Philippine Airlines Warned Against Cambodia Deal

A report by the Center for Asia-Pacific Aviation (CAPA) says Philippine Airlines (PAL) should abandon its joint venture with local conglomerate Royal Group to create Cambodia’s second national airline, Cambodia Air, and that establishing another carrier in the country would be “risky.”

“PAL’s decision to shelve and question the viability of its Cambodian joint venture project is the right move…. It should avoid the temptation of revisiting the Cambodian project or pursuing any other potential overseas joint venture,” the report, released last week, concludes. 

“While PAL has enough aircraft commitments to support a new overseas venture, the group is better off focusing on reducing expenditure and improving profitability of its Philippine operation,” CAPA said.

“The deferral and likely abandonment of the project makes sense as establishing a new carrier in Cambodia would be a risky proposition. The Cambodian market is growing rapidly but is unlikely to support a second full-service carrier,” the report adds.

The report follows recent Philippine media reports that quote PAL’s president and chief operating officer, Ramon Ang, as saying his company had shelved the investment because of Cambodia’s ongoing political unrest.

“We have delayed it because of the situation there,” Mr. Ang was reported as saying.

The deal was expected to close in October after being delayed from July. PAL was expected to pay 10 percent on closing.

Officials at Royal Group in Phnom Penh, however, say the project is moving forward, and a source with direct knowledge of the venture said Wednesday that PAL and Royal Group “have invested considerable sums to date [in the airline],” but he, too, declined to comment when asked if PAL had deferred its investment.

PAL did not return a request for comment.

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