A new national carrier is set to break into the Kingdom’s  monopolised domestic airline market with the formal establishment yesterday of Cambodia Airlines, stoking hopes of cheaper airfares.

Cambodia Airlines will launch flights by the third quarter of this year linking Phnom Penh, Siem Reap and Sihanoukville, said Mark Hanna, chief finance officer of Royal Group, which has a 51 per cent stake in the joint venture airline.

Regional flights would begin in October, and Cambodia Airlines is also considering launching services to more obscure domestic destinations such as Battambang, Ratanakkiri and Mondulkiri, he said, ahead of the signing ceremony yesterday.

“We are looking at Southeast Asia and China, and will be flying to the major regional hubs,” Hanna said.

“Long-haul flights will start next year,” he added. He could not confirm any specific destinations, and declined to reveal the airline’s paid-up capital.

Philippines-based food, beverage and packaging giant San Miguel Corporation, which already has significant holdings in Philippine Airlines, owns the remaining 49 per cent stake of the joint venture.

The arrival of a new player in Cambodia’s airline market will likely up the ante for Cambodia Angkor Air (CAA), which until now has enjoyed total market share of the Kingdom’s scheduled domestic flights.

A January report from the Centre for Aviation found that CAA’s monopoly had led to unusually high fares, causing domestic air travel to shrink by about 15 per cent since roughly 170,000 domestic passengers took to the skies in 2008.

The government later disputed these claims, with Council of Ministers Secretary of State Tek Reth, himself chairman of CAA, arguing that other local airlines operating chartered flights were free to launch scheduled domestic flights. He said international carriers were forbidden from entering the Cambodian domestic market and that it was standard practice for countries to impose such restrictions. With the new Cambodia Airlines in the works, experts said yesterday they believed the industry would benefit.

“With more competition, I believe ticket prices may go down, but I don’t know by how much,” Cambodian Association of Travel Agents president Ang Kim Eang said.

The new airline has been more than 10 years in the making for the Royal Group, which set up a company called Cambodia Airlines in 2002.

“We didn’t launch [the airline] because we were looking for a suitable partner,” Hanna said.

Negotiations had begun last year with San Miguel, he said. That  year, San Miguel bought a 49 per cent stake in the loss-making Philippine Airlines for $500 million.

Philippine Airlines had a good network of long-haul destinations in the US and Europe, so “We can feed into this network,” Hanna said.

Cambodia Airlines hopes to bring in two Dash-8 aircraft for domestic flights and two Airbus A321s to fly overseas. The airline will submit its flight plans to SSCA “over the next couple of months”.

Cambodia Airlines and Royal Group chairman Kith Meng said the new carrier would “contribute to Cambodia’s economic growth by creating employment opportunities, bringing in foreign investors and building a strong aviation industry.”

Both Cambodia Angkor Air and Cambodia Airlines insisted they were not worried about the competition that lay ahead.

“The number of tourism arrivals  in Cambodia is growing quickly every year,” Hanna said.

“Cambodia Airlines] believes there is a demand for two airlines in this country.”

Meanwhile, Reth said: “[Cambodia Airlines] is the newcomer. We have been flying in this market for more than three years — they should be worried about us.”