Government negotiators from Hong Kong and the Philippines have finally agreed to a formal round of talks on air services, signalling that a six-month wrangle over flights may soon end. Industry sources last night said two days of talks were due to begin in Manila today in a bid to resolve the dispute that threatens to halt flights between the Philippines and the territory after Hong Kong reverts to China next year. They are the first talks since a February round failed. It was crucial that agreement was reached at this round because the handover was getting close, one source close to the talks said. The source said the last round of talks ended in deadlock after Hong Kong refused to give in to Philippine demands that capacity be cut on the Hong Kong-Manila route to boost the dwindling market share of Philippine Airlines (PAL). Although China's takeover is still 328 days away, all air agreements - previously negotiated by Britain on the territory's behalf - must be approved by the Sino-British Joint Liaison Group (JLG). The process normally takes one year, according to an airline official. This means it could already be too late for any agreement to be approved by the JLG in time for the handover. A Manila-based senior executive of Philippine Airlines said the two sides had been moving closer to talks in the past weeks, although relations were still poor. 'We are working on the basis that flights will continue,' the executive said. 'We are quite aware of the approval procedures and we are confident there will still be flights after China takes back Hong Kong. We are not worried.' Cathay Pacific Airways corporate communications manager Kwan Chuk-fai yesterday said the airline was pleased talks were finally taking place. 'Naturally, we would like to see some results from the talks,' Mr Kwan said. 'It would be important for the airlines from both sides to plan their future services.' Air services agreements are a prerequisite for services between countries, and normally specify the routes to be operated and the airlines designated to fly them. They also set out the capacity each side may provide and tariffs to be charged. The agreements often come with confidential memorandums of understanding, which are more restrictive than the published air services agreements and the details of which are kept secret. Last August, negotiators initialled a confidential memorandum of understanding that opened up more Philippine airports for flights to and from Hong Kong, but it needs a new bilateral agreement to be valid after June 30 next year. The February talks were the ninth round in eight years aimed at finding an agreement to replace the British-negotiated deal - in place since 1955 - which expires on June 30 next year. It is understood that a last-ditch commercial agreement to maintain flights after the handover has been brought up in discussion, although it has not been formally proposed. It would be modelled on the existing arrangement between Cathay, Hong Kong Dragon Airlines, Taipei-based China Airlines and its rival Eva Airways, which allows for services to and from Taiwan. The two airlines would have to come to their own agreement on frequency and capacity, and would have to agree to a renewal of operating permits for the five other foreign airlines and two other Philippines-based carriers that fly between Hong Kong and the Philippines. Because it would apply after the handover, an agreement would have to be approved by China. A Manila accord is the last one to be worked out before the change of sovereignty. Air services agreements with 19 countries have either been approved by the JLG or are awaiting approval.
