A new air services pact has been agreed between China and its Special Administrative Region of Macau allowing a second airline to operate from each side.

Most observers expect this will be a new low-cost carrier part-owned by Australia's Virgin Blue. The agreement was negotiated late in November. Macau's civil aviation authority says the new memorandum of understanding "greatly enhances the liberalisation of the air transport market between the two places".

It says the number of destinations included in the agreement has been increased to 37 from 31, while the number of allowable passenger and cargo combination services has been increased by 82%, to 539 weekly flights. The number of allowable all-cargo services has been doubled, to 50 from 25 a week.

Perhaps most importantly, the new agreement allows each regulatory authority to designate two airlines to operate between the two sides, up from one. Until the summer schedule of 2006, however, only one airline from each side can be designated for Beijing, Guangzhou and Shanghai, although after that time "all designated airlines are allowed to operate services to all destinations".

Codesharing is also allowed, although not with third-country airlines. Macau became a Special Administrative Region of China late in 1999, but it maintains authority to negotiate its own air services agreements. "The arrangement has put into consideration the potential development of the Macau aviation industry under the present environment and paved the way for big expansion in the future," says Macau's government of the new agreement.

Macau has only one fixed-wing passenger airline, Air Macau, but that carrier has been in talks for months with Australia's Virgin Blue and other potential partners on the establishment of a low-cost airline focusing on the China market. The carrier also plans a major expansion of its cargo fleet. Macau itself is growing in popularity as a leisure destination. Its airport is keen to attract new business from low-cost carriers.

Nicholas Ionides Singapore

Source: Airline Business