Airlines flying to Cambodia look likely to face increased competition with renewed

interest in the bankrupt national carrier from a Chinese company, and the arrival

by April of another new entrant.

With both groups seeking state approval for their plans, the Minister for the Council

of Ministers, Sok An, flew to China for negotiations on the future of Royal Air Cambodge,

the national carrier.

China's Hainan Air, in which American financier George Soros has a stake, is said

to be close to securing a joint venture with the government to re-launch RAC, which

ceased operations October 2001 to seek "a new financial situation" after

running up losses of at least $30 million. Minister Sok An is in charge of the airline

and is keen to find a new partner.

Early reports suggested a deal had already been done. However under-secretary of

state for civil aviation, Tea Sutha, said "negotiations are progressing at the

moment, but the agreement is not yet finalised".

A potential problem is that there is at least one court case still outstanding against

RAC and its former joint venture partners: the company is being sued for several

million dollars by ATR, a division of Airbus, for unpaid leases on its former fleet.

That case is being heard at the Queen's Bench Commercial Division of the High Court

in the United Kingdom.

A reborn RAC could face competition from Australian group, VIA Aviation, which earlier

announced plans for its own international airline. Mekong Airlines plans to fly to

several of RAC's old destinations including Hong Kong, Kuala Lumpur, Bangkok and

Singapore

A management source said that the State Secretariat for Civil Aviation would issue

a licence early March; Mekong Airlines hopes to begin flights April 1.

"We have our company registered at the Ministry of Commerce and have applied

for an Air Operator's Certificate through the SSCA. This has been approved and will

be issued ... next week," he said. "We have great confidence in the ministries

to honour their commitments which we have discussed in depth over the past 12 months."

With tourist numbers up 25 percent on 2000 and with 250,000 passengers flying into

Phnom Penh alone, the rush of new airlines has caused fears about air safety and

infrastructure.

In its 2001 report, the Cambodia Development Resource Institute stated that although

the government's 'open skies' policy had resulted in higher passenger numbers, "based

on current increases in passengers Phnom Penh [airport] will reach its capacity in

the next five years".