T ourism Minister Veng Sereyvuth says he expects to sign the contract for the
creation of Royal Air Cambodge before the end of the month, cementing a
wholesale airline shake-up.
But analysts and airline sources have cast
serious doubts over whether the Royal Government's deal with Singapore
International Airlines will be to the long-term benefit of the country and air
The Post has obtained an early draft of the contract for the
creation of the new national flag carrier and some of the contents raised the
eyebrows of independent analysts.
Among areas of concern:
- The government is tightly bound to provide RAC with a Cambodian monopoly not
only on domestic and international air services but also on a wide range of
ground support services, including catering, passenger and cargo handling,
maintenance and at least a share in duty free shops.
- SIA would be able to take a controlling interest on the seven-strong board
by increasing its capital invested. If the government were unable to match the
new stake, SIA would be able to increase its number of directors in line with
the revised financial balance between the two sides.
- The contract is said to be drawn up under the constitution of the Kingdom of
Cambodia but a later contradictory clause specifies it shall be "governed and
construed in all respects in accordance with the laws of Singapore."
- SIA cannot be ordered to divest any part of its stake in RAC for the first
15 years of operation. After that the government will be allowed to acquire up
to 10 percent of the airline's stake.
One analyst said: "My simple advice to the government is 'Don't sign the
"The government's hands are tied very tightly by this contract
for a long time to come and one would have to question why they would want to
"There is currently some competition among airlines here but
this deal would replace that with a monopoly situation."
The two airlines
operating from this country, Cambodia International Airways and Siam Kampuchea
Air have been told by the government to cease operations a week prior to RAC's
launch, targeted for July 1.
These Thai-owned and managed airlines have
been offering discounted fares to regional destinations and airline sources fear
that with their demise travelers will be forced to pay high prices.
RAC is formed it will negotiate a series of bilateral air service agreements
with its opposite number national flag carriers, setting the price and passenger
levels for each proposed route.
An airline industry source has pointed
out that these agreements are open to exploitation by SIA through RAC,
particularly once competing carriers have left.
The source said: "For
example they may get an agreement to cut the number of seats permitted per week
on the Bangkok route, with the intention of forcing more people to enter the
country via Singapore.
"SIA might also use RAC to get around the fact
that they have filled their seat quota with other countries such as the US. In
this way RAC would simply be SIA under a different hat."
International have not been offering any discounts on the $276 economy round
trip fare to Bangkok which was agreed on under the existing bilateral agreement,
yet virtually fill their flights to capacity every day due to their worldwide
Under the proposed deal, the government will take a 60
percent stake and SIA 40 percent. SIA is offering an interest free loan to cover
the government's stake. The government has to provide guarantees it will repay
Previous plans to introduce third and fourth party company
investors have been scrapped, Sereyvuth confirmed.
The minister defended
the deal and said: "We will probably sign it by the end of the month, work is
already going ahead "
Sereyvuth added: "We are doing this in the
interests of tourists and the country.
"We feel that Singapore Airlines
is a company with a good reputation and the expertise to bring in modern
He sidestepped the question of the creation of a monopoly
for RAC, saying: "We have an open skies policy. Anybody can apply to fly. We
have Thai International, Bangkok Airways, Silkair and Dragonair all flying
He said CIA and SK were flying on the Cambodian quota of seats and
could not be allowed to continue.
As to the future of those airlines, he
said: "That is not up to the government, as businessmen they may be able to
figure a way out to keep operating."
Ng also ducked the monopoly issue
saying: "That question is not for me to answer you must ask the
Top CIA executives have said they may relocate their
operation to Vietnam or Laos