Hong Kong's two major airlines will benefit significantly from a new agreement substantially liberalising air traffic rights in China. Under the terms of the agreement Hong Kong Dragon Airlines will be allowed a range of new scheduled services to China, while Cathay Pacific Airways will gain mainland fly-over rights. The talks between China and Britain which proposed the new arrangements concluded on Thursday after four days of discussions. Hong Kong was represented on the British side by the Economic Services Branch. Details of the pact have been made public just days after Cathay shareholders approved the historic deal that will see a dramatic restructuring in the ownership of both Cathay and Dragonair. The Beijing-backed conglomerate Citic Pacific was given the go-ahead to raise its stake in Cathay from 10 per cent to 25 per cent, in a move which saw Swire Pacific's stake reduced to just under 44 per cent from 52.6 per cent. Swire/Cathay and Citic also sold a total of 35.9 per cent of Dragonair to the China National Aviation Corporation. Under the terms of the Sino-British agreement, it appears Dragonair will be the big winner. The airline has not been able to obtain any new routes or capacity in China over the last two years, despite its open desire to expand on the mainland and a 20 per cent growth in the mainland air market over the period. Dragonair will now be granted five new mainland routes and also will obtain an increase in capacity on the Hong Kong to Dalian route, in the wake of the change of its ownership structure. Both Cathay and Dragonair will be winners from the provision which will allow Hong Kong airlines to fly over China on their major services to Hanoi, Europe and North America. Cathay is likely to be particularly boosted by this provision, because of its broad range of international routes and the shortened flight time it will now encounter to these destinations. Cathay has welcomed the outcome of the Britain/China talks. Its managing director, Rod Eddington, said in a statement the agreement was 'a balanced one with something for all parties'. Ultimately, the increased fly-over rights would provide 'an improved service to Cathay Pacific travellers'. British Airways will also benefit from new over-flying rights in China, but has been knocked back in its bid for landing rights in Shanghai. A Government spokesman yesterday said the full details of the package could not be unveiled due to 'commercial sensitivities'. However, he said the overall package was a good one, allowing Hong Kong airlines to provide new and better services to the public.