CATHAY Pacific Airways is due for a taste of tough competition on its most lucrative route tomorrow as start-up carrier Air Macau begins the first 'semi-direct' flights between Taiwan and China. Air Macau's second leased Airbus Industrie A321 arrived from Germany yesterday and is due to begin flying between Macau and Taipei after the formal opening of the Macau airport tomorrow. Air Macau, which had its inaugural flights to Beijing and Shanghai on the airport's soft opening last month, is allowed under a commercial air agreement with Taiwan to operate 'through-flights' to China - a service previously banned under Taiwan's law governing relations with China. The law bans direct travel by ships and commercial aircraft between Taiwan and China as well as services through third points. Taiwan's Transport Ministry said the government had the power to relax the ban if it was in the 'national interest'. It confirmed Premier Lien Chan agreed to allow Air Macau to operate such 'one-aircraft-to-the-end' flights when an accord was reached on October 17. The only provision was that flight numbers on the Taiwan-Macau and Macau-China legs be different. Air Macau chief executive Ng Kian-wah said thrice-weekly services to Taipei began tomorrow. Analysts said it would mark the beginning of the end of the duopoly held by Cathay and Taipei-based China Airlines between Hong Kong and Taiwan. The Hong Kong-Taiwan routes, which thousands of Taiwan residents fly each year to get to the mainland, is soon to open up to two new airlines - EVA Airways and Hong Kong Dragon Airlines (Dragonair). Those two, and the addition of the Macau airport as a new entry point to China, probably will mean a 5 to 10 per cent drop in revenue for Cathay on the Hong Kong to Taiwan routes next year alone, according to in-house Cathay forecasts. Its Taipei and Kaohsiung routes account for about 15 per cent of annual revenue, analysts said. A decline of 10 per cent would amount to a revenue loss next year of $400 million to $500 million. Cathay said that it would not mean a corresponding reduction in profits. Not only will Air Macau fly between Taiwan and the enclave, EVA Airways and TransAsia Airways will join it early next year and have promised low fares. Air Macau will, from January next year, add a fourth Taipei flight and a weekly service to Kaohsiung. From April, there will be six Taipei services a week. This would amount to about 8,000 seats for sale and fares would be set against those between Hong Kong and Taiwan. The agreement allows airlines from each side to sell a maximum of 4,200 seats between the two points, with the allowance rising to 5,800 between January and March 1996 and then to 8,400 from April.