SMC to invest $1.5 B in Cambodia Airlines

MANILA, Philippines - Diversified conglomerate San Miguel Corp. (SMC) will invest $1.5 billion for its airline venture in Cambodia, its top executive said yesterday.

Cambodia Airlines will have about 20 aircraft in its fleet and add as much as $400 million revenues per year to Philippine Airlines (PAL), said SMC and PAL president Ramon S. Ang in a briefing.

“For Cambodia Airlines, we were studying to deploy 16 to 22 aircraft immediately,” he said.

While the new aircraft will need around $1.5 billion in investments, PAL will spend a lower amount because 70 percent of the funding needs will be secured through bank financing, Ang said.

Early last month, PAL, a joint venture between taipan Lucio Tan SMC, tied up with the Royal Group of Cambodia (RCG) to establish its first international airline.

PAL owns a 49-percent stake in Cambodia Airlines while RGC, chaired by Neak Oknha Kith Meng, controls the airline with a 51-percent interest.

The new airline venture is expected to beef up the revenues of flag carrier PAL.

“PAL today has $1.7 billion in revenues per year in the last two years. If we are able to do this code sharing with Cambodia Airlines, it will add another $300-400 million in revenues,” Ang said.

He said PAL will implement a code sharing with Cambodia Airlines for both short and long-haul flights.

Code sharing is a deal between two airlines allowing passengers to book flights served by only one of the two companies.

Ang said Cambodia Airlines targets to reach 16 to 22 aircraft within the next two years, with an initial 10 airlines in the first year of operations.

Since the entry of SMC last year, PAL has embarked on a massive refleeting program aimed at acquiring 100 new aircraft to replace its existing fleet.

PAL entered into a $7-billion contract with EADS Group in August last year for the acquisition of 54 Airbus aircraft consisting of 34 A321ceo, 10 A321neo and 10 A330-300s, and another $2.5 billion to exercise an option to acquire 10 more A330 aircraft last September.

PAL will likely accept the delivery of 21 new aircraft this year that would boost its $1.7 billion revenues for its fiscal year ending March 31 by as much as 25 percent.