OFFICIALS have effectively ruled out the prospect of halting Qantas Airways flights between Hong Kong and Australia, confirming yesterday the airline would be issued with a new operating permit. Hong Kong's Economic Services Branch said the new permit would be granted with restrictions on passenger volume originating in the territory that the Australian airline could carry from Hong Kong on its 'fifth freedom' routes to Singapore and Bangkok. Air services negotiator Janice Tse Siu-wa said: 'We are going to issue a new permit to Qantas . . . some time this week, that would cover flights from Australia to the end of this traffic season.' She said the branch would 'have to take some action' on the number of travellers Qantas could carry onward from the territory. The current traffic season runs from March 26 to the end of October. The Qantas permit expired in March but was extended to the end of this month pending the outcome of negotiations. Ms Tse was in Canberra two weeks ago negotiating an extension to the current agreement, due to expire on April 29. The talks failed after three days of heated discussions over Qantas's alleged fifth freedom abuses. The all-important fifth freedom is an airline's right to pick up passengers and mail from a foreign country and deliver them to a third country. It is most often the subject of aviation disputes between countries. The dispute is over a claim by Cathay Pacific that 85 per cent of the passengers Qantas took from Hong Kong to Bangkok and Singapore were picked up in Hong Kong and not Australia. Cathay claimed 100 per cent of the passengers on the Bangkok route boarded in Hong Kong, while 75 per cent on the Singapore route did so. Qantas claimed it picked up only between 50 and 60 per cent on the two, in line with industry practice. There had been speculation that the territory would impose a 35 per cent limit on the number of passengers originating in Hong Kong Qantas would be allowed to carry after April 29, a limit Hong Kong negotiators had demanded during negotiations early this month. The move would almost certainly have led to retaliation by Australia against Cathay. Sources yesterday said the branch would not be restricting the number of passengers to 35 per cent, leading to speculation that it would be set at half. A 50 per cent limit would represent a compromise by the territory which could appease the Australian Government. Qantas Airways Hong Kong general manager Rick Coyle said: 'We will make up our mind on what we think about it after we see what is in the permit.'