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Royal Group’s proposed airline still grounded

A Philippine Airlines airplane sits on the tarmac at Terminal 2 of Ninoy Aquino International Airport
A Philippine Airlines airplane sits on the tarmac at Terminal 2 of Ninoy Aquino International Airport (NAIA) in Manila. Bloomberg

Royal Group’s proposed airline still grounded

Cambodia Airlines, Royal Group’s airline start-up venture with partner Philippine Airlines (PAL), has again been thrown into doubt with Cambodia’s aviation authority yesterday saying neither party had yet applied for the necessary certificate and questioning whether the $10 million deal is still in play.

Keo Sivorn, director general at the State Secretariat for Civil Aviation (SSCA) said neither firm had initiated the application process for an Airline Operations Certificate (AOC) – Cambodia’s foremost qualification for airline operations – for the proposed joint venture.

Sivorn added that the future of the project was in question altogether.

“Cambodia Airlines’ AOC is not in the process because we do not know if the two partners even still want to continue or not,” Sivorn said. “It depends on them and we are still waiting.”

Cambodia Airlines in 2012 initially aimed to become the country’s second full-service carrier after Cambodia Angkor Air (CAA), which currently holds a monopoly of the market.

Royal Group and PAL’s joint venture, which promised both domestic and international flights from Cambodia’s main international airports, was slated to launch in mid-2013 with an initial $1 million investment from PAL. But after missing closing dates in both June and October last year, the venture has yet to get off the ground.

Mark Hanna, chief financial officer of RGC, denied that there was heightened uncertainty over the PAL deal saying that the two companies were in fact in the process of applying for an AOC from the SSCA.

“The project is not being abandoned. We are working on getting an AOC with Philippine Airlines, it is just up to the Civil Aviation Authority of Cambodia,” Hanna told the Post, declining to detail where in the application process they were or how long the process might take. “When we get the AOC, we will move on the project,” he added.

The renewed uncertainty around the Cambodia Airlines’ deal comes as more foreign-owned, especially Chinese airlines, continue to penetrate Cambodia’s ripe tourism market.

In a report published on July 24, Brendan Sobie, chief analyst and Singapore representative at the Australian-based Centre for Aviation (CAPA), stated that Chinese-backed Bassaka Air is now poised to become the next full-service international carrier based in Cambodia, joining CAA.

Bassaka Air reportedly has two Airbus A320 aircraft sitting idly at Phnom Penh’s International Airport ready to commence regular flights to and from China as early as September this year, pending the SSCA’s regulatory approval.

“The start-up activity in Cambodia is impressive and it’s all about Cambodia-China,” Sobie said.

“A slight delay is possible, but Bassaka should be operating multiple routes to mainland China by the start of the peak season.”

Aggressive Chinese investment in Cambodia’s aviation sector comes as little surprise to Sobie, with the number of Chinese tourists visiting Cambodia during the first five months of the year reaching more than 240,000, up 19 per cent from 202,000 during the same five-month period in 2013.

The prospect of the Royal Group and PAL deal being abandoned and instead a rise of Chinese investment in Cambodia’s aviation sector has been reluctantly welcomed by Ang kim Eang, president of the Cambodia Association of Travel Agents (CATA).

“If the two businesses [RGC and PAL] cannot reach an agreement, what can we do? We need more airlines to respond to the growing tourism sector here,” Eang told the Post.

“We do not enjoy a free market here in Cambodia with just one flag carrier. If there are competitors, two good things will happen; first airfares will potentially drop and the second is that services will improve.”

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