Kuwait-based Wataniya also did a deal with Airbus today. But what we want you to watch is the personal connection between Airbus’ sales chief the the airline’s representative, also a son of the founder. There is clearly something of a deep connection between these two people. You can have all the funding and expertise. Absent that “something” between people who like each other and trust each other, deals probably are really risky. But with that “something” in place, a lot of risk becomes manageable.