China, Hong Kong agree to ease airline curbs

HONG KONG, Dec 27 (Reuters) - Hong Kong and mainland China have agreed to relax a swathe of restrictions on aviation services, letting carriers such as Air China (0753.HK: Quote, Profile, Research) and Cathay Pacific (0293.HK: Quote, Profile, Research) expand flights and cargo services.

Hong Kong also said it had reached a bilateral deal to more than double existing flights to the Indian cities of Mumbai and Delhi, as well as to launch new flights to Bangalore and Chennai, although it did not say when the agreement would take effect.

Asian airlines are keen for access to booming Chinese cargo and passenger business, a pivotal reason behind Cathay's tie-up with Air China (601111.SS: Quote, Profile, Research) last year and Singapore Airlines' (SIAL.SI: Quote, Profile, Research) pending acquisition of 24 percent of China Eastern (0670.HK: Quote, Profile, Research) (CEA.N: Quote, Profile, Research) (600115.SS: Quote, Profile, Research).

Hong Kong and mainland China have agreed to scrap restrictions on the number of all-cargo services from the end of October 2008, including for services to and from Beijing and Shanghai, the Hong Kong government said on Thursday.

On passenger services, airlines would be allowed to operate without any capacity restrictions on 49 routes, versus 35 routes at present, from summer of next year.

"(The agreement) will strengthen the status of Hong Kong as an international and regional aviation hub," the city's government said in its statement.

Cathay Pacific welcomed the agreement. The carrier's chief executive Tony Tyler said in a statement it would bring more Hong Kong and international passengers to the mainland using Hong Kong as a hub.

The proposed memorandum of understanding covers other initiatives, including letting more airlines ply more routes, but restrictions in general will be relaxed more gradually for the busiest destinations: Shanghai, Beijing, Guangzhou, the tourist hotspot of Kunming, Chengdu in the southwest and Dalian in the northeast. (Reporting by Edwin Chan; Editing by Edmund Klamann)