Optimism is growing that sensitive and secretive negotiations to secure a new commercial air services agreement between Taiwan and Hong Kong can be concluded by June. Sources close to the negotiations say the Taiwanese have proposed that their airlines not have an official presence at the continuing talks. A Taiwanese airline official said he understood the Taipei Aviation Association (TAA) would take over the negotiations on behalf of the airlines. This move is expected to go a long way to finally bringing the two sides together, as they have been having tremendous difficulty even agreeing who would negotiate for their respective sides. Sources said Taiwan's move was made in response to concessions proposed by Hong Kong before Christmas, backing off its stance to negotiate only with China Airlines and EVA Airways, the two Taiwanese carriers with operations to Hong Kong. Instead, Hong Kong decided that the TAA would make an acceptable counterparty. The TAA is an industry coalition that includes Taiwan's key carriers and often serves as a cloak for Taipei's official representatives in dealings with mainland-linked parties. For Taipei's part, it has insisted in recent years that, since Taiwan-Hong Kong air services constituted cross-straits relations, negotiations would be handled directly by government bodies or government-authorised private agencies, such as the Straits Exchange Foundation. 'There are still some political and other issues to be dealt with and resolved, but the magnitude of our differences have certainly diminished over the past few months,' a source said. He added that neither side wanted to see a third six-month extension to the five-year pact which expired last June, alluding to the move by negotiators to simply extend the old agreement when a series of pre-Christmas meetings failed to produce a new accord. While air traffic between Hong Kong and Taiwan has fallen in recent months because of the economic downturn and other post-September 11 effects, airlines say that it remains the busiest international route in Asia. The talks are especially important for Dragonair and EVA, as the pair have a significantly smaller presence than their larger rivals China Air and Cathay Pacific Airways. Under a new agreement, Dragonair expects to be offered a share of the Hong Kong-Taipei route for the first time. Since direct cross-straits air transport links will probably also be a reality within the lifetime of a new agreement, Dragonair will be especially eager to begin work as soon as possible on building up its market presence ahead of time. Cathay officials declined to comment. It is believed that as much as 40 per cent of Taiwan-Hong Kong traffic is transfer traffic to mainland destinations, either by air or other transport modes. While Beijing is presumed to have been behind Hong Kong's tough stance on Taiwan, it has moved significantly to soften its approach to cross-straits relations in recent months. This is part of increased wooing of Taiwan by the central Government, including the recent relaxation of a mainland travel ban on members of the ruling Democratic Progressive Party. Still, Taiwan's move is unusual in that previous air services pacts with Hong Kong have been binding agreements signed by the airlines involved, rather than the usual government-to-government bilateral agreement. With the airlines not officially present, the Taiwanese negotiating party will have to prove that it has a binding right to sign a new pact with Hong Kong on behalf of its carriers.