Taiwan and Hong Kong have reached a "consensus" to solve a sensitive sovereignty issue in an aviation agreement between the two sides, it was reported Tuesday.

After the first two rounds of negotiations, the two parties reached an initial consensus on the number of flights, the content of the agreement to be signed, and who will sign on behalf of the two sides, the China Times said.

"The sole disputable point is if Taiwan's director of the Civil Aeronautics Administration (CAA) would also be able to put his signature on the agreement," an aviation source was quoted by the paper as saying.

"However, it is understood Taiwan may back down on the front after Hong Kong negotiations agreed that the pact would model on the aviation pact Taiwan struck with

Macau," the source said.

Under the new pact the Taipei Airlines Association would sign on behalf of Taiwan while the Hong Kong side would be represented by Cathay Pacific Airways and Dragon Airlines.

The existing pact was signed by the two air carriers and Taiwan's China Airlines and EVA Airways.

Transportation minister Lin Ling-san told parliament in April a new air pact would be signed before a second six month extension of the old accord expires at the end of June.

The third round of talks are due to be held in Taipei on Friday.

No CAA officials were able to confirm the report.

Taiwan's mainland policy decision-making body Mainland Affairs Council had previously demanded the new pact be signed on a govern-ment-to-government basis. But the proposal had been rejected by Beijing, which considers Taiwan part of its territory.