China Airlines, Taiwan’s oldest carrier, founded in 1959, has postponed plans to retire several older aircraft due to ongoing delays in receiving its Boeing 787-9 jets. The setback may trigger compensation clauses outlined in the purchase contract, according to newly appointed Chairman George Kao.
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The airline is undergoing a significant fleet modernisation effort. In a major deal last year, it split a nearly USD 12 billion long-haul aircraft order between US-based Boeing and European manufacturer Airbus. As part of its strategy, China Airlines placed orders for 24 Boeing 787s, comprising 18 787-9s and six 787-10s, intended for regional and select long-haul operations.
However, Kao confirmed that the timeline for phasing out ageing Airbus A330S and Boeing 737-800s is being affected by delivery delays, particularly of the 787-9 model. The plan to replace them with 787-9s and A321neos has been disrupted, prompting lease extensions on aircraft originally scheduled for retirement.
"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," Kao told Reuters during an interview at China Airlines’ headquarters in Taoyuan, near Taiwan’s primary international airport.
While Boeing has not provided China Airlines with a precise delivery schedule, the US planemaker has indicated that 787-9 deliveries will "basically" commence by late 2025. Kao, who began his career as a flight attendant and later trained as a pilot, noted that the matter of compensation is governed by the purchase agreement.
"This is written into the contract," Kao said. "For example, if it's in the supply chain, the responsibility is Boeing's, and Boeing has to provide some compensation. But if it's not, then there is no compensation. It's all recorded in the contract."
Boeing has not issued a public response regarding the delay or potential compensation.
Adding to Boeing’s delivery challenges is the recent imposition of a 25 per cent tariff on aluminium and steel imports, key materials in aircraft manufacturing. While Boeing's 787 is made primarily of composites (52 per cent), about 20 per cent of the structure includes aluminium and 10 per cent steel. Industry analysts suggest the new tariffs could increase Boeing’s material costs, indirectly impacting delivery timelines and pricing. Aviation expert Scott Hamilton emphasised that "any tariffs that affect Boeing’s costs in its present financial condition do not help Boeing’s financial recovery."
Although Aercap CEO Aengus Kelly warned that such tariffs could drive up the price of a Boeing 787 by up to USD 40 million, Hamilton clarified that the tariffs apply only to raw materials, not the entire aircraft. The exact cost impact will depend on Boeing’s supply chain, with Canada being a leading exporter of both aluminium and steel to the US between 2015 and 2025. If cost hikes persist, they could eventually affect downstream pricing, including airfares.
China Airlines is not alone in grappling with these disruptions. Airlines globally are facing aircraft delivery setbacks. IATA Director General Willie Walsh recently described delivery forecast issues for the remainder of this decade as "off-the-chart unacceptable."
Despite the challenges, Kao remains optimistic about future growth. He highlighted that newly ordered, fuel-efficient aircraft like the Boeing 777-9 and Airbus A350-1000 will allow for expanded capacity on transcontinental routes such as New York and London. He also pointed to the new third terminal at Taoyuan Airport, partially opening later this year, as a key enhancement to the passenger experience.
Plans are also underway to bolster the fleet of subsidiary Mandarin Airlines. Currently operating ATR-72 turboprops on domestic routes, Mandarin is being repositioned to serve regional routes out of southern and central Taiwan with new jets.
"I can talk about this with aircraft lessors," Kao said, though he declined to name specific aircraft types. "We have this plan to let Mandarin Airlines grow up."
The competitive landscape in Taiwan includes long-standing rival EVA Air and the fast-growing Starlux Airlines, which recently ordered an additional 10 Airbus A350S. Kao expressed confidence that the market can sustain three full-service carriers, thanks largely to Taiwan’s role as a transit hub.
He noted that while Taiwan's local market is limited, the island’s strategic location makes it ideal for connecting trans-Pacific and intra-Asian travel. According to Kao, Taoyuan Airport has a competitive edge compared to other regional hubs.
"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 in transit. Because Taiwan's location, connecting the Pacific to all of Asia, is very convenient."
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