PAL, partner to spend $1.5B

San Miguel Corp. and its Cambodian partner are planning a $1.5-billion maiden fleeting program for their newly created Cambodian Airlines.

About 16 to 22 aircraft will likely be deployed by Cambodian Airlines in the next two years, said Ramon S. Ang, president of San Miguel Corp. and flag carrier Philippine Airlines.

Last month, PAL struck a deal to set up the new airline in Cambodia in partnership with local tycoon Okhna Kith Meng. PAL controls 49 percent of the new airline.

The move is an attempt to incubate a new airline in a new market that is among the least developed in Southeast Asia but which enjoys rapid growth.

At the sidelines of the stockholders meeting of Ginebra San Miguel, Ang said Cambodian Airlines would also enter into a “code-sharing” arrangement with PAL, through which the latter could earn additional revenue of $300 million to $400 million per year.

“Code-sharing” is a reciprocal agreement through which two or more airlines offer their passengers single booking, ticket and check-in flight to a certain destination.

“We are studying to deploy at least 16 to 22 planes immediately,” he said

Ang said the new carrier would initially cater to regional destinations and later to cover domestic Cambodian flights.

The project value of $1.5 billion assumes an initial fleet of 20 planes. PAL’s equity contribution is expected to be its pro-rated share of 30-percent usual equity contribution.

In the first year of operations, Ang said Cambodian Airlines would likely have eight to 10 planes and operate more in the second year. “If business is good we’ll increase some more,” he said.

Asked how Cambodian Airline could acquire new planes that soon given the usually long procurement process, Ang said: “We have already acquired a lot of aircraft for PAL and some of these can be redeployed.”

Aside from Cambodia, SMC is  also looking at Vietnam and Myanmar, he said. “We’ve been offered by lots of friends and bankers to take a look at opportunities. We are at the moment assessing those opportunities,” he said.

In 2011, the San Miguel group also made a strategic move into Malaysia with the acquisition there of the downstream petroleum businesses of American multinational oil and gas company Exxon Mobil.