PHNOM PENH, 12 February 2014: The Centre for Asia-Pacific Aviation says Philippines Airlines should abandon its joint venture with local conglomerate Royal Group to create Cambodia’s second national airline.
The centre claimed forming another airline in the country would be “risky.”
According to the CAPA report, the deferral and likely abandonment of the project makes sense as establishing a new carrier in Cambodia would be a risky proposition.
“PAL’s decision to shelve and question the viability of its Cambodian joint venture project is theright move ,” the report stated.
“The group should focus on the Philippine market, where it has opportunities, but challenges including stiff competition from low-cost carrier. It should avoid the temptation of revisiting the Cambodian project or pursuing any other potential overseas joint venture.”
The report cited: “The Cambodian market is growing rapidly, but is unlikely to support a second full-service carrier. For PAL the group has a lot on its plate and does not need the distraction of an overseas venture.”
“The opportunities to use the new venture, Cambodia Airlines, to feed PAL’s long-haul network would have been rather limited as the Philippines is not well geographically positioned to serve Cambodia’s traditional source market of Europe.”
The report added Cambodia Airlines’ planned 2013 launch never materialised.
Cambodia Airlines was first unveiled in April 2013 as a joint venture between PAL, which has been controlled by Philippine conglomerate San Miguel since 2012, and leading Cambodian investment company Royal Group of Cambodia.
After signing the joint venture agreement at the beginning of April, last year, the two shareholders stated they intended to launch Cambodia Airlines in the domestic market as early as June 2013 while international services were expected to start in October.
While the project was subsequently delayed, the PAL Group continued to maintain it was committed to launching the airline.
In August, last year, a revised closing date for the transaction of October 2013 was provided, which suggested the airline could still potentially launch by the end of 2013. But the October 2013 deadline was missed, making it impossible for Cambodia Airlines to launch services to capture peak season business.
PAL and San Miguel president Ramon Ang continued to express optimism in the fourth quarter 2013 that the Cambodian carrier would still be launched. But in a U turn, Mr Ang acknowledged to Philippine media in late January that the Cambodian project was deferred while the group studies the viability of the project.
In addition, the report said potential political instability was a factor in deferring Cambodia Airlines project.
PAL expressed concerned about the threat of political instability. Cambodia has been stable for several years, providing a foundation for rapid economic growth, but saw a spate of at times violent protests in January. The opposition could be plotting a bigger response as it continues to protest low garment worker wages and the July 2013 elections, which were won by the ruling party.
However the long-term outlook for the Cambodian aviation market remains bright. Cambodia has emerged as one of Asia’s most popular and fastest growing tourist destinations.
Nevertheless, the report said: “While there are opportunities for more new services, there is not necessarily a need for a new Cambodian carrier. The growth in demand can easily be met by Cambodia’s existing and foreign carriers.”
As Cambodians account for less than 20% of total airport passenger traffic in Cambodia, foreign carriers are particularly well placed to respond to the surging inbound demand.
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