HONG KONG air services negotiators have reportedly offered concessions to Australia in a bid to break the deadlock in a dispute threatening to halt flights between the two points. Reports in Australia said the Hong Kong Government was prepared to drop its demand that a 50 per cent cap be imposed on the number of passengers Qantas Airways could pick up in Hong Kong and carry to Singapore and Bangkok. Hong Kong is insisting on certain limitations to the intra-Asian services of Australian flag carrier Qantas, and is unlikely to permit expansion of so-called fifth freedom rights to other Asian destinations. A fifth freedom is an airline's right to pick up passengers and cargo in a foreign country and carry them to another foreign country. Hong Kong's negotiators, led by Economic Services Branch chief negotiator Andrew Pyne, met their Australian counterparts in Canberra last Wednesday. No progress was made, but branch spokesman Phylomena Fung Tam Lap-chun said talks would be held before the December 31 deadline for a new agreement to be reached. No dates had yet been set. 'We exchanged views and we adopted a flexible and reasonable attitude,' Ms Fung said. 'There should be more talks held . . . but no date has been set.' The previous round in Hong Kong last month ended after just two hours when Australia approached the bargaining table with a long list of demands, taking Mr Pyne and his team by surprise. In June, the two sides set December 31 as the deadline to 're-evaluate' the existing air services agreement and draw up a new confidential memorandum of understanding (CMU). Bilateral agreements are a prerequisite for services between countries and normally specify routes to be operated, airlines designated to fly them, the capacity each side may provide and the tariffs. The agreements often come with CMUs, which are more restrictive than the published air services agreements and the details of which are kept secret. The dispute flared up in April after Cathay Pacific Airways accused Qantas of reneging on the terms of the existing air services agreement by picking up too many passengers in Hong Kong.