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Abstract: Political rivals for six decades, Taiwan and China, began regular non-stop passenger flights on July 4, 2008. This paper aims to clarify the implications of the Cross-Strait Air Transport Agreement reached by both countries. It offers a review of air transport development in Taiwan and China and compares their approaches with other countries. In particular, this paper discusses Taiwanese and Chinese perspectives on the opening of direct flights. It goes onto analyse the probable effects of the direct flights and identifies the likely winners and losers. It concludes that strengthening air links between the two countries did reduce travel time considerably for passengers and the resulting growth in business will help cushion the effects of the industry’s current economic downturn. [Copyright &y& Elsevier]