Hainan Airlines is set to become the first mainland airline to invest in a foreign flag carrier - clinching a deal to take 49 per cent of Air Cambodia. Hainan will become the largest shareholder in the carrier, set up to replace bankrupt Royal Air Cambodge which stopped flying in October last year. Air Cambodia would have a monopoly, Hainan executive vice-president Zhong Shu said. In an announcement to the Shanghai stock exchange, Hainan said it would invest US$4.9 million. The new carrier will have a registered capital of US$10 million. The Cambodian Government will contribute market access and property rights worth US$4.1 million for a 41 per cent stake, while Cambodia-based CTG will exchange US$1 million worth of intangible assets for a 10 per cent stake. Mr Shu said the deal was struck after talks with the Cambodian Government. The deal awaits approval from Cambodia's Civil Aviation Authority and the Civil Aviation Administration of China. Analysts believed the investment would also encourage more mainland tourists to visit Cambodia. An official at Hong Kong's Cambodian Consulate said the mainland and Hong Kong were prime sources of tourists for Cambodia, which last year saw about 400,000 visitors arriving by air. Royal Air Cambodge was forced into bankruptcy in October due to high indebtedness, administrative problems and reduced travellers following the September 11 terrorist attacks on the United States. In its early stage of operation, Air Cambodia planned to lease two Boeing 737-400 planes, air crew and maintenance services from Hainan, the Hainan Daily reported. Hainan Airlines is 14.8 per cent owned by investment fund American Aviation. The commercial arm of the mainland's aviation regulator, China National Aviation Corp, bought 35.3 per cent in Dragon Airlines in 1996 from Swire Pacific, Cathay Pacific Airways and Citic Pacific. State-controlled companies also hold large stakes in overseas airlines, such as Citic Pacific's 25 per cent holding in Cathay Pacific Airways.