Malaysia Helicopter Services is continuing its rapid expansion of global aviation interest, but the launch of its latest joint venture may sour relations between Cambodia and Thailand.
MHS has taken a 40 per cent stake in Royal Air Cambodge, stepping into the breach left by Singapore Airlines, which opted out of a similar equity-management proposal last year.
Malaysia Airlines, in which MHS holds a 32 per cent controlling stake, will provide management and maintenance support and lease aircraft to RAC. MAS involvement is the latest step in the revitalised Malaysian flag carrier's expansion under its new chairman, Datuk Tajudin Ramli, driven by the investments of his company MHS.
Sources say MHS is now renewing interest in a stake in Indian domestic Jet Airways, to which MAS already provides extensive maintenance support and management advice. MHS also holds a 49 per cent share of another regional operator, Air Maldives, and rates the Indian subcontinent and Indo-China as key growth areas.
RAC operated its first service, from Phnom Penh to Kuala Lumpur, at the start of January using a leased MAS Boeing 737-400. It will lease further aircraft from MAS as it expands its network.
Analysts suggest Ramli also sees the deal as a way to advance plans to take advantage of future telecommunications opportunities in these areas; his flagship company, Technology Resources Industries Berhad, is Malaysia's biggest cellular telephone network.
The Cambodian deal has other benefits for MAS. Hit badly by the economic downturn because of its large fleet expansion programme, MAS can now offload surplus capacity to RAC.
It does involve some element of risk, with political instability in the new Cambodia continuing to affect travel patterns. The country has not had a national carrier since 1970 when its previous flag carrier - also Royal Air Cambodge - ceased operations.
The startup of RAC threatens further turmoil, however, by damaging the country's relations with neighbouring Thailand. The rebirth of RAC ended flights from Phnom Penh by two Thai-backed carriers, Cambodia International Airlines and SK Air. The move could anger the Thai business community, which is one of the largest investors in Cambodia.
CIA and SK Air were told two days before RAC's first flight that their licences to operate were being withdrawn. However, both were warned last February they would have to cease operations when RAC began flying; part of the deal was that RAC would be Cambodia's sole carrier.
Hardest hit was CIA, which flew from Phnom Penh to Bangkok, Hong Kong, Vientiane, Singapore and other cities in the region. RAC is expected to take over all these routes over the next 12 months and launch flights to Taiwan and Japan. CIA complained it was taken 'totally by surprise' by Phnom Penh's decision and said 35,000 passengers who had booked tickets with the airline had no recourse.
Meanwhile, Ramli's investment in MAS, described by critics as a huge gamble, is beginning to pay off. The carrier's shares are now trading 60 per cent higher than at the time of the purchase. In the six months to September MAS lifted its pre-tax profit to M$102 million, turnover rose 15.6 per cent and units costs were cut. by 1.8 per cent.
Meanwhile, Ramli's investment in MAS, described by critics as a huge gamble, is beginning to pay off. The carrier's shares are now trading 60 per cent higher than at the time of the purchase. In the six months to September MAS lifted its pre-tax profit to M$102 million, turnover rose 15.6 per cent and units costs were cut. by 1.8 per cent.
Source: Airline Business
