Logo of Phnom Penh Post newspaper Phnom Penh Post - Local airlines to face headwinds

Local airlines to face headwinds

Passengers board a Bassaka Air flight parked on the tarmac of Siem Reap International Airport last year.
Passengers board a Bassaka Air flight parked on the tarmac of Siem Reap International Airport last year. Scott Howes

Local airlines to face headwinds

Cambodian airlines trying to grow and capture a slice of the more promising Chinese market will face stern competition from more-established international carriers, while new startups could struggle to gain a foothold in the Kingdom’s relatively small market, according to new research by the Centre for Aviation (CAPA).

All four of Cambodia’s local airlines – Cambodia Angkor Air, Sky Angkor Airlines, Cambodia Bayon Airlines and Bassaka Air – have made China a focus of their international expansion. However, the airlines lack the scale and resources to compete with the 10 foreign carriers that already provide air connectivity between the Kingdom and China, the Australia-based aviation research and consulting firm said in a report released yesterday.

“Cambodia may not be able to support more than four local airlines over the long term,” it said. “The four existing airlines, none of which operate more than seven aircraft, lack the scale to compete effectively with foreign airlines, and the proposed start-ups will face similar challenges if they succeed at launching services.”

The four Cambodian carriers have a combined fleet size of 17 aircrafts, according to CAPA research. Bayon is expected to add two A320s this year, adding to its fleet of two MA60 turboprops, while Bassaka is planning to secure a third A320 and add more flights to China.

Additionally, newcomer JC International plans on operating two A320s this year, with Lan Mei Airlines expected to begin operations by the end of the year. Both airlines are owned by Chinese investors and expected to launch services to China.

Air passenger traffic between Cambodia and China has experienced double-digit growth since 2009 and currently accounts for about 20 percent of Cambodia’s international scheduled seats. Some of the fiercest competition on these routes is expected to come from Chinese airlines plying these routes.

“Chinese airlines have the scale and distribution network in China to outmuscle small foreign competitors. They also have the flexibility to redeploy aircraft in other markets, should China-Cambodia demand slow,” the CAPA report said.

Brendan Sobie, chief analyst at CAPA, said despite the impressive growth in recent years of Cambodia’s aviation market, which chalked up around 400,000 annual domestic passengers and 7 million international passengers last year, local carriers could struggle with commercial viability.

“Cambodia has a very limited domestic market, while its other international markets are not growing nearly as fast as China and are extremely competitive,” he said.

Local airlines serving international destinations must compete with over 10 foreign low-cost carriers and more than 15 established Asian flag carriers that serve Cambodian airports. The top competitors include Vietnam Airlines, Bangkok Airways, Thai AirAsia and China Southern Airlines, which together operate nearly 50,000 weekly seats.

“Foreign airlines offer connections beyond their hubs, and have a huge competitive advantage over any Cambodian airline,” he added.

Steve Kim, chief commercial officer for Cambodia operations of Small Planet Airlines, a Lithuanian-based carrier that is seeking government approval this year to fly from Cambodia to China and Korea, said fierce competition from established foreign carriers was unavoidable. However, he said Cambodian airlines could carve out a niche during the high tourist season.

“Cambodian airlines can rely on charter flights for maybe three or four months a year during the winter months to capture passengers from China,” he said. “This is something they could do well with because they lack the scheduled flights and have no infrastructure and there is less risk.”

Nevertheless, with two new Cambodian airlines scheduled to launch this year, he said that the government needed to give incentives to help keep the market buoyant.

“Charter flights are not a solution, because what do you do for the rest of the year?” he asked. “The only solution is if the government works with carriers to lower operating costs and encourage low season promotions.”

MOST VIEWED

  • Angkor lifetime pass, special Siem Reap travel offers planned

    The Ministry of Tourism plans to introduce a convenient, single lifetime pass for foreign travellers to visit Angkor Archaeological Park and potentially other areas. The move is designed to stimulate tourism to the culturally rich province of Siem Reap as the start of the “Visit

  • ASEAN Foreign Ministers’ meet commences, Taiwan issue possibly on table

    The 55th ASEAN Foreign Ministers’ Meeting (AMM) and related meetings hosted by Cambodia kicks off in Phnom Penh on August 3, with progress, challenges, and the way forward for the ASEAN Community-building on the table. Issues on Taiwan, sparked by the visit of US House Speaker

  • Pailin longan winery tries to break through to the big time

    Longan aren’t quite as glamorous as some fruits. They don’t have the star-power of mangos or generate the excitement of a pricey seasonal niche fruit like the pungent durian. Unlike bananas or oranges, which are known and loved everywhere, longan remains a decidedly

  • Recap of this year’s ASEAN FM meet and look ahead

    This year’s edition of the ASEAN Foreign Ministers’ Meeting (AMM) hosted by Cambodia comes against the backdrop of heightened global tensions and increasing rivalry between major powers that have been compared to the animosity of the Cold War era. The following is The Post’

  • Debt restructuring over, time to tackle rising NPL ratio

    The Cambodian banking system has just completed a 26-month debt restructuring exercise where scores of loan accounts were revised, classified and provisioned as the rate of non-performing loans inched up, sparking a slight credit risk unease Implemented in April 2020, the Covid-19 debt restructuring measures came

  • Koh Slaket studio resort brings culture with style

    Davitra (Cambodia) Co Ltd’s multi-million-dollar 13ha Koh Slaket studio-cum-resort just east of the capital was inaugurated in the first phase on August 6, providing national and international tourists with a new travel option and job opportunities for locals. The man-made cultural and scenic lakefront getaway