Compromises on symbolic points have produced new air agreements between Taiwan and both Hong Kong and Macau. Following expected ratification in December, Taiwan will have five-year agreements that straddle the return of both territories to Chinese control. The deals provide new opportunities for Taiwan's airlines and an end to the long-running uncertainty about its crucial but indirect transport links with China. But it has paid a high price.

The new Hong Kong accord required Taipei to drop its demand for new weekly flights from 35 to 16, and to concede that the new airlines on the route can operate no other flights except these new frequencies. Cathay Pacific will turn over five Kaohsiung flights to Dragonair, but otherwise the current 105 flights will remain equally divided between the incumbents, Cathay and China Airlines. By mid-November Taipei hoped to designate one or more carriers for Macau service and to choose between EVA Air, Mandarin, and TransAsia as its second carrier to Hong Kong. But in view of the agreed flight restrictions, Hong Kong no longer seems like much of a plum.

Speaking of plums, Taipei's political concessions were more painful than its commercial ones. One was to convince China Airlines to replace the Taiwan flag on its tail with a plum blossom. CAL's chairman, Hung I Chiang, says the change is part of a new image introduced strictly for commercial reasons, but the Sino-British Joint Liaison Group, which oversees Hong Kong's transition, reportedly insisted that CAL could not carry the controversial flag into Hong Kong after July 1997.

Taiwan also retreated from its request that the Hong Kong pact be signed by its quasi-official Taipei Airlines Association, and instead the two carriers from each side will be the only signatories.

The biggest concession, however, followed from a retreat during Taiwan-Macau negotiations. Taiwan had insisted that Air Macau not fly the same aircraft from China to Macau and then on to Taiwan because that would breach Taiwan's ban on direct links with China. When Air Macau pointed out the hardships that would cause given that it only had two aircraft, Taipei agreed that the same plane could fly both sectors so long as it changed flight numbers in Macau.

Dragonair could not plead the same fleet shortage, but when the issue of Dragonair flights from China to Taiwan arose in the Hong Kong talks Taipei accepted the same compromise, so Dragonair can use the same aircraft if it changes flight numbers in Hong Kong.

This precedent-setting compromise drew more fire during a parliamentary debate in Taipei than other sensitive features of the Macau agreement. For instance, a Chinese representative participated in the Macau talks - with Taiwan's acquiescence - and Air Macau flight crews operating into Taiwan will mostly be Chinese nationals. Flights between Taiwan and Macau will routinely overfly southern China, operating under Chinese air traffic control.

Finally, in a major but little discussed retreat, Taiwan will allow Air Macau to operate to Taiwan even though an Air China subsidiary holds a majority of its equity. Previous Taipei policy banned companies owned by China from doing business in Taiwan. The US also has retreated from its earlier opposition and inked a bilateral despite the Chinese majority stake in Air Macau.

David Knibb

Source: Airline Business