Philippine Airlines’ Parent Invests in Cambodian Start-up Venture

San Miguel Corporation, the leading shareholder in Asian national carrier Philippine Airlines has entered into a joint venture with Cambodian investment and development company, Royal Group to establish a new full-service carrier in the fast-expanding country. The start-up, Cambodia Airlines, will act as a second national entity and will offer a network encompassing a mix of domestic and international routes which will be flown with a small fleet of Airbus A321s and Bombardier Dash 8 turboprops. It plans to launch flights in October 2013 initially between Phnom Penh, Siem Reap and Sihanoukville.

Under the terms of the agreement, Royal Group will hold a 51 per cent controlling share in the joint venture, while San Miguel Corporation will hold the remaining 49 per cent stake. At the formal signing of the joint venture in Phnom Penh this week which was also attended by Cambodia’s Deputy Prime Minister and Cabinet Minister Sok An, the deal was revealed as the highest value venture between the Philippines and Cambodia; however, details about investment levels were not disclosed.

The start-up is looking to capitalise on the rapidly growing economy in Cambodia, a market that Royal Group has significant expertise. The company has been working to bring quality investment to the country and providing investors with the platform to run successful and profitable operations. The conglomerate has interests in a wide range of industries including telecommunication, media, banking, insurance, resorts, education, property, trading and agriculture.

Cambodia is a market in growth with a booming economy, second in Asia only to China in double-digit GDP growth. It enjoys a stable political situation, together with the most welcoming and liberal business, investment and trade environment in the ASEAN region. New affluence is spreading throughout the country and urbanisation, growing literacy rates, and the return of many Cambodians from overseas are reshaping the economic landscape. The country has a predominantly young population and an emerging middle class providing a manpower and consumer pool that is revitalising the business environment for the long term.

Cambodia has a population of more than 13 million people, half of whom are no older than 25 years. Adult literacy has consistently risen to 75 per cent since 2000 while the urban population has grown at a rate of over five per cent annually since 1990. Tourism growth is impressive and provides the biggest contribution to growth in the services sector with the Angkor complex alone drawing tourists at an annual growth rate of 30 per cent meaning tourism is replacing agriculture as the backbone of the national economy.

In the table below we highlight the growth in international capacity to/from Cambodia over the past five years. In the last five years air capacity from Cambodia has grown by 24.3 per cent as O&D demand has increased by 37.0 per cent. The largest carrier in the country is Cambodia Angkor Air, a joint venture between the Cambodian government and Vietnam Airlines, but it is the latter that is the largest international carrier in the country with a 20.4 per cent share of the seat capacity from Cambodia in 2012. Other notable carriers providing international flights from Cambodia are Bangkok Airways (14.4 per cent capacity share in 2012), AirAsia (7.5 per cent share) and then Cambodia Angkor Air (7.4 per cent share).