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Cambodia Airlines to get $20m

Cambodia Airlines to get $20m

Cambodia Airlines is expected to receive an initial investment of about $20 million, a sum an airline expert says contradicts the new flag carrier’s “aggressive” expansion plans, which would probably come with a higher price tag.

In a disclosure two days ago to the Philippine Stock Exchange, Philippine Airlines said it would pump in $10 million for a 49 per cent stake in Cambodia Airlines, with the first $1 million expected to be paid by July 15 this year.

The other 51 per cent – worth 1,000 shares – would be owned by Inter Logistics, a company that is part of local conglomerate Royal Group, said the report. This means Cambodia Airlines would, in total, expect an initial paid-up capital of $20.4 million.

Comparatively, carrier Cambodia Angkor Air received a $100 million investment when it launched in 2009.

Cambodia Airline’s investment figure “cannot support” its “aggressive” expansion strategy, especially since airlines usually make heavier losses in the early years, said Thomas Jaeger, managing director of ch-aviation, a website that analyses aviation issues.

While it is possible for airlines to launch with less than $20 million, he said, “they usually only have three or four aircraft and employ a lower-risk strategy [such as flying to regional destinations]”. But Cambodia Airlines has much bigger plans, he added.

According to another disclosure, Philippine Airlines plans to deploy up to 22 planes to Cambodia Airlines worth $1.5 billion, with eight to 10 planes delivered in the new carrier’s first year of operations. A Cambodia Airlines representative had also previously announced plans to serve long-haul destinations next year.

However, Jaeger suggested that either partner could still provide additional support to the joint venture airline beyond their share in the paid-up capital. For example, Philippine Airlines can help implement the IT systems of Cambodia Airlines.

As for Cambodia Airlines’s fleet, the planes could be deployed from Philippine Airlines’ own outstanding orders, reducing the need for new acquisitions, he said. Philippine Airlines expects to receive 44 Airbus A321 and 20 A330s over the next three years. Some of its flights would also be shared with Cambodia Airlines, the Post earlier reported.

But Jaeger believes that Cambodia Airlines’s planned fleet size may be too large for market demand. Cambodia Airlines could not be reached for comment yesterday.

In an aviation report quoted earlier by the Post, its main competitor, Cambodia Angkor Air, scheduled domestic flight increases from July this year, to prevent the new airline from making up lost time.

But with Cambodia Airlines muscling in with big plans, Jaeger said, its strategy seems to be “to kick Cambodia Angkor Air out and get market share as soon as possible, before consolidating after that”.

“If this happens, it would be good for Cambodia Airlines – but it would cost a lot.”

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