European Commission approval is required for a Hong Kong-UK deal That the Hong Kong-UK air services agreement signed yesterday requires European Commission approval shows the uncertain business climate created by Brussels' wish to be the sole negotiator of such pacts for European Union countries. The pact gives Cathay Pacific rights to operate services between London's Heathrow Airport and John F. Kennedy Airport in New York. In exchange, Virgin Atlantic has been given the right to extend its London-Hong Kong service to Sydney. But it must first be approved by the commission in light of a European Court of Justice ruling a year ago that rights and benefits in any bilateral aviation agreements between EU members and other countries must apply to all EU airlines. That is a concession the Hong Kong government ruled out in this week's negotiations, on the grounds that some EU members, such as Italy, offered limited access to Hong Kong-based carriers. Local airline industry sources doubt the new deal will pass scrutiny by the commission, given the increased competition it would bring to the 'kangaroo' route between Australia and Europe. Industry consultants said British Airways and Qantas, which have a joint-venture partnership on the route, together control about 30 per cent of traffic between the UK and Australia, and BA and Cathay fly between 60 per cent and 80 per cent of the passengers travelling between the UK and Hong Kong. 'We're nervous about the implication of commission scrutiny of the deal. I don't think it will hold up,' one source involved in the negotiations said. He said there was no precedent for the commission to review such pacts and it was uncertain how much discussion it would take just to establish the guidelines for forming a panel to review the pact. 'The traffic rights will not apply until there is written confirmation from the commission that it has agreed with the deal. There's no handle on how long that will take,' he said. But Chris Humphrey, Virgin's government and external affairs manager, said: 'It is inconceivable the commission could withhold approval. It is completely pro-consumer and pro-competition.' Cathay officials declined to comment lest they prejudice the commission's review process. A British airline source said: 'Both sides wanted to do a deal, but obviously the Hong Kong negotiators were spooked by the EU issues. In the end, it was agreed that a deal be done now but not implemented until the commission could clarify its position.' Wilson Fung, the deputy secretary for economic development and labour, who led the Hong Kong negotiating team, said it was now up to Britain to take the deal to the commission to see if it violated the spirit of the European Court of Justice ruling. A spokeswoman for Britain's Department for Transport said it would do so. 'What we have done is exchanged [liberalised] opportunities for UK or Hong Kong-designated airlines to fly [between Hong Kong and the UK, as well as some on some routes beyond Hong Kong],' Mr Fung said.