Philippine Airlines has formed a joint venture with Royal Group of Cambodia headed by tycoon Okhna Kith Meng to set up a new airline in Cambodia.
In a disclosure to the Philippine Stock Exchange last week, conglomerate San Miguel Corp. said the joint venture will create Cambodia Airlines, in which PAL will hold 49%. SMC owns a significant stake in and exercises management control of PAL.
SMC president Ramon Ang, who is also PAL chief executive officer, said in a statement that the joint venture is another strategic move in SMC’s continuing diversification into fast-growing industries and economies.
Cambodia Airlines, which intends to initially lease two Airbus A321s for international routes and two Bombadier Dash 8s for domestic flights, is expected to compete head on with national flag carrier Cambodia Angkor Air.
Ang himself recently flew to Cambodia to seal this venture with Kith Meng, whose group controls leading television and telecommunications networks in Cambodia and also has interests in hotels, banking, insurance and education.
After relegating the bulk of its domestic operations to affiliate Air Philippines – now operating as PAL Express, the Philippine flag carrier is banking on the expansion of its international operations to boost operations. However, the Center for Asia Pacific Aviation (CAPA), a research firm, said it has been facing headwinds in the form of stiff competition from other airlines both locally and overseas, especially from low-cost carriers (LCC).
“The group’s new focus entirely on the full-service end of the market could hinder its ability to expand internationally as LCCs have gradually been increasing their share of the Philippine international market,” CAPA said in a report published this week.
Citing data from the Civil Aeronautics Board, CAPA said PAL has already seen its share of the Philippine international passenger market slip from 27.5% in 2010 to 24.9% in 2011 and 23.6% in 2012. This, even though 58% of PAL’s seats were already reserved for international flights, CAPA said.
It added that Cebu Pacific, an LCC owned by the Gokongwei family, was already ahead of PAL in regional destinations. Cebu Pacific has a 28% share of seat capacity in the Philippines-Southeast Asia international market compared to 23% for the PAL Group.
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