Little more than a year after throwing out two Thai-owned airlines to give new flag carrier, Royal Air Cambodge, a local monopoly on international and domestic services, the Phnom Penh government is threatening to end the protection from competition.

RAC is 40 per cent owned by Malaysian telecommunication magnate Tan Sri Tajudin Ramli's Malaysia Helicopter Services, which controls Malaysia Airlines. MAS provides management expertise, aircraft and maintenance for the Cambodian operator but the government has concluded RAC's performance during its first twelve months apparently hasn't come up to scratch.

Cambodia has two prime ministers and they have both lambasted RAC over poor service and lack of flights. In a speech to a tourism conference, Second Prime Minister Hun Sen clearly placed the potentially lucrative economic benefits of tourism above the need to protect RAC, which he criticised for its service levels and shortage of flights.

'If RAC does not provide some more airplanes, the only way will be to create an open-skies policy. We must not think of the loss to RAC, but consider how to make sure there are no losses to our tourism community,' Hun Sen warned.

Then First Prime Minister Prince Norodom Ranariddhalso appealed for the airline to lease more planes in a speech aired on national radio and television. Both politicians are gravely concerned about RAC's failure to offer sufficient flights into the northern province of Siem Reap, home of one of the country's leading tourist attraction, the 12th-century Angkor Wat temple complex.

MAS' took the stake in RAC as part of Ramli's strategy to gain feed from the fast-growing tourism trade of Indo-China. Phnom Penh had originally reached an agreement on a joint venture with Singapore Airlines, but this failed, and MAS was only to eager to fill the gap left by its main rival.

Part of the deal forged with MAS saw the Cambodian government eject two Thai-based carriers, Cambodian International Airlines (CIA) and SK Air, in late 1994. At the time Thailand lodged an official complaint over the treatment of its carriers and blocked RAC's inaugural flight to Bangkok, lifting the ban only after Cambodia threatened to suspend Thai Airways' traffic rights to Phnom Penh.

RAC currently operates two leased MAS B737-400s on international routes and a small number of turboprop aircraft to its domestic destinations.

Any decision by the Cambodian government to end RAC's monopoly and promote open skies would come as a severe blow to MAS. Not only would it hurt RAC's finances, but it would also damage Ramli's stated aim of replacing SIA as the region's leading carrier.

Tom Ballantyne

Source: Airline Business