Royal Group in Deal to Create 2nd National Airline

The Cambodian conglomerate Royal Group on Tuesday signed a deal with a major company from the Philippines to set up Cambodia’s second flag-carrying airline in a matter of months.

Deputy Prime Minister Sok An oversaw a signing ceremony in Phnom Penh last night to create Cambodia Airlines, a joint venture between Royal Group and the San Miguel Corporation, which owns a controlling stake in Philippine Airlines (PAL).

The deal is expected to open up Phnom Penh’s only direct flights to Manila, as well as more flights between Cambodia’s existing do­mes­tic airports.

Royal Group chairman Kith Meng, left, and Prime Minister Hun Sen's youngest son, Hun Many, are seen at a signing ceremony Tuesday night to set up Cambodia Airlines, a joint venture between Mr. Meng's Royal Group and the San Miguel Corporation, the company that controls Philippine Airways. (Siv Channa)
Royal Group chairman Kith Meng, left, and Prime Minister Hun Sen’s youngest son, Hun Many, are seen at a signing ceremony Tuesday night to set up Cambodia Airlines, a joint venture between Mr. Meng’s Royal Group and the San Miguel Corporation, the company that controls Philippine Airways. (Siv Channa)

“The benefits of partnering with Philippine Airlines are initially we will see increased arrivals from amongst 94 million Filipinos,” Royal Group chairman Kith Meng said at a ceremony held at the Cambodiana Hotel, which was also attended by dignitaries including Hun Many, the son of Prime Minister Hun Sen, and Jose de Venecia, the former speaker of the Philippines’ House of Representatives.

“Later, as our route network expands, we will see a greater number of business [and] tourist arrivals from Asean and East Asia. The increased travel into and out of Cambodia will foster increased commerce. In turn, the greater [foreign direct investment] in Cambodia can be expected…with the arrival in 2015 of the Asean Economic Communi­ty,” Mr. Meng continued.

According to a press release distributed to reporters, Mr. Meng will have a 51 percent controlling share in the joint venture, while San Miguel Corporation will hold the remaining 49 percent.

Cambodia Airlines had previously provided technical assistance to Singapore’s Tiger Airways in Cambodia, but Royal Group will now have its own carriers operating international flights as well as domestic routes within Cambodia, according to the press release.

“I would like to thank the Cambodian government and our partner, Royal Group, for this opportunity to help introduce a national carrier that will boldly carry the flag of your country throughout the world,” said Ramon Ang, San Miguel and PAL’s chief operating officer and president, at the ceremony.

Royal Group chief financial officer Mark Hanna said Cambodia Airlines would be leasing two twin-propeller Bombadier Dash 8 planes for domestic routes—which could include currently un­used provincial airports such as Bat­tam­bang and Ratanakkiri—and two Airbus A321 passenger jets for international flights.

Mr. Hanna said domestic flights could begin as early as June this year, and that he expected international flights to begin in October.

The link-up with PAL would open up long-haul routes to the U.S. and Europe, via Manila, he added.

It is unclear how having a second flag-carrying airline will impact the existing one, Cambodia Angkor Air, in which the government owns the majority stake in a joint venture with Vietnam Airlines. Cambodia Angkor Air is currently the only airline offering domestic flights in the country.

Vietnam Airlines general manager in Cambodia Pham The Hung said Tuesday he was not aware of the deal.

“You are the first to inform me of this airline,” he said. “Wow!”

But Mr. The Hung said that since the new joint venture was a link-up with the Philippines, it might focus on routes connecting with that country, and could therefore coexist with Cambodia Angkor Air.

“They [Cambodia Angkor Air] are focusing on Vietnam, Southern China and Thailand,” he said.

The deal comes amid rapid growth in the number of passengers arriving at both the Phnom Penh and Siem Reap international airports. Cambodia Airports is spending nearly $150 million on doubling the capacity of both airports to handle 5 million passengers each a year by 2015.

The new airline joins mobile phone operator MobiTel, ANZ Royal Bank, Toll Royal Railways and Infinity Insurance in Mr. Meng’s ever-expanding portfolio, to which he also recently added a stake in the Lower Sesan 2 hydropower dam. Royal Group also owns the Cambodiana Hotel, where last night’s elaborate ceremony took place.

San Miguel Corporation began more than a century ago as the producer of San Miguel beer, and has diversified into the power, infrastructure, mining and telecommunications sectors, reporting revenues of $12.5 billion last year.

In 2010, San Miguel and Royal Group announced that they would build a brewery in Cambodia, but the project has still yet to materialize.

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