1
CONFIDENTIAL
AS MUCH AS £150M OF BUSINESS FOR THEM OVER THE NEXT 3 OR 4 YEARS MIGHT TURN ON CATHAY'S DECISION, THE FACT THAT, FOLLOWING THE DELAY AT THE END OF JANUARY, BOTH LOCKHEED AND DOUGLAS HAD SIGNIFICANTLY REDUCED THEIR OFFERED PRICE INDICATED THAT THEY ALSO REGARDED THIS AS A KEY ORDER. WE HOPED THE CATHAY BOARD WOULD THEREFORE GIVE FULL WEIGHT TO OTHER BRITISH INTERESTS IN CONSIDERING THEIR DECISION, WE COULD NOT OF COURSE FORECAST THE ATTITUDE OF THE INCOMING GOVERNMENT: BUT WE FELT SURE THAT IN THE PRESENT ECONOMIC CIRCUMSTANCES OUR NEW MINISTERS WOULD DE KEENLY INTERESTED IN AN ISSUE WITH SUCH IMPORTANT IMPLICATIONS FOR BOTH THE AIRLINE
AND THE AERO-ENGINE MANUFACTURER.
4. THE SWIRE BROTHERS CONFIRMED THAT ALTHOUGH THE BALANCE OF
ENGINEERING AND OPERATING CONSIDERATIONS WAS SOMEWHAT IN FAVOUR OF THE DC10 THE MAIN ISSUE WAS THE CATHAY BOARD'S LACK OF CONFIDENCE IN LOCKHEED'S FINANCIAL MUSCLE. AS TO THIS, WE SAID THAT SO FAR AS ROLLS-ROYCE'S OWN STRENGTH WAS CONCERNED THE GOVERNMENT HAD CLEARLY STATED THEIR SUPPORT IN THE HOUSE ON A NUMBER OF OCCASIONS. IT WAS INCONCEIVABLE THAT THE INCOMING GOVERNMENT WOULD CO BACK ON THIS. SWIRES SAID THAT THERE WAS A CERTAIN BIAS WITHIN CATHAY IN FAVOUR OF AMERICAN ENGINES SINCE THEIR ENGINEERS WERE SO FAMILIAR WITH THEM, BUT THEY EXPRESSED FULL SATISFACTION BOTH WITH ROLLS-ROYCE'S POSITION AND WITH THE ENGINE ITSELF. THEY MENTIONED THAT THERE WERE SOME PROBLEMS ABOUT SERVICING TO BE IRONED
OUT AND WE UNDERTOOK IF NECESSARY TO ENSURE THAT ROLLS-ROYCE MADE
ADEQUATE ARRANGEMENTS. WE ALSO OFFERED IF NECESSARY TO ARRANGE FOR
BRITISH AIRWAYS ENGINEERS TO ADVISE CATHAY IN THE LIGHT OF THE ARRANGEMENTS THAT THEY THEMSELVES WERE MAKING FOR THE INTRODUCTION OF TRISTARS INTO SERVICE.
5. THIS NARROWED THE DISCUSSION DOWN TO THE FINANCIAL MUSCLE OF
LOCKHEEDS THEMSELVES. WE SAID THAT IT WAS NO CONCERN OF THE
BRITISH GOVERNMENT TO ''KNOCK' ANY OF THE AMERICAN AIRCRAFT FIRMS. HOWEVER BOEING AND DOUGLAS, NO LESS THAN LOCKHEED, HAD GONE THROUGH VERY DIFFICULT FINANCIAL CIRCUMSTANCES IN THE PAST FEW YEARS AND THERE DID NOT SEEM TO BE A GREAT DEAL TO CHOOSE BETWEEN
THEM ON THIS SCORE. IN VIEW OF THEIR LARGE AND SUCCESSFUL DEFENCE INTERESTS, AND WITH THE TRISTAR NOW BECOMING PROFITABLE, LOCKHEED SEEMED AT LEAST AS FIRMLY BASED AS EITHER OF THE OTHER TWO MAJOR AIRCRAFT MAHUFACTURERS, ONCE THEY HAD RESOLVED THEIR IMMEDIATE CASH FLOW PROBLEM. A NUMBER OF IMPORTANT AIRLINES HAD BOUGHT TRISTARS AND SOME PURCHASES HAD RECENTLY EVEN BEEN
ACCELERATED. THESE DECISIONS MUST HAVE BEEN TAKEN IN THE LIGHT
2.
CONAT INANGATAL
/OF THE