RPT-China, Taiwan airlines to see lift from new flights

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By Joseph Chaney

TAIPEI, June 29 (Reuters) - Direct weekend flights between China and Taiwan starting this week are likely to give a boost to carriers on both sides of the Taiwan Strait at the expense of Hong Kong, but probably not until all restrictions are lifted.

Beijing and Taipei on June 13 signed a deal to launch the first regular weekend flights since 1949 after a decade-long stalemate between the world's No. 4 economy and the neighbouring island it claims as its own.

Most flights between China and Taiwan now need to stop at a third external destination such as Hong Kong or Macau, providing a boost for airlines in those hubs. [ID:nSP105393]

Over the long term, unlimited direct flights would wipe nearly a 10th off the bottom line of Hong Kong's flagship carrier, Cathay Pacific (0293.HK: Quote, Profile, Research, Stock Buzz), which had hitherto enjoyed a large chunk of the business of flying passengers on the roundabout route, according to Nomura.

But the deal set to take effect this week will be relatively limited, allowing for a small number of direct flights only on weekends (defined as Friday through Monday) that still must pass through Hong Kong airspace.

New Taiwan President Ma Ying-jeou has said he wants to make the flights daily and more direct as soon as possible, with a broader deal possible as soon as next year.