Cambodia’s aviation industry struggles with no upturn in business predicted until 2025

[ASEAN NOW News]

Aviation as we all know have been especially hit by the pandemic all over the world, and many certainly do not think it will recover any time soon.

 

 

Here in Southeast Asia, especially in Singapore, Thailand, and Malaysia, they predict that any recovery may not start well into 2025.

 

And this is out of their hands as it will be contingent on Covid-19 not coming back in different mutations.

 

This perhaps describes the challenges faced by the tiny aviation sector in Cambodia, which is thoroughly dependent on the tourism sector to lift its wings.

 

And where 80 per cent of the air routes are dominated by the Chinese market, any setback can jeopardise the tourism sector.

 

 

The recent travel notices by the Chinese Embassy in Cambodia for travellers to China from Cambodia, where two weeks quarantine and dual Covid-19 tests prior to departure are compulsory, is one such example.

 

As it is merely a “supporter” of tourism rather than a “leader”, growth plans for the aviation sector are dictated by Ministry of Tourism’s roadmap (2021-2025), said State Secretariat of Civil Aviation (SSCA) spokesman Sinn Chansereyvutha.

 

In that, the two-week quarantine period, proof of minimum $50,000 insurance policy and payment of $2,000 deposit for Covid-19 tests and accommodation remain in place, much to the chagrin of tourism players.

 

They hope that these measures are dropped in due course to not deter travel to Cambodia.

 

But with an unrelenting rise in coronavirus cases across the region, and new variants emerging since February 20 this year in Cambodia, coupled with start-and-stop government policies on travel and border openings in the region, optimism for growth is running low in the industry.

 

Airports take a beating

 

Even the airport segment took a beating where some 50 per cent of 1,180 employees of French-listed Vinci SA’s majority-owned Cambodia Airports have been relieved on “authorised authority”.

 

The hardest hit are the airports in Siem Reap and Sihanoukville, SSCA data showed where in the first four months this year, nearly zero passengers were recorded.

 

However, the affected employees continue to receive a “very reasonable” portion of their salary, Cambodia Airports communication and public relations director Norinda Khek said.

 

He added that the airports have been kept open to fulfill their public service mission, but has had to scale down and adopt cost-saving measures, though it is not adequate to offset revenue loss caused by the sharp fall in traffic.

 

“We consolidated terminal operations at the airports to cut utility costs and adapt to less traffic [as well as] internalise tasks that used to be carried out by external service providers,” he told The Post via email.

Grounded Planes

 

As of now, about 13 out of 22 aircrafts leased by local airlines are grounded, translating to an airline operating loss of 60 to 65 per cent, Chansereyvutha said.

 

Granted, all five local airlines – foreign and local-owned – have yet to breakeven, never mind taking a profit, given their short stint of operation of between four and 11 years.

 

Government bailout has been rudimentary, apart from the extension of tax relief till September this year, which is part of the fiscal measures to ease the burden on affected parties.

 

The fate is the same with national flag carrier Cambodia Angkor Air, which is 51 per cent state-owned and whose history dates back to 1950s.

 

Despite the entry of new owners, comprising Chinese investors who acquired Vietnam Airlines’ 49 per cent stake for $37 million, Chansereyvutha said no action plan has been announced to rejuvenate the airline, possibly due to Covid-19.

 

“It is two years now … the investors have not taken any action since the pandemic,” he told The Post via a social messaging app.

 

However, Angkor Air, as it is known locally, and other Cambodia-based airlines - Lanmei Airlines, Cambodia Airways, JC International Airlines and Sky Angkor Airlines continue to serve their severely reduced number of routes on a weekly basis despite fewer landing slots.

 

Air Cargo is vital

 

Air Cargo has risen at Phnom Penh International Airport with over 22,974 tons of goods handled between January and May this year, while the other two airports received no shipments.

 

 

This sector has been good news for Cambodia Airports as it helped to bring in some revenue, Norinda said, while sharing that air cargo rose 14 per cent in the January to June period this year versus the corresponding period in 2020.

 

Most SE Asia airlines have suffered with Laos Airlines seeking new funding and Brunei Airlines converting a passenger plane to handle cargo to stay solvent.

 

Global Picture is grim

 

In 2020, the global industry chalked up more than $126 billion in net loss, according to the International Air Transport Association (IATA), which however, anticipates net losses to narrow to around $48 billion this year.

 

Unlike North American airlines, particularly the US, which is benefitting from rapid vaccination rollout and large home market, Asia Pacific remained a “very mixed region”, IATA indicated in April.

 

With tourism so vital to the SE Asian region, governments will be forced to dig deep into their coffers. to support their own transport industry in the next few years.