The Philippine Airlines (PAL) has shelved its planned affiliate in Cambodia nine months after signing a joint venture agreement with a local partner to launch Cambodia Airlines.
The Center for Aviation (CAPA) said that Cambodia Airlines was intending to compete in Cambodia’s tiny domestic market, which is only served by Cambodia Angkor Air, the country’s fast-growing international market starting with a new link to PAL’s hub in Manila.
“But its launch, originally planned for mid-2013, was repeatedly delayed as the PAL Group and parent San Miguel re-examined the viability of the project,” said CAPA.
CAPA noted that the deferral and likely abandonment of the project makes sense as establishing a new carrier in Cambodia would be a risky proposition.
“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.”
Cambodia Airlines was first unveiled in April 2013 as a joint venture between PAL and leading Cambodian investment company Royal Group of Cambodia.
After signing the joint venture agreement in April, 2013, the two shareholders planned to launch Cambodia Airlines in the domestic market as early as June 2013 with a fleet of two Bombardier Dash 8s sourced from the PAL Group.
International services were expected to start in October 2013 with an initial fleet of two Airbus A321s, which were also to be sourced from PAL’s existing fleet.
While the project was subsequently delayed, the PAL Group continued to maintain it was committed to launching the airline.
In August, 2013, a revised closing date for the transaction of October, 2013 suggested the airline could still potentially launch by the end of 2013. But the Oct-2013 deadline was missed, making it impossible for Cambodia Airlines to launch for Cambodia’s peak season, which is in the northern hemisphere winter months.
PAL continued to express optimism in fourth quarter of 2013 that the Cambodian carrier would still be launched. However, PAL acknowledged in late January, 2014 that the Cambodian project was deferred while the group studies the viability of the project.
CAPA also noted that PAL has expressed concern 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, 2014.
“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.
CAPA believes that political instability could create a blip but – as the tourism industry in neighboring Thailand has proven again that the market will likely recover.
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