Nicholas Ionides/HONG KONG Air services talks between Hong Kong and the USA ended in failure in the second half of April, with Hong Kong claiming US demands were unreasonable and the US side accusing the former UK colony of failing to liberalise as promised.

The round was the first formal session since 1995, when the two sides last updated their air services accord after years of difficult discussions.

While few anticipated major breakthroughs, agreement was expected on codesharing to allow American Airlines and Cathay Pacific Airways to market flights jointly. Negotiators failed even to agree on this, however.

The US side has been calling for an "open-skies" arrangement for some time. Hong Kong, however, argues that rights to operate US domestic flights would have to be granted to its carriers in return for open beyond, or fifth freedom, rights for US carriers.

Hong Kong has for years been accused of having a protectionist aviation policy, but has been promising to open up over the past 12 months.

Since the failure of the talks, US airlines have again gone on the offensive, saying the government is not living up to its liberalisation commitments.

This is despite the fact that the existing air services agreement effectively allows for unlimited services between Hong Kong and the USA and some fifth freedom rights.

United Airlines is the main US carrier serving Hong Kong, with just under 3%of total frequencies, making it the tenth largest carrier serving the former UK colony. Overall, North America accounts for just over 5% of Hong Kong's traffic. Cathay Pacific is Hong Kong's leading airline, accounting for 27% of flights.

Source: Airline Business