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Logo of Phnom Penh Post newspaper Phnom Penh Post - One airline is enough: report

An aviation worker guides a plane at Phnom Penh International Airport last year
An aviation worker guides a plane at Phnom Penh International Airport last year. Vireak Mai

One airline is enough: report

Cambodia's aviation sector doesn’t need a second domestic carrier, according to a new report from the Australia-based Centre for Aviation (CAPA).

The report, published yesterday, is the latest instalment in a two-part analysis of the country’s aviation industry, and focuses on Cambodia Airlines, the Royal Group and Philippine Airlines (PAL) joint venture that, after several delays, has yet to materialise.

While the first part of the analysis, released on Tuesday, commends the Kingdom’s aviation sector for being one of the fastest growing in Asia, inbound and outbound traffic, rather than domestic travel, drove the increase. Yesterday’s instalment cites Cambodia’s low average income level and unchanged domestic passenger figures as evidence that a new airline is not necessary.

The country’s sole full-service national carrier, Cambodia Angkor Air (CAA), has expanded international capacity by more than 70 per cent in the past year. But domestic passenger numbers in the industry have not varied greatly since 2007, when there were four now-defunct Cambodian carriers to choose from.

“While there are opportunities for more new services, there is not necessarily a need for a new Cambodian carrier,” the CAPA report says.

Cambodia Airlines was initially slated to launch mid-2013 with a $1 million investment from PAL, the first chunk of a $10 million overall commitment, according to a statement on the Philippine Stock Exchange in May of 2013.

After missing its initial June closing date and a second closing date on October 15, the deal remains up in the air. Business World last week quoted PAL’s CEO, Ramon Ang, as saying that the firm was “reviewing when to start and whether the project is still viable”.

Ang said Cambodia’s current “situation” was the reason, alluding to an ongoing political stand-off over elections in July, garment industry protests and violent government-backed crackdowns on free assembly.

The new domestic carrier hoped to compete with Cambodia Angkor Air’s traditional routes to Siem Reap and Sihanoukville, while also launching services to Battamabang and Ratanakkiri provinces.

The new report says PAL’s deferral and likely abandonment of the Cambodia Airlines deal are reasonable options due to the risk involved in launching an airline when there is limited demand for domestic travel.

The chief representative and chief analyst at CAPA, Brendan Sobie, rejected suggestions that Cambodia’s recent garment industry protests and continued political unrest could significantly affect the aviation industry’s attractiveness.

“Political instability could create a blip, but as the tourism industry in neighbouring Thailand has proven again and again, the market will likely recover. So far, tourists have shown no signs of cancelling trips to Cambodia, despite the recent protests.”

During the first three weeks of the year, the same period that garment worker demonstrations violently escalated and a ban on public assembly was put in place and aggressively enforced, tourist arrivals at Siem Reap and Phnom Penh airports actually increased 25 per cent compared to the same period in 2013, Cambodia Airports data shows.

David Pearson, group controller at Royal Group, said he was unsure of the context of the quotes from the Philippines Airlines CEO. From the viewpoint of Royal Group, however, the project was still on track and very close to being finalised, Pearson said.

“We are in regular discussion with PAL on the project,” he said, but refused to put a monetary figure on the joint venture. “Given the information in the reports, it would be foolish of me to give a concrete date and discussions need to be had with PAL to find out what the direction is.”

Pearson also reiterated the company’s confidence in launching a new full-service domestic carrier, despite Cambodia Angkor Air’s monopoly on the market.

“Cambodia Angkor Air’s offering is good, but competition is healthy and certainly another locally based domestic and international carrier would be good for the Cambodian aviation market.”

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vandavid's picture

The Filipinos should have first and foremost done proper due diligence and the commercial viability of such J/V in setting up another local airline in Cambodia in the first place. Now it's rather a bit late to find ways to exit after so much highly publicized media coverage of their planned J/V with Royal Group

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