Extra baggage: Capacity for cargo services will rise 100% from October.

Hong Kong and the Mainland will increase air passenger and cargo capacity in October.

Under a new air services arrangement, overall passenger capacity will rise 30%, increasing weekly passenger flights operated by airlines in the two jurisdictions to 1,600.

Cargo capacity will also increase 100% from the current 21 flights a week for each side to 42, bringing the total number of weekly freighter services that can be operated by airlines of both sides to 84.

The new arrangement provides a clear timetable for opening the Hong Kong-Mainland aviation market to more airlines and for expansion of capacity limits on individual routes. The limit on the total number of airlines allowed to partake in the market will be lifted immediately, while the number of routes that allow "dual designation" by each side will rise in phases, eventually covering all routes by winter 2006.

Strengthening HK's status

Secretary for Economic Development & Labour Stephen Ip said a liberal arrangement is crucial for enhancing the competitiveness of Hong Kong International Airport, and for strengthening Hong Kong's status as a global and regional aviation centre.

"In the face of increasing competition from airports in the region, the Government must firmly and actively implement its progressive liberalisation policy on air services. The latest expansion of the arrangement clearly demonstrates our commitment to this policy," he said.

Since the arrangement was signed in 2000, annual reviews are conducted to address market needs. Compared to previous exercises, the latest review covered a much wider spectrum of issues and achieved substantial progress on various fronts.

Beijing, Shanghai flight frequencies rising

Taking Beijing as an example, the new arrangement will allow Hong Kong airlines to add four weekly passenger frequencies from next month and another seven from March, bringing the total to 70.

For Shanghai, Hong Kong can designate a new airline to operate all-cargo services from next month, and the maximum number of cargo flights on the route will rise from 21 to 28 per week. Passenger capacity will grow about 10%, or seven flights a week, and another 10% from March, bringing the total number of weekly frequencies that can be operated by the Hong Kong airline to 98.

In addition, from October 2006, a second Hong Kong airline will be allowed to operate passenger services to Shanghai. The new rights provide valuable business opportunities to Hong Kong airlines planning to launch or increase services.

Lijiang route to be introduced

The arrangement currently offers a wide route network covering 44 Mainland destinations. A new route to Lijiang has been included and will run once customs, immigration and quarantine facilities are in place and technical issues are fulfilled.

The new arrangement also provides for new modes of operation and additional flexibility, by allowing airlines to combine two Mainland points in one service, and enter into code-share arrangements.

Expanded through-running rights (to more destinations with higher capacity on each route) are also provided to Mainland airlines to operate services to overseas destinations via Hong Kong, to strengthen the airport's hub position.

Mr Ip said: "It is a win-win arrangement for all, as the additional traffic rights will create abundant opportunities for both incumbent airlines as well as newcomers."

He said it will add impetus for further development of the local aviation industry, bring in more competition and provide consumers with wider choices.