Malaysia-based AirAsia Group has signed a joint venture (JV) agreement with Cambodian investor Sivilai Asia to create AirAsia Cambodia.

The LCC giant hopes to bring as many as 6 million passengers annually to Cambodia via its extensive Southeast Asia network, but cautioned this will happen only if aviation authorities in Cambodia reduce airport fees and fuel taxes.

AirAsia will take a majority stake of 51%, with Sivilai holding the remaining shares. Both are expected to put in $5 million in direct investment initially. Pending regulatory approvals and securing an air operator’s certificate (AOC), the airline is slated to commence operations in late 2023.

AirAsia Cambodia will join AirAsia Malaysia, AirAsia Indonesia, AirAsia Thailand and AirAsia Philippines in the group’s portfolio.

AirAsia Malaysia operates five routes from Kuala Lumpur (KUL) to Cambodian cities Siem Reap (REP) and Phnom Penh (PNH). Penang (PEN)-PNH service will start Jan. 3, 2023. AirAsia Thailand operates from Bangkok (BKK) to REP and PNH.

Vissoth Nam, director of Sivilai Asia, has been designated as AirAsia Cambodia’s CEO.

Tony Fernandes, CEO of AirAsia parent company Capital A, told the Aviation Week Network that the airline is expected to have 10-12 aircraft, primarily Airbus A321s directly leased from AirAsia.

Cambodia saw 6 million visitors in 2019, and is expecting around 2 million for 2022.

Fernandes believes AirAsia Cambodia can inject 6 million more annual travelers within three years, opening new routes from the country to destinations in Southeast Asia, North Asia and India. He described Cambodia as an untapped market that is under-served because of a lack of connectivity and flight frequencies. But he called for the Cambodia government to remove a visa-on-arrival requirement, and lower high fuel taxes and airport fees.

Fernandes estimates Cambodia’s airport fees on average are around 40% higher than other Southeast Asian countries.

“The government will realize that by lowering the fees, you will see greater long-term income with more arrivals into Cambodia,” he said.