Latest Stories

PAL, Kith Meng of Cambodia sign deal to set up Cambodia Airlines


SMC president Ramon S. Ang. AP FILE PHOTO

MANILA, Philippines—Flag carrier Philippine Airlines has struck a deal to help set up a new airline in Cambodia in partnership with local tycoon Okhna Kith Meng, hailed by many as the new face of Cambodian capitalism.

In a disclosure to the Philippine Stock Exchange on Thursday, conglomerate San Miguel Corp. said a joint venture with Kith Meng was formed to create Cambodia Airlines, in which PAL will hold a 49 percent interest. SMC in turn owns a significant stake in and exercises management control of PAL.

This marks a landmark initiative by a Philippine conglomerate to make an overseas investment in the highly competitive regional aviation sector. This deal also marks a bold attempt by PAL, Asia’s oldest commercial airline, to incubate a new airline in a new market that is among the least developed in the region but one which is enjoying a rapid pace of growth and seen on track to join the middle-income developing group in the next decade or so.

“Cambodia is SMC’s investment focus and the government of Prime Minister Hun Sen is good,” SMC president Ramon Ang said in a text message, when asked about the rationale for this investment.

Hun Sen is widely credited for bringing stability and economic growth to Cambodia since consolidating power in a 1997 coup. Apart from the restoration of peace and security after almost three decades of conflict, including the terrible rule of the Khmer Rouge (1975–1979) when it is estimated that about one-quarter of the population either perished or left the country, Cambodia has grown rapidly since opening up to the regional and global economy and benefited from large capital inflows, both in the form of official development assistance and private capital, based on a recent Asian Development Bank report.

Ang, who is also chief executive officer of PAL, said the group had yet to finalize the budget for the fresh investment in Cambodia. 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.

Industry sources said PAL’s expansion in Cambodia would allow the flag carrier to better maximize its assets – in particular its capital-intensive fleet- by opening up new routes.

“SMC may become an IndoChina play,” said Jose Mari Lacson, head of research at local stock brokerage Campos Lanuza & Co.

While Cambodia is a small market to begin, “the main advantage is that it’s fast-growing and there is a lot of interest in that area these days,” according to Lacson.

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 percent in 2010 to 24.9 percent in 2011 and 23.6 percent in 2012. This, even though 58 percent 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 currently has a 28 percent share of seat capacity in the Philippines-Southeast Asia international market compared to 23 percent for the PAL Group.

Also nearly beating PAL in its home turf is Singapore Airlines, which also corners 23 percent of the Philippines-Southeast Asia market if the latter’s affiliates’ Tiger Airways and Silk Air are taken into account.

“With LCCs now accounting for over 50 percent of capacity within Southeast Asia, the PAL Group will struggle to grow in this market without a budget subsidiary,” CAPA said.

CAPA said PAL would be facing an even steeper climb if it were to expand operations in the Middle East and Europe—markets dominated by well-funded and state-backed Middle Eastern carriers.

“Competition in the Philippines-Europe market is intense, with Gulf carriers and other Asian carriers offering a large range of one-stop destinations throughout Europe,” CAPA said.

Follow Us

Follow us on Facebook Follow on Twitter Follow on Twitter

Recent Stories:

Complete stories on our Digital Edition newsstand for tablets, netbooks and mobile phones; 14-issue free trial. About to step out? Get breaking alerts on your mobile.phone. Text ON INQ BREAKING to 4467, for Globe, Smart and Sun subscribers in the Philippines.

Tags: airlines , aviation , Business , Cambodia Airlines , Okna Kith Meng , Philippine Airlines , Ramon Ang , San Miguel Corp.

  • pfc_kulapu

    Boycott Cambodia Trip…

Copyright © 2014, .
To subscribe to the Philippine Daily Inquirer newspaper in the Philippines, call +63 2 896-6000 for Metro Manila and Metro Cebu or email your subscription request here.
Factual errors? Contact the Philippine Daily Inquirer's day desk. Believe this article violates journalistic ethics? Contact the Inquirer's Reader's Advocate. Or write The Readers' Advocate:
c/o Philippine Daily Inquirer Chino Roces Avenue corner Yague and Mascardo Streets, Makati City, Metro Manila, Philippines Or fax nos. +63 2 8974793 to 94


  • UN heads say Syria aid needs ‘largely unanswered’
  • Captain who left doomed ferry had 40 years at sea
  • UK woman held for murder after children’s bodies found
  • Washington calls S. Sudan violence an ‘abomination’
  • Abducted soldier freed in Compostela Valley
  • Sports

  • UP nips St. Benilde; Adamson blasts RTU in Filoil women’s caging
  • Kevin Garnett responds to Raptors’ GM F word
  • Albert Pujols hits 500th HR of major league career
  • UST posts twin kill in Filoil pre-season cup opening day
  • Wizards beat Bulls in OT to take 2-0 series lead
  • Lifestyle

  • Entering the monkhood a rite of passage
  • Haneda International Airport: A destination on its own
  • Wanted: Beauty queen with a heart that beats for the environment
  • Kim Atienza: At home with art and design
  • Life lessons I want to teach my son
  • Entertainment

  • Ex-Fox exec denies allegations in sex abuse suit
  • Kris Aquino backtracks, says Herbert Bautista and her are ‘best friends’
  • Summer preview: Chris Pratt enters a new ‘Galaxy’
  • Bon Jovi helps open low-income housing in US
  • Summer movie preview: Bay reboots ‘Transformers’
  • Business

  • McDonald’s 1Q profit slips as US sales decline
  • SEC approves SM’s P15B retail bond offer
  • $103M Vista Land bonds tendered for redemption
  • Oil slips to $102 as US crude supplies seen rising
  • SC stops Meralco power rate hike anew
  • Technology

  • Engineers create a world of difference
  • Bam Aquino becomes Master Splinter’s son after Wiki hack
  • Mark Caguioa lambasts Ginebra teammates on Twitter
  • Brazil passes trailblazing Internet privacy law
  • New York police Twitter campaign backfires badly
  • Opinion

  • One-dimensional diplomacy: A cost-benefit analysis of Manila’s security deal with Washington
  • No ordinary illness
  • Reforest mountains with fire trees and their kind
  • Day of the Earth
  • When will Chinese firm deliver new coaches?
  • Global Nation

  • Hong Kong accepts PH apology; sanctions also lifted
  • China won’t budge, wants PH gov’t to apologize to HK
  • Cha cha train to follow Obama visit?
  • No word yet on inking of US-PH defense pact during Obama visit
  • Filipina, 51, shot dead by 24-year-old American boyfriend
  • Marketplace