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Market Analysis

Cambodian Aviation Ushers Into A New Era Of Market Competition



Lanmei Airlines A319

The throughput of the three airports in Cambodia is increasing at a rate of 20% per year, but compared with other countries in the Southeast Asia region, there is still much room for development. In the near future, Cambodia will plan a series of new airports, while airlines are actually a capital-intensive, specialised, high-input, low-return industry. The greatest benefit that this industry can bring to investors is not from the airlines themselves, but from the facilitations and synergies of other industries. Therefore, the investment enthusiasm of private capital for the aviation industry has never been reduced. In Southeast Asia, $20 million for funding guarantee might just be entry-level.

Fleet Overview Of Operating Airlines In Cambodia:

A319-100 A320-200 A321-200 ATR 72-500 Total
Lanmei Airlines 1 4 2
JC International Airlines

Sky Angkor Airlines
3 2
Cambodia Angkor Airlines
2 2 3 7
Cambodia Airways 3 2

Bassaka Air


Established in March 2016, Lanmei Airlines is currently the largest player in the Cambodian aviation market and is also expanding rapidly. Since its first flight on September 29, 2017, its operation time has been merely two years.

Recently, Lanmei Airlines participated in a cooperation with Philippine Airlines and put one of the aircrafts into operation in the Philippine market. This layout has brought certain imagination to Lanmei’s future development and has indeed brought some pressure to competitors in the industry.

Lanmei Airlines A320
Lanmei Airlines A320

With a fleet size of seven aircraft, Lanmei Airlines is now firmly in Cambodia’s largest airline.

Lanmei Airlines can be considered as Cambodia’s most market-oriented airline. The head of the company owns important positions in state-owned enterprises and private aviation companies. The decision-making process of Lanmei is short and flat. The company’s general direction is clear, and the grass-roots execution is strong. With the goal of developing the market, Lanmei Airlines looks like a perpetual motion machine. The pace of progress has never stopped, not even a short rest.

In 2019, Lanmei Airlines announced that it would realise full-year profit. Lanmei Airlines also registered South Asia Maintenance Company, Lanmei Foods Company and Lanmei Express (mainly express transportation business, currently opened parcel express business from China to Cambodia, Palau), Lanmei’s layout in the upstream and downstream of the industry chain is extremely clear.

JC International Airlines was registered in June 2014, and its preparatory work began in the second half of 2016, making JC Airlines’ operation start half a year earlier than Lanmei Airlines. After more than two years of precipitation, JC has gradually entered a period of steady development. 

JC International Airlines
JC International Airlines

Earlier this July, although in the face of delays in adding new capacity, seven new routes were opened to maximise revenue during this peak season. The main source of profit for JC Airlines comes from the Phnom Penh – Preah Sihanouk route. 

Before the establishment of Lanmei and JC, the hegemony of the Sino-Cambodian tourism market was actually the now little known Sky Angkor Airlines. Sky Angkor was registered in 2010 and is a well-established local cost carrier, its profitability cannot be underestimated. 

Sky Angkor Airlines

Sky Angkor had formed a good cooperative relationship with its partners in Europe and Vietnam earlier. By taking advantage of the differences between peak seasons of Cambodia, Europe and Vietnam, Sky Angkor was able to deploy cheaply wet-leased European aircrafts in winter and Spring to the Cambodian market. Thus, Sky Angkor can reach maximum capacity of 9 airplanes in Winter and Spring, and only 2 airplanes were kept during the low season in rest of the year. This business model has greatly enhanced Sky Angkor’s profitability. At the same time, its founder’s Korean background also allowed Sky Angkor to show its pioneering ability in the Korean market that is different from other companies. Before Chinese tourist s occupied Angkor Wat, South Korea was the main source country of tourism for Siem Reap. 

Since the entry of Lanmei and JC, two aggressive market expansion carriers, have intervened in the China-Cambodia market, Sky Angkor’s heyday is gone, and its market share has been nibbled away quite a bit. However, due to its early entry into the Chinese market, it has a first-mover advantage and has a lot of time slot resources for first- and second-tier airports in China. Although the Siem Reap market took a lot of pressure in 2018, its took on “changing Siem Reap to Preah Sihanouk” strategy in 2019, helped them guarded the market once again.

There are also two “Que Sera Sera” operators on the sky in Cambodia: Cambodia Angkor Air and Cambodia Airways, of which both are flag carriers of the country. 

This year is the tenth year of Angkor Air operations. Its most important capital source, Vietnam Airlines, has imposed severe restrictions on the development of Angkor Air due to concerns that the rise of the Cambodian market will affect the construction of the parent company’s hub in Ho Chi Minh city.

Cambodia Angkor Air A321
Cambodia Angkor Air A321

As an airline that is about to be established for ten years, Angkor Air has only two A320 series medium-sized passenger aircrafts. It operates Beijing, Shanghai, Guangzhou, Nanning, Hangzhou, Zhengzhou and other mainland Chinese destinations and Ho Chi Minh.

This year, Angkor Airlines opened two new routes, Phnom Penh – Preah Sihanouk and Phnom Penh – Macau, which can be regarded as a breakthrough in recent years. At the same time, following the footsteps of the majority of Cambodian airlines, changing some mainland China to Cambodia routes from Siem Reap to Preah Sihanouk.

Cambodia Angkor Air ATR-72-500
Cambodia Angkor Air ATR-72-500

The Cambodian government has always criticised the lack of development of Angkor Air’s expansion, but it has no capability to strengthen the airline’s capital base, so the government can only temporarily allow foreign investment to gallop. This also explains why the Cambodian government is relatively laissez-faire on foreign-invested airlines. Perhaps they are looking forward to the emergence of an airline that can truly represent the image of the Kingdom of Cambodia.

Cambodia Airways A320
Cambodia Airways A320

Bassaka Air, established on October 6, 2014, is a Cambodian airline initially backed by Air China. It made its first domestic flight on December 1, 2014, and its international flight first operated on May 1, 2015. The airline is invested by Naga World Golden Circle Group.

2018 was a sad year for the Cambodian civil aviation industry, but it gave a shot to the six airlines that are still flying in the Cambodian sky.

Beginning in October 2018, KC International Airlines, Small Planet Airlines, and Bayon Airlines all stopped flying. For a short while, the Cambodian aviation industry ushered in a comprehensive reshuffle. The nine companies that had been in operation were sharply reduced to five, which greatly released the competitive pressure.

  • KC International Airlines, established on July 2, 2018, has been full of legends since its inception. During the preparation process, at least three sets of management teams have been replaced. After the company first obtained the AOC(Air Operations Certificate), the actual number of days of operation did not exceed 60 days, which is very typical of Cambodia’s airlines in the last era. 
KC International Airlines
KC International Airlines
  • Little Planet’s European parent company is a long-term partner of Sky Angkor and one of the main suppliers of wet-leasing aircraft to airlines in the Indochina Peninsula. In December 2017, Little Planet Airlines officially launched its inaugural flight. It stably operated charter flights from Macau to the ASEAN region, and continued to wet lease aircrafts to Sky Angkor and Vietnam Airlines.
Small Planet Airlines 320
Small Planet Airlines 320
  • Bayon Airlines, established on August 21, 2014, is an airline based in Cambodia’s capital Phnom Penh. The airline was reinvested and established by the Chinese Joy Air.

Cambodia Bayon Airlines
Cambodia Bayon Airlines

Also Worth Noting:

  • In April 2012, Cambodia Airlines was established. Cambodia Airlines is an airline operated by Royal Group in cooperation with Philippine capital PAL Holding;
  • In November 2015, Phonm Penh Air Cargo was established;
  • In February 2017, Air Siem Reap was established;
  • In February 2018, Domrey Angkor Airline was established. The capital was backed by the owner of the Angkor Elephant Travel Agency based Siem Reap.
  • In June 2018, CC International Aviation Airlines was established. Except for the main air transportation business, the company’s application scope covers almost all aircraft maintenance-related business projects;
  • In March 2019, Maritime Airlines and Damei Airline were incorporated. Maritime Airlines is part of the Cambodian Maritime Group. The owner of the group is Lord HENG SITHY, whose industries include real estate development, resort development and mining. Damei Airline has a Chinese background as a replacement, and its public shareholders are from China.

1 Comment

1 Comment

  1. Julie

    February 24, 2020 at 8:52 pm

    Interesting, in Europe, we dont hear much about it, but it looks like there’s tons of Chinese capital involved here

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Market Analysis

Lessons Learned From Thai Airways’ Application for Bankruptcy & Reorganisation



Thai Airways Fleet
According to a report on May 19, Thai Airways International’s largest shareholder, the Thai government, has submitted a reorganisation plan to the Thai Central Bankruptcy Court. Thai Airways will implement the reorganisation plan under the supervision of the Bankruptcy Court while maintaining normal operations.

Note: Thai Bankruptcy Law

Similar to Chapter 11 of the US Bankruptcy Law, the Thai Bankruptcy Law also allows companies to apply for bankruptcy protection in the event of financial difficulties, temporarily stop paying debts and perform reorganisation procedures to prevent the company from directly entering the bankruptcy liquidation process.

This year coincides with the 60th anniversary of the establishment of Thai Airways, but it has ushered in this huge test of survival. As a large country in Southeast Asia, Thailand has a large population, a relatively developed economy, and tourism is a pillar industry. The development of the aviation industry has very favourable external conditions. Thai Airways is known for its high-quality services and is a Skytrax four-star airline. As a state-owned airline with considerable international prestige, it has become the first mainstream airline in Southeast Asia that cannot be sustained. It is indeed somewhat unexpected. Analysing the reasons for this should serve as a warning.

Let us first look at the market position of Thai Airways.

Market share of Thailand’s domestic route

In the domestic market, Thai Airways’ share of air capacity is only 8%, which is constrained by many low-cost airlines. In the domestic Thai aviation market, Thai AirAsia has the highest share, with a share of 32%; Nok Air accounts for 18%, Thai Lion Air accounts for 16%, and Bangkok Airways accounts for 12%, and Thai Smile Airways accounts for 9%. Among the airlines whose domestic market share is higher than that of Thai Airways, only Bangkok Airways is a full-service airline, and the rest are low-cost airlines. In recent years, the growth of Thailand’s domestic aviation market is more than 70% driven by low-cost airlines. Therefore, it is difficult for Thai Airways, a full-service airline, to “take their fists” in the domestic aviation market.

International route market share

Of the two airports in Bangkok, Thai Airways operates from Bangkok Suvarnabhumi International Apt. In the international route market of the airport, Thai Airways has an absolute leading position with a capacity of 30%; Bangkok Airways, which ranks second in capacity, has only a 4% capacity share; Emirates and Thai Smile Airlines each holds 3%, ranking third in place; the remaining 60% is occupied by airlines worldwide with a share of less than 3%.

How big is the impact of the pandemic?

Similar to most airlines, Thai Airways has also been severely affected by the pandemic, and its operations are close to be fully suspended. Since the spread of the pandemic in Asia, Thai Airways has successively grounded flights to many countries in Asia (including China, Japan, etc.); and after the pandemic escalated globally, it has successively canceled flights to Europe, the Middle East, and Australia. Subsequently, few domestic routes (including routes to Chiang Mai, Phuket, and Krabi) were also operated by its subsidiary Thai Smile Airways, leaving only cargo routes intact. As of the end of March, 69 of the 82 Thai Airways aircraft were parked, amounting to 84% of the entire fleet. If calculated based on the fixed cost in the Thai Airways financial report in 2019, in the case of no income from grounding, Thai Airways’ daily expenditure accounts to about 300 million baht (about 9.64 million dollar). Some analysts believe that Thai Airways may lose 66 billion baht (about 2.12 billion dollar) due to the pandemic.

Thai Airways Boeing-777
Thai Airways Boeing-777

Although the Thai government has also provided assistance loans to Thai Airways, it is only a shortfall. According to a report on April 30, Thai Airways has sought approval from the government for an emergency loan of 58.1 billion baht (approximately 1.87 billion dollar), and it will be distributed in instalments according to operational needs. However, Banyong Pongpanich, a former board member of Thai Airways, told the media that the government’s aid loan can only allow the company to maintain its operation for another six months, and cannot solve the fundamental problem. It turned out that before the outbreak of the pandemic, Thai Airways had been losing money for consecutive years. When applying for reorganisation, Thai Airways’ total debt reached 92 billion baht (2.96 billion dollar), and government assistance was far from enough to cover the debt.

Affected by the 2008 global financial crisis and the Thai political violence campaign, Thai Airways had a net loss of 21.38 billion baht (about 687 million dollar) that year, ending its profit record of more than 40 years. Subsequent 2009 and 2010 ‘s return to profit by 7.42 billion baht (about 238 million dollar) and 14.79 billion baht (about 475 million dollar), but the good times are not long. In the past ten years since 2011, Thai Airways was hardly profitable. In 2012 and 2016, the profit was 6.51 billion baht (about 209 million dollar) and the district’s 50 million baht (about 1.61 million dollar). Most of the remaining eight years of losses exceeded 10 billion baht (about 321 million yuan).

It can be seen that, similar to the situation of many other airlines that suffered misfortune under this impact, the pandemic is only overwhelming the “last straw” to breakThai Airways’ back, and the internal cause is the main reason. These airlines have either poor business models or poor business decisions that have been losing money year after year. When market demand is strong on normal days, they can still rely on the stability of their accumulated resources. Once a huge shock occurs, they will immediately exposed the problem of insufficient ability to resist risks.

So, for Thai Airways, what caused it to never return to pre-2008, the glorious era of profitability for forty consecutive years?

The bitter fruit of aimless expansion

Affected by the grounding caused by the pandemic, most Thai Airways employees have been forced to take vacations since April and cut their salaries by 10%-40%. On May 9th, The Thai Airways Workers Union published an article on Facebook rebuking the management and government for “wrong decisions” over the years, which caused Thai Airways to change from year-to-year profit to year-to-year loss. These “wrong decisions” include the introduction of different aircrafts models, the adjustment of shareholding structure, and the introduction of new sales distribution systems. Because Thai Airways and trade unions may have labor conflicts, these accusations may be biased. We have analysed the above-mentioned “accusations” and believe that the main reasons may be the following two points:

  • Aimless introduction of unsuitable aircraft types, the fleet composition is too complicated. The Thai Airways Trade Union mentioned that Thai Airways insisted on introducing Airbus A340 aircraft more than ten years ago. Although the Thai National Economic and Social Development Committee Office at that time repeatedly reminded it to consider carefully, Thai Airways still introduced four Airbus A340-500 during 2004-2005. The union believes that this is the beginning of Thai Airways’ decline.

Thai Airways A340
Thai Airways A340

Our analysis found that after introducing the Airbus A340 aircraft, Thai Airways used its characteristics of the longest range at that time to open direct flights from Bangkok to New York, aiming to expand the North American market. However, the result turned out to be unsatisfactory. Due to the lack of direct flights, the route changed to have a stopover at Tokyo. Although the flight was the farthest at the time, the 300-seat dual-aisle airliner used a four-engine design, which resulted in a huge fuel consumption for the A340. Soon after, Boeing launched the 777-200LR twin-engine super long-range passenger aircraft, which has lower fuel consumption and longer range capabilities, which quickly made the A340 lose its competitive advantage. In the end, Thai Airways finally grounded the route in 2008 due to the high fuel cost and the economic crisis.

Thai Airways also tried to use A340 to fly other routes, but they were not profitable. In 2017, Thai Airways planned to withdraw A340 from the company’s fleet, but this model is unpopular in the used aircraft market, it is difficult to resell, so it can only be sealed for a long time. These parked Airbus A340 bring additional losses to Thai Airways which amounted to 30-50 billion baht (approximately 965 million -1.62 billion dollar).

Thai Airways Boeing-747
Thai Airways Boeing-747

In addition to the problems caused by the introduction of the A340, from the perspective of the Thai Airways fleet structure, the Thai Airways fleet has been very complex in the past 20 years. In 2019, Thai Airways has a fleet of 80 aircraft, and there are 6 main types of aircraft, including Boeing 777, Airbus A330, Airbus A350, Boeing 787, Boeing 747 and Airbus A380. It can be seen that Thai Airways is using Boeing 777 as its main fleet combination evolved. But at the same time, we have also seen the composition of the past fleet at Thai Airways, the number of aircraft types is scattered, and the main aircraft types have not been highlighted. Moreover, after the change of multiple aircraft types, the economies of scale of the fleet are low.

Aircraft Type200120082019

Composition of Thai Airways fleet over the years

  • Aggressive external investment, relative low brand coordination. The Thai Airways Trade Union pointed out that three consecutive external investments after 2010 have made Thai Airways’ financial situation worse and worse:
    • In 2010, the company’s management established Thai Tiger Airways with the loss-making Singapore Tiger Airways without careful consideration. However, under the strong resistance of many parties, the joint venture project ended in failure in 2011. Thai Airways invested 100 million (about 3.22 million dollar) baht falls on the deaf ears.
    • Only 5 months after the Thai Tiger Airways joint venture planned abortion, Thai Airways management decided to invest huge capital to build a low-cost airline brand, Thai Smile Airways, resulting in a loss of 10.16 billion baht (about 327 million dollar) in 2011. Thai Airways expected that Thai Smile Airways would be able to make a total profit of about 5.056 billion baht (about 163 million dollar) from 2014 to 2016, but actually lost 4.485 billion baht (about 144 million dollar).
    • Against the backdrop of meager profits in 2012 and huge losses in 2013, Thai Airways in 2014 promoted the joint venture of its new subsidiary, Nok Air with Singapore Scoot to establish NokScoot, which cost about 983 million baht (about 32 million dollar).
    • In recent years, the operating conditions of the joint ventures and subsidiaries established by Thai Airways are all not very good. Thai Smile Airlines (100% shareholding), Nok Air (16% shareholding), NokScoot Airlines (NokAir 49% shareholding) are in a state of consecutive years of losses.

After careful analysis, we found that the purpose of Thai Airways’ external investment is to form a multi-brand strategy and broaden the market, but in fact, the benefits brought by their multi-brands are far from making up for the high capital investment.

Although in the domestic market of Thailand, the total size of the three airlines of Thai Airways, Nok Air and Thai Smile Airlines has reached a 35% capacity share, it seems to be comparable to its rival AirAsia Thailand. But in fact, Thai Airways, which holds only 16% of the Nok Air’s shares, has a weaker binding capability on the company, and the company basically maintains independent operations and even directly competes with Thai Airways on some routes. According to the Thai Airways Trade Union, the company has even ignored the requirements and recommendations of Thai Airways. Thai Smile Airlines is a wholly-owned subsidiary of Thai Airways, but its brand positioning has fluctuated between low cost and regional full-service. It also operates two bases at Suvarnabhumi Airport and Don Mueang Airport in Bangkok. Thai Airways operated solely at Suvarnabhumi Airport cannot be effectively connected, and the coordination is low. However, NokScoot, which is controlled by Nok Air, only uses Don Mueang Airport as its operating base in Bangkok and cannot assist Thai Airways in transporting passengers. It can be said that the multi-brand strategy development of Thai Airways lacks consistency, and it is difficult to form a joint effort against a stronger competitor such as Thai AirAsia.

In addition to the above problems, the corruption history of Thai Airways has also made people lose confidence in it. The bribery case of British aircraft engine manufacturer Rolls Royce caused widespread concern in 2017. The investigation found that it had paid bribes to Thai Airways employees in order to maintain T800 engine orders for Boeing 777-200s models of Thai Airways, and Thai Airways took bribes. The total amount is up to 36.38 million US dollars. Therefore, when the government is preparing to provide assistance loans to Thai Airways, many Thais believe that this state-owned airline company with a history of corruption should not be rescued.

Faced with large consecutive losses, the management has also made many efforts to save the current company. In order to boost the company’s revenue, the management proposed a six-point development strategy:

First, to reduce costs without affecting the company’s service level; second, to reduce waste, and implement the “Circular Economy” strategy; third, to develop new markets with profit potential; fourth, increase revenue from main operations, including digital transformation and development of auxiliary revenue; fifth, in-depth cooperation with partners to expand sales channels; sixth, enhance transit experience and attract more passengers.

Thai Airways A350
Thai Airways A350

Where is the future for Thai Airways?

After many years of glorious history, Thai Airways has to face reorganisation as a result of a combination of factors. Thai Airways has already come to this point where at this stage, Thai Airways should look into the future and think about how to survive.

Thai Airways is currently implementing restructuring, and initially plans to reduce the size of the fleet, reduce the number of leased aircraft, and will lay off 6,000 personnels (about 30% of the employees) to reduce labor costs.

The Thai government, as a shareholder, is still working hard to help Thai Airways recover. The Thai government has sold about 3.2% of its 51% Thai Airways shares to the Vayupak 1 mutual fund operated by Krung Thai Bank. After the transaction, the Thai government’s shareholding in Thai Airways fell to 47.86%. Although the Thai government is still the largest shareholder of Thai Airways, according to the Thai company division rules, Thai Airways is no longer a majority-owned state enterprise. The government’s move is to help Thai Airways get rid of some of the legal obstacles for major state-owned enterprises to obtain protection under the bankruptcy law, so that Thai Airways can better obtain the protection of the provisions of the bankruptcy law.

Thai Airways enlightenment to us

The deep foundation accumulated by Thai Airways’ forty years of profit has been exhausted in ten years, and because of the excessive development of the plan, the debts are entangled. It is a pity that the “Black Swan” event caused the airline to be on the verge of bankruptcy.

In fact, what is more horrible for the airline than the “Black Swan” event is the “Gray Rhino” event. The “Gray Rhino” incident is a large probability crisis that usually occurs during the business development of the enterprise. The signs were already showing before the outbreak, but it is often overlooked by managers with fluke, and eventually has devastating consequences. As far as Thai Airways is concerned, the loss caused by the initial wrong decision is a sign of decline, but Thai Airways has not been alert and failed to stop the loss in time.

It can be said that every large airline company that has applied for bankruptcy or reorganisation since the outbreak has had its own development problems before the outbreak, and thus fell first among the hits of the “grey rhino” and “black swan” events. Such a crisis also makes us think about what the meaning of “steady development” means for airline companies.

<strong>Institute For Aviation Research</strong>
Institute For Aviation Research

This article is authorised and translated from IAR’s research publication, the Institute for Aviation Research is an independent think tank that promotes research into aviation. For more info please go to their website below.

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