Anti-competitive behaviour limits Cambodia’s domestic airline industry

With only one domestic airline, Angkor Air, Cambodia is the most underserved market in Southeast Asia, along with Myanmar, according to the Centre for Aviation. Photograph: Vireak Mai/Phnom Penh Post

21 January 2013
By Low Wei Xiang and Daniel de Carteret
The Phnom Penh Post

Anti-competitive behaviour in Cambodia’s domestic airline industry is limiting its growth, with the relevant authorities “reluctant” to open the domestic market up to competition, an aviation report found.

Monopolising this market currently is the country’s flagship carrier, Cambodia Angkor Air, according to a Centre for Aviation report released last Friday.

This has led to “high fares” and caused domestic air travel to shrink by about 15 per cent since 2008, when there were about 170,000 domestic passengers.

“The lack of competition in Cambodia’s domestic market is a dampener to growth, particularly at Sihanoukville,” the report wrote.

For one, Sihanoukville’s “unspoiled beaches” need better domestic connectivity with Angkor Wat so that visitors will combine these two attractions, “instead of with the beaches of Thailand.”

But Cambodia Angkor Air, currently the only airline flying the direct Sihanoukville-Siem Reap route, “has been reluctant to add capacity” to the route.

Angkor Air’s website shows only three flights a week from Siem Reap to Sihanoukville and back, even though some flights in late February are fully booked.

The report alleged that Angkor Air’s “reluctance to expand at Sihanoukville” could be because the carrier is controlled by Vietnam Airlines.

The company owns 49 per cent of Cambodia Angkor Air, which was launched in 2009 as a joint venture with the Cambodian government.

Thus, the move is seen by some “to favour Phu Quoc, a Vietnamese island near the Cambodia airport that just opened a new international airport and has similar ambitions to become a major tourist destination.”

Calls to Angkor Air and the Ministry of Tourism yesterday were not answered.

If Cambodia’s domestic market had higher competition and lower fares, local demand would also be “stimulated”, said the report.

“Only a small fraction of Cambodians have sufficient discretionary income to afford flying. But the country’s economy is growing and, most importantly, its tourism industry has big growth potential,” the report added.

But because “the market may not be big enough to support a second local scheduled carrier”, an alternative is to allow foreign carriers to enter the domestic market.

Yet, “Cambodian authorities have so far been reluctant to let foreign carriers enter the domestic market,” the report alleged.

“Some foreign carriers such as Jetstar Asia and SilkAir already operate between Phnom Penh and Siem Reap as part of their international flights to Phnom Penh and Siem Reap but are unable to pick up domestic passengers,” the report added.

Chan Sophal, president of the Cambodia Economic Association, agreed that low-cost carriers would boost domestic travel.

“As long as the low-cost airlines are efficient and have a low risk of failure, it is very good for the economy,” he said.

But he believes that while the “high fares” cited in the report may have caused domestic air travel to shrink, other factors may have come into play too. With Cambodia’s road systems improving, “perhaps travel is now easier by road,” he said.

Cambodia’s three airports served more than 4.3 million passengers in 2012. However, it remains “the most under-served market in Southeast Asia”, along with Myanmar, said the aviation report.