Cambodia gets national carrier with Vietnam's help

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PHNOM PENH, July 27 (Reuters) - Cambodia launched a new national carrier on Monday, a $100 million, three-aircraft venture set up in a bid to boost the tourist sector with the help of Vietnam Airlines.

Cambodia will hold 51 percent of Cambodia Angkor Air and Vietnam Airlines the rest.The airline will operate domestic flights from Cambodia's capital, Phnom Penh, to Siem Reap, site of the Angkor temples, the country's biggest tourist destination, and to the coastal tourist town of Sihanoukville.

"The government is investing to facilitate the company's flight operations to carry tourists for competitive fares, to attract more visitors," Prime Minister Hun Sen told a crowd at Phnom Penh International airport.The new airline will initially operate with two ATR 72 planes and is scheduled to get an Airbus A321 in September.

It was looking to expand commercial flights to Vietnam and another neighbouring country, Laos, and hoped to increase its fleet to 10 by 2015, said Vietnam Airlines Executive Director Pham Ngoc Minh.

Vietnam and Cambodia are traditional rivals, and Vietnam's deputy prime minister, Truong Vinh Trong, said at a signing ceremony on Sunday evening that the airline was not just a rare joint investment, but a way to "improve the two Asian neighbours' bilateral relations".

Cambodia has had no national carrier since Royal Air Cambodge went bankrupt in 2001 with estimated losses of $25 million.In 2007, Indonesia's Rajawali Group signed a deal with Cambodia to establish a flag carrier and planned to begin flights in mid-2008, but the deal was cancelled because of the global economic downturn.

Cambodia welcomed 2.2 million tourists last year.Tourism brought in the equivalent of 13 percent of gross domestic product in 2005 to 2007, according to the International Monetary Fund.

The sector had been growing at around 18 percent a year before the global financial crisis but growth in the sector is likely to be only 5 percent this year, according to tourism officials.The IMF has forecast that Cambodia's economy could shrink 0.5 percent this year, hurt by a drop in tourism and a slowdown in garment exports.