CONFIDENTIAL
}
Australia, Japan and China. An agreement with China was initialled in 1973 which provided for a trunk service by British Airways through Hong Kong to Peking. However, the Chinese have not yet agreed to sign the agreement. Instead they have made demands which would threaten CPA's extensive and profitable services through Taiwan to Japan. In refusing to accede to these demands we are protecting CPA's interests at the expense of BA's.
6.
The major point of friction in the past has been over an SAS route to Hong Kong. For some years the Scandinavians have been pressing for a trunk route Copenhagen-Hong Kong for SAS. We have accepted the DOT view that on purely aviation grounds there is no case. In order however to go some way towards meeting the wishes of the Scandinavians and also, particularly, of the Hong Kỏng Government, we offered the Scandinavians at a meeting in Copenhagen in December 1973 a once-weekly service to Hong Kong by the southern route. We insisted on an aviation quid pro quo in order to maintain the important basic principle in air services negotiations that route concessions should be matched either in kind or by financial compensation. The Scandinavians took the view that the route offered, although "commercially viable", was "commercially uninteresting" to SAS. The talks broke down because of the Scandinavians' refusal even to discuss a commercial quid pro quo. No date has been set for a resumption.
7.
We regret that the Copenhagen talks ended without agreement. Our offer remains on the table and we are moreover always willing to look at any fresh proposals they may wish to put forward.
Hong Kong & Indian Ocean Dept.
7 January 1975
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