CAMBODIA International Airlines (CIA) is threatening legal action over the Cambodian Government's order for it to cease operations and hand over routes to newly re-launched national carrier Royal Air Cambodge (RAC).

The Thai-owned airline says that it was given 24h notice to stop services on 24 December, invalidating some 35,000 bookings and stranding 3,500 paid passengers around the region. Smaller operators SK Air and Kampuchea Airlines were also forced to shut down.

At the same time, Malaysian Helicopter Services (MHS) has taken a 40% stake in RAC, in the latest of a series of major air-transport acquisitions. MHS, which holds a controlling 32% share in Malaysia Airlines (MAS), signed a joint-venture agreement with the Cambodian Government on 28 December. The remaining 60% of Phnom Penh-based RAC is owned by the Government.

Under the MHS deal, MAS will provide RAC with management and sales support, and a leased Boeing 737-400. The airline's first service was on 2 January between Phnom Penh and Kuala Lumpur.

RAC has been given a monopoly on international and domestic services. CIA argues that, as the Government revoked its operating licence, it is therefore responsible for its stranded passengers and wants compensation for its $12 million investment. "We're looking into legal action, probably in the Singapore courts," says the airline.

It also accuses the Government of reneging on pledges to respect CIA's three-year-old agreement with Cambodia's former interim government and to let it keep flying.

The Government has refused to take responsibility for compensating CIA passengers, claiming that the company was warned in early 1993 that its licence would be revoked once RAC was re-launched. At the time, Cambodia was negotiating a joint venture for RAC with Singapore Airlines, but failed to reach an agreement.

CIA claims that, as late as 18 December 1994, the Cambodian Government had told the Taiwanese authorities that it would be the designated carrier on the planned start-up service between Phnom Penh and Taipei. "When something like that happens, you think you've an on-going business," says CIA official Jeff Swain.

CIA had planned to launch a service to Japan in April and had just completed the purchase of two more Boeing 727-200s.

Source: Flight International