Hong Kong and Australia have reached a landmark agreement, substantially liberalising air services between the two places.

The deal calls for a completely open regime for air services between Hong Kong and all regional points in Australia, such as Adelaide and Cairns. Within two years, the capacity for services between Hong Kong and four Australian gateway cities - Sydney, Melbourne, Brisbane and Perth - is set to double under the arrangement.

"The much expanded capacity will enable an additional Hong Kong carrier to launch services to Australia. This will enhance competition on this popular route and the travelling public will certainly benefit from the deal," Deputy Secretary for Economic Development & Labour Wilson Fung said.

Mr Fung led the negotiation on the Hong Kong side.

Dragonair designated third HK airline to fly Down Under

The Government has designated Dragonair as the third Hong Kong airline to operate services between Hong Kong and Australia.

The agreement also includes a comprehensive code-share facility for airlines to co-operate with their partners to enhance their marketing capability and offer better connected services to travellers.

Under the arrangement, Australian carriers can more easily establish their hub in Hong Kong for traffic to and from Europe.

"This is an important step for Hong Kong to compete with other regional hubs to attract more traffic to hub through Hong Kong on the Kangaroo Route. This will further strengthen Hong Kong's position as an aviation hub in the region," Mr Fung said.