AirAsia Cambodia to Take Off to Expand ASEAN Market Share

Capital A’s fifth airline, AirAsia Cambodia, has numerous plans – immediate ones being to strengthen connectivity to North Asia, diversifying Cambodian routes and stimulating local air travel demand
Tony Fernandes, CEO of Capital A shakes hand with Mam Vissoth, CEO of Air Asia Cambodia
Tony Fernandes, CEO of Capital A shakes hand with Mam Vissoth, CEO of Air Asia Cambodia

“AirAsia Cambodia. I really like the sound of that,” said Tony Fernandes, CEO of Kuala Lumpur-listed Capital A Berhad at the launch of the group’s fifth low-cost carrier in ASEAN in Phnom Penh.

“When I launched AirAsia 21 years ago, we dreamt of making ASEAN smaller. This is our fifth airline in ASEAN. It has been my dream for a long, long time, so it comes naturally to say AirAsia Cambodia. It’s really good to be in this country,” he said.

The low-cost carrier, slated for take-off in the second half of 2023, will be managed by AirAsia (Cambodia) Co Ltd, a $25 million joint venture (JV) between Capital A’s wholly-owned subsidiary AirAsia Aviation Group Ltd (AAAGL) and Phnom Penh-based Sivilai Asia Co Ltd at a 51:49 ratio, respectively.

Sivilai Asia is a consultancy management firm, which operates hospitality businesses in Cambodia and aims to bring new innovative products to enhance the lifestyle of Cambodians. The JV is expected to be headed by CEO Mam Vissoth.

China, Korea, India

Following the pandemic, Fernandes said he was keen to see AirAsia's growth story restart in Cambodia.

“It's been a long time coming and it took hundreds of hours of negotiation,” he said, adding that he visited Cambodia in 1975 and is “amazed” by the development since then. “Cambodians should be very proud.”

He said the plan for AirAsia Cambodia is to connect all of Asia, with China and Korea as soon as possible, as well as India, while strengthening ASEAN connectivity.

“Most of ASEAN [citizens] have not visited this amazing country. The Thais have come, so we will bring Filipinos, Malaysians, Indonesians and Singaporeans to Cambodia. Then there is an untapped market, India. We believe it could be a massive market,” he added.

In addition, the airline is expected to connect the logistics hub and cargo with the rest of the region which would help grow Cambodia’s economy.

“We’ll also provide technical training. We want all our pilots, engineers, and food to come from Cambodia. First thing we’ll do is to start training people to run this airline,” he added.

‘Almost doubled’

According to Capital A’s filing with Bursa Malaysia, the feasibility study showed that the JV would enhance AAAGL’s ASEAN regional expansion by providing it with additional routes and destinations.

This is expected to increase AAAGL’s market share in the region and its position as a strong player in the ASEAN region.

“The key objective of the JV is to bring low-cost airline travel to Cambodia, as we look forward to expanding and accelerating our network to connect Cambodia to ASEAN, North Asia and beyond, true to our mission of democratising air travel, providing best values, driving tourism and boosting economic growth of Cambodia.

“We are excited about the prospect of delivering true low-cost air travel connectivity, experience and convenience to the seventh largest country in ASEAN with 17 million population,” Capital A said.

Plans to set up the airline were based on Cambodia’s fast-paced economic growth pre-pandemic, noting that its total capacity has “almost doubled” within five years, displaying an “impressive growth trajectory and massive potential”.

“Cambodia’s low-cost carrier market penetration is only 28 percent and has room to grow, as other ASEAN countries such as Malaysia, Thailand and the Philippines have low-cost penetration in excess of 50 percent.

“Furthermore, there is only one low cost or hybrid local airline based in Cambodia with a small fleet of four aircrafts,” Capital A said.

Diversify network

Given that AAAGL is the “largest foreign airline” operating into Cambodia in terms of capacity, the JV was a “natural next step”, Capital A said, adding it was in line with its ASEAN expansion strategy.

A local Cambodian air operator certificate would further establish AirAsia’s brand in Cambodia and Indochina, enabling it to access the domestic market.

Ability to expand internationally to various destinations and existing markets from Cambodia will also help the group build scale, network connectivity and further reduce operation costs.

“Cambodian passengers would be able to connect to over 150 other destinations in over 20 countries where AAAGL operates to by connecting unto flights operated by other AAAGL’s airlines.

“AirAsia Cambodia plans to operate mostly to AAAGL’s existing stations within the four-hour radius from Cambodia to leverage scale and brand presence while minimising setup costs,” it said.

The airline would raise Cambodia’s network offerings by launching new services to Asian destinations lacking connectivity from Cambodia today.

“This will help diversify Cambodia’s network connectivity and create more links within the region and beyond,” it added.

Disney fairy tale

Accordingly, air connectivity improvement in Cambodia would be a key enabler to economic growth and boost multiple industries, such as tourism, export-related industries, logistics, airport retailers and airline support businesses.

An increase in connectivity would stimulate air travel demand among Cambodians with increased airline and destination choices.

It could “open doors to students travelling abroad, supporting work-related travel, boosting trade ties, and catalysing growth of new small and medium enterprises”, Capital A said.

Meanwhile, Fernandes, who was taken by Cambodians and the country’s growth, said the group will do its best to promote Cambodia in the region and world.

“Cambodia is a fairy tale. If Disney were to do a movie about a country, it should be about Cambodia. It had bad luck and a terrible life but has transformed itself into a beautiful country,” Fernandes said.