In a bid to revive Cambodia's standing in the region and the world, new leader Hun Sen played the aeropolitical card while the country was still reeling from a civil war sparked by his bloody coup in early July.

As foreign airlines cancelled services and refugees fled into neighbouring Thailand, Hun Sen made the apparently incongruous gesture of declaring immediate open skies in mid-July. Then, the former Khmer Rouge official ended the international monopoly of government-controlled Royal Air Cambodge, and revealed a joint venture with Bangkok-based Orient Thai Airways to set up a second flag carrier, Kampuchea Airlines.

But Hun Sen's interest in aviation may not be as keen as it appears. Political sources in Phnom Penh suggest the moves are aimed at currying favour among members of Asean - Cambodia was only days away from full membership of the regional economic group when its application was frozen in the wake of the coup. According to one foreign embassy official in Cambodia, support from Bangkok is critical to his chances of cementing legitimacy. Moreover, as Hun Sen strives to win back support from the major Western powers, the official notes that open skies was clearly in tune with US trade aims in the region.

Yet whether the Cambodian market can support two flag carrier is questionable, especially if other carriers in the region exploit the open skies regime. The incumbent RAC reported a loss of US$24 million last year and is expected to carry 500,000 passengers this year with a fleet of two Boeing 737-400s, leased from partner Malaysia Airlines, and three ATR72s. Revenues were forecast to climb to US$40 million from US$25 million.

Hun Sen's move has angered RAC's 40 per cent shareholder Malaysia Helicopter Services (MHS), the majority stakeholder in MAS, which has a management contract with the Cambodian carrier. MHS chairman Tajudin Ramli has hinted he may pull out of the joint venture, in which the Cambodian state holds the other 60 per cent stake, but he remains ambivalent about MAS' continued involvement in the country. 'If it is open skies . . . we can deploy our aircraft stationed in Cambodia elsewhere and operate other sectors. We can then just go cherry picking,' he says, adding that MAS could still continue to manage RAC.

Cambodia is planning to take a 51 per cent stake in the new airline, with the remainder held by Orient Thai. Services were set to begin by September to Bangkok, Singapore, Kuala Lumpur, Hong Kong and Guangzhou, but no details were released of aircraft type.

Orient Thai is no stranger to Cambodia. Its managing director Udom Tantiprasongchai headed Thai-owned Cambodia International Airlines, which was given a week to terminate services in 1994 when Phnom Penh set up RAC and awarded it sole-flag carrier status.

Tom Ballantyne

Source: Airline Business