CONFIDENTIAL
RECEIVED IN
Regy
hoe
REGISTRY No.52
MEMORANDUM OF DISCUSSION
SHELL MEX HOUSE 14 FEBRUARY 1974
28 FEB1974
(34)
Sed to HK10)
Air Division
JR Stephenson CA2/1A
Present: Messra G T Rogers
A Warrington
CA2
A Swire
John Swire and Co
HJC Browne
John Swire and Co
CATHAY PACIFIC AIRWAYS (CPA): CHOICE OF WIDE-BODIED AIRCRAFT
Introduction
RECEIVED IN REGISTRY No. 55
14 MAR 1974
HKK 21|1
26.12.
(1) Messrs Adrian Swire and Browne had come at the DTI's request to explain the thinking behind the CPA board's decision to choose the Douglas DC10-10 in preference to the Lockheed TriStar as the basis of their re-equipment plans.
(2) Mr Swire started by emphacising, lest there should be any doubt, that he and Mr Browne had only come to explain the CPA decision and were quite unable to act independently of Cathay Pacific's full board.
(3) Although CPA have been offered secondhand DC10s and TriStars the board have definitely decided to buy two new aeroplanes. They are doing this so as to ensure that CPA receive the maker's full engineering support. After the first two they may well buy secondhand aircraft.
Lockheed's Future and CPA's Ability to accept Risks
(4)
One reason had dominated all others in Cathay Pacific's thinking on the choice of wide-bodied aircraft. Namely, that CPA, being a small airline, had to buy from a manufacturer who could be relied upon to continue to develop the model purchased, and equally would be able to correct any defects that might be found to occur in any model.
(5) CPA did not want to make the same mistake twice: they had paid dearly for buying the Convair 880 whose growth had subsequently been completely stultified.
(6) CPA had a high regard for Lockheed. They had been particularly grateful that Lockheed had been strong enough to spend a very large sum of money (around US £60 million), on correcting the fatal faults in the wings of the Electras. Had Lockheed not done this free, Cathay Pacific could have been bankrupted through their fleet of Electras.
(7) CFA have no confidence that Lockheed can be relied upon to correct major faults or develop new models; CPA were too small to take the risks arising from Lockheed's financial position.
(8) The same theme, of CPA's size and its ability to bear risks, was echoed when Mr Swire said that the Boeing 747 had been rejected as being too large. CPA could not take the risk that the traffic would grow sufficiently. CPA want a plane that can be stretched. They are convinced that in their area wide-bodied aircraft will become essential as the number of "slots" available for their operations at various airports cannot be increased much more.
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CONFIDENTIAL