US embassy cable - 05TAIPEI4573

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