China and Hong Kong have negotiated a new air services pact that allows more passenger and cargo flights and finally allows Cathay Pacific Airways to operate passenger services to Shanghai, writes Nicholas Ionides.

Hong Kong’s government says the new agreement provides “a clear timetable for opening the aviation market”, which airlines have for years criticised for being too restrictive.

It will allow for services on another 11 routes between China and Hong Kong, increasing the total to 56 from 45 and “extending coverage to all major cities on the mainland”.

More airlines will be allowed to operate between China and Hong Kong. From the first quarter of 2007, each side will be able to designate up to three airlines to operate passenger and/or cargo services as well as one airline to operate dedicated cargo services on most routes.

Restrictions will remain over services to cities such as Beijing, Guangzhou and Shanghai, but the new agreement will allow for more flights to these destinations and will enable Cathay Pacific to fly to Shanghai, which it has sought to do for some time.

“Capacity constraints on most routes will also be relaxed,” adds the Hong Kong government.

The deal was announced weeks after Cathay agreed to acquire fellow Hong Kong-based carrier Dragonair, which earns most of its revenue from China services, as well as increase its stake in Beijing-based Air China to 20% from 10%. Air China, with subsidiary China National Aviation, will in turn acquire a combined 17.5% of Cathay.

In a separate deal, China’s Hainan Airlines last month acquired 45% of Hong Kong-based CR Airways.

Hong Kong became a Special Administrative Region of China in 1997, but retains autonomy over its air-services policies.

Source: Flight International