CAMBODIAN VENTURE LESS LIKELY FOR PHILIPPINE AIRLLINES

Tuesday, July 29, 2014
A report published by the Centre for Aviation suggests that a joint venture between the Royal Group of Cambodia and San Miguel Corporation, part owner of Philippine Airlines, to launch a new carrier under the name of Cambodia Airlines is looking less likely.

Image Source: Brains Communication

Last year, Ramon Ang, President of Philippine Airlines, indicated that the carrier was pursuing talks with the Royal Group of Cambodia to launch Cambodia Airlines, a national carrier that would operate domestic operations with Bombardier Dash 8 aircraft and international flights with Airbus A320 aircraft that were to be supplied by Philippine Airlines.

However, the project has remained on the shelf since it was established in April 2013. Earlier this year, Ang revealed that the closing of the deal had been repeatedly delayed due to political tensions in Cambodia. He added that they were still trying to determine if the project was still viable, suggesting that the proposed deal may not proceed. But in February, the carrier announced in a disclosure at the Philippine Stock Exchange that it intended to proceed with the joint venture and preparations were being made to close the deal.

It was earlier believed that PAL had already transferred some aircraft to the Cambodian venture but none have yet appeared on the Cambodian registry. Meanwhile, Cambodia Angkor Air remains as the only carrier operating scheduled domestic services in Cambodia. Airports in Cambodia have been eager for the launch of a second domestic carrier to stimulate demand.

Image Source: Brains Communication

For now, the Cambodian authorities are counting on a new group of Cambodian charter carriers that are set to take flight. The new charter carriers are all Chinese owned, with the intention of tapping into growth opportunities in the China-Cambodia market. As Cambodia does not have any foreign airline ownership restrictions, it is an ideal market for foreign investors to launch an airline.

It is believed that there are several Cambodian start-up carriers that have been proposed and preparing to launch service, including the three Chinese-owned charter carriers. Most are focused on operating narrow-body aircraft between China and Cambodia in an all-economy configuration. With the prospect of these charter carriers earning first-mover advantage in the Cambodian market, it seems less likely that Cambodia Airlines will materialise as opportunities are scooped up by earlier entrants.

The aviation market continues to grow in Cambodia as turmoil continues in Thailand and Malaysia's appeal has suddenly declined among Chinese tourists. Tourist traffic from China is up 20 percent this year, making Cambodia an exception to other Southeast Asian nations that have seen a decline in tourist traffic from China this year.

Meanwhile, the Royal Group of Cambodia continues to deny that its proposed venture with Philippine Airlines has been shelved. According to Mark Hanna, Chief Financial Officer at the Royal Group, the venture is anything but dead. "It's definitely not abandoned," said Hanna in an interview with The Cambodia Daily. "We're going through the process of getting the Air Operator's Certificate approved." He added that he could not confirm how long it would take for approval to arrive from the Secretariat of Civil Aviation. Hanna went on to say that the Project Director of the joint venture from the Royal Group had left the position and that he would be taking on the role in the coming weeks.

As for Philippine Airlines, it seems less likely that the carrier is in a position to proceed with the Cambodian deal given the internal battle for ownership and control of the national flag carrier. Although the deal with the Royal Group of Cambodia is with San Miguel Corporation, much of that deal hinges on the ability to source aircraft from Philippine Airlines, which ultimately would require management and control of the carrier.

Cambodia Airlines was expected to launch international flights in October 2013 and domestic flights in June 2013, just shortly after the Royal Group of Cambodia and San Miguel Corporation signed the deal in April of last year. Philippine Airlines did not provide any comment on the Cambodian venture.