Phnom Penh International Airport would soon host flights by a new domestic carrier called Cambodia Air if talks between Philippine Airlines and a local property tycoon finally reach fruition. (Photo: Gabriele Stoia)
December 9, 2013, 12:05 PM
Talks between Cambodian telecommunications, banking and property tycoon Kith Meng and Philippine Airlines (PAL) over a new Cambodian flag carrier called Cambodia Air have intensified following their failure to realize plans to close on a deal on October 15.
On April 25, PAL’s board agreed to acquire a 49-percent stake in Cambodia Air, now solely owned by Meng’s company, Inter Logistics (ILC).
The failure to finalize the joint venture on October 15 followed an earlier extension from July 15, when the parties held high hopes that flights would start in the fourth quarter of this year. According to a statement on the Philippine Stock Exchange, PALconfirmed that the Cambodia national elections delayed the process. Cambodia’s Secretariat of State for Civil Aviation reports that it hasn’t yet issued Cambodia Airlines its air operator certificate.
PAL plans to invest $10 million in Cambodia Air. The first $1 million would come due on closing, and the balance upon the call of the airline’s board of directors. Under the terms of the merger agreement, PAL will own 961 shares (49 percent), while ILC will own 1,000 shares (51 percent).
Among the closing conditions, PAL has agreed to equip the carrier with 16 to 22 aircraft worth an estimated $1.5 billion over a two-year period. PAL reports that it will initially deploy Bombardier Dash 8s and Airbus A321s. The new carrier would gain traffic rights and slots under bilateral agreements between Cambodia and other countries. Finally,PAL plans to address its own aging fleet with plans to invest $10 billion in new aircraft over a five-year period.
On October 26 and 27 Cambodia Air hosted a career fair in the capital city Phnom Penh in an effort to recruit captains, first officers and cabin crew as well as general airport staff.
PAL president Ramon Ang predicts that a code-share deal with Cambodia Air would boost his airline’s revenue by $300 million to $400 million. PAL has struggled financially for years and faces fierce competition from low-cost carriers, including Cebu Airlines, which controls 28 percent of seating capacity in the Philippine international market compared with PAL’s 23 percent.
PAL has managed to trim its losses since last year by 4.8 percent, according to its financial statement for the period ending on September 30 posted on the Philippine Stock Exchange. It reported a 5.9-percent decline in total revenue due to a decrease in passenger volume, while operating costs essentially stood steady.
If the launch succeeds, Cambodia Air will compete against the country’s sole national carrier, majority government-owned Cambodian Angkor Air. Cambodia Air will also face competition from Asian flag carriers and regional low-cost carriers, including Bangkok Airways, AirAsia, Asiana, China Airlines and Korean Air.
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