New Airline Grounded by Big Losses

Just six months after its inaugural flight, First Cambodia Airlines has suspended operations amid large financial losses, a senior company official said Monday.

The company—a joint-venture partially owned by Okhna Sour Pheng, owner of the Hong Kong Center in Phnom Penh, and Prime Minister Hun Sen’s daughter Hun Mana—has already lost more than $1 million since its launch in February, said Chhai Han Chhor, assistant manager of the Hong Kong Center. He did not say whether the loss was expected.

Though the airline expects to resume its flights soon, no date has been set, he said.

Chhai Han Chhor said the airline, which flies to Singapore, Kuala Lumpur and Guangzhou, China, is waiting to replace its single French-made Airbus 320 with a smaller, cheaper plane from China.

“We have just suspended flights temporarily. The new aircraft is under negotiation,” Chhai Han Chor said. He added that that operation costs for the company’s existing airplane were too high.

Investors initially put in $2.5 million to start up the airline and committed an additional $5 million for the long-term, company officials said when it opened.

The losses have primarily been due to spiraling fuel prices, high aircraft rental and airport fees and cut-rate ticket prices, said Chhai Han Chhor, adding: “Every­thing is expensive.”

In recent years, the business climate for Cambodia’s airline industry has been shaky. In 2001, the country’s national carrier, Royal Air Cambodge, collapsed under mounting debts.

In July 2003, the Australian and Cambodian-owned Mekong Airlines was sold to Malaysian entrepreneurs after accumulating thousands of dollars in debt. Hun Sen’s niece Hun Kim Leng, the daughter of the premier’s older brother Hun Neng, governor of Svay Rieng province, was a shareholder in Mekong Airlines.

In addition to high operational costs, a decline in regional tourism following the regional outbreak of severe acute respiratory syndrome in 2003 has hurt the airline industry in Cambodia.

Airlines worldwide have also suffered from a downturn in travel following the Sept 11, 2001, attacks on the US and the Iraq war.

Airline competition in Cambodia has become increasingly stiff as several new airlines have recently set up shop, spurred on by the government’s “open skies” policy adopted in 1998.

Following the launch of First Cam­bodia, Indonesian-owned Royal Khmer Airlines opened in April, introducing flights from Phnom Penh to Siem Reap, Hanoi and Ho Chi Minh City. And last week, the Cambodian government announced it was working with Thai-owned Phuket Air to establish a new national carrier, which will be called Air Cambodia.

But some question whether the country’s economy can sustain its airline industry.

“There are many things that can make a business unsuccessful in Cambodia,” said a senior official of the Secretariat for Civil Aviation, citing inexperienced staff and a general lack of management experience in Cambodia.

“If you run a large-scale business, you have to prepare to lose profits in the beginning,” he said on condition of anonymity.

Others agreed.

“Airlines in Cambodia have a lack of understanding of how to operate,” said an airline official who has operated in Cambodia for more than 10 years.

First Cambodia Airlines, which is 49 percent owned by partners in Hong Kong and China, will continue to pay its employees while operations are suspended, Chhai Han Chhor said.

 

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